>> Accounting Basics
Riff CD Company has had 4 years of retained earnings. Due to this success, the market price of its 400,000 shares of $3 par value common stock has increased from $12 per share to $51. During this period, paid-in capital remained the same at $2,400,000. Retained earnings increased from $1,800,000 to $12,000,000. CEO Josh Borke is considering either
(1) A 15% stock dividend or
(2) A 2-for-1 stock split. He asks you to show the before-and-after effects of each option on
(a) Retained earnings and
(b) Total stockholders' equity.