Reference no: EM131750470

Question: The share price of Morris Sports Ltd., a small but growing sporting goods company, has escalated rapidly. The price has recently risen to $20 and management thinks this is too high for such a small company. Assume that Morris could meet this problem through either a 2-for-l stock split or by declaring a 1 00-percent stock dividend. The present equity section of Morris balance sheet appears as follows:

Shareholders' Equity                                      $100,000

10,000 common shares without par value            265,000

Retained earnings                                         $365,000

Show what the effects of the 2-for-l stock split and of the stock dividend would be on the firm's balance sheet.