Exercise 11-7 On October 31, the stockholders’ equity section of Oriole Company’
ID: 2513004 • Letter: E
Question
Exercise 11-7
On October 31, the stockholders’ equity section of Oriole Company’s balance sheet consists of common stock $336,000 and retained earnings $394,000. Oriole is considering the following two courses of action:
The current market price is $14 per share.
Prepare a tabular summary of the effects of the alternative actions on the company’s stockholders’ equity and outstanding shares.
2- On October 31, the stockholders’ equity section of Blossom Company’s balance sheet consists of common stock $501,000 and retained earnings $412,000. Blossom is considering the following two courses of action: (1) Declaring a 5% stock dividend on the 83,500 $6 par value shares outstanding (2) Effecting a 2-for-1 stock split that will reduce par value to $3 per share. The current market price is $18 per share. Prepare a tabular summary of the effects of the alternative actions on the company’s stockholders’ equity and outstanding shares.
(1) Declaring a 6% stock dividend on the 84,000 $4 par value shares outstanding (2) Effecting a 2-for-1 stock split that will reduce par value to $2 per share.Explanation / Answer
Oriole co a) Before After After stock div stock div stock split Stockholders Equity paid in capital 336,000 406,560 336,000 retained earnings 394,000 323,440 394,000 total stockholders Equity 730,000 730,000 730000 outstanding shares 84,000 89040 168000 stock dividend = 84000*6% 5040 5040*14 70560 b) Blossom co. Before After After stock div stock div stock split Stockholders Equity paid in capital 501,000 576,150 501,000 retained earnings 412,000 336,850 412,000 total stockholders Equity 913,000 913,000 913000 outstanding shares 83,500 88510 167000 stock dividend = 83500*5% 4175 shares 4175*18 75150
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