Answer:
Explanation:
1. Before action
The company is having the 37000 shares of $10 each outstanding.
Par value of outstanding shares = $10 * 37000 shares = $370,000
Common stock in excess of par = Total common stock - Par value of outstanding shares = $370,000 - $370,000 = 0
2. After stock dividennd
Stock dividend declared = 6% of 37,000 shares = 2,220 shares
Current market price of shares = $16 per share
Value of stock dividend declared = $16 * 2,220 = $35,520
Common stock in excess of par = $35,520 - $22,200 = $13,320
Total number of shares outstanding = 37,000 + 2,220 = 39,220
Total par value of common stock = 39,220 * $10 = $3,92,200
The stock dividend is declared out of the retained earnings.
Retained earnings after stock dividend = $904,000 - $35,520 = $868,480
3. After stock split
In this case, there is no financial impact. Only, the number of shares will get double because one share is split into two shares.
No. of outstanding shares = 37000 * 2 = 74000 shares
