Reference no: EM13919200

On October 31, the stockholders' equity section of Pele Company's balance sheet consists of common stock $488,400 and retained earnings $404,500. Pele is considering the following two courses of action: (1) Declaring a 5% stock dividend on the 81,400 $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. Pele Company's Balance Sheet Before Action After Stock Dividend After Stock Split Stockholders' equity Paid-in capital $Entry field with correct answer 488400 $Entry field with correct answer 561660 $Entry field with correct answer 488400 Retained earnings Entry field with correct answer 404500 Entry field with correct answer 331240 Entry field with correct answer 404500 Total stockholders' equity $Entry field with correct answer 892900 $Entry field with correct answer 892900 $Entry field with correct answer 892900 Outstanding shares Entry field with correct answer 81400 Entry field with incorrect answer 56980 Entry field with incorrect answer 138380