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ACC 291 WileyPLUS Week 4 Assignment Exercise E11-15

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ACC 291 WileyPLUS Week 4 Assignment Exercise E11-15
Correct.
On October 31, the stockholders' equity section of Omar Company consists of common stock
$600,000 and retained earnings $900,000. Omar is considering the following two courses of
action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding, or (2)
effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price
is $14 per share.
Complete the tabular summary of the effects of the alternative actions on the components of
stockholders' equity and outstanding shares. (If answer is zero, please enter 0. Do not leave any
fields blank.)
Before Action After Stock Dividend After Stock Split
Stockholders' equity
Paid-in capital
Common Stock $ 600,000 $ 630,000 $ 600,000
In excess of par value
0 12,000 0
Total paid-in capital 600,000 642,000 600,000
Retained earnings
900,000 858,000 900,000
Total stockholders'
equity
$ 1,500,000 1,500,000 $ 1,500,000
Outstanding shares
60,000 63,000 120,000
In excess of par value after stock dividend 3,000 × ($14 - $10)
Retained earnings after stock dividend $900,000 - (3,000 × $14)

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