Prepare a tabular summary of the effects of the alternative actions on the components of stockholders’ equity, outstanding shares, and book value per share

Question
Financial Accounting

On October 31, the stockholders’ equity section of Hinckley Company consists of common

stock $800,000 and retained earnings $400,000. Hinckley is considering the following two

courses of action: (1) Declare a 10% stock dividend on the 80,000, $10 par value shares outstanding,

or (2) effect a 2-for-1 stock split that will reduce par value to $5 per share. The current

market price is $15 per share.

Instructions

Prepare a tabular summary of the effects of the alternative actions on the components of stockholders’

equity, outstanding shares, and book value per share. Use the following column headings:

Before Action, After Stock Dividend, and After Stock Split.

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