Question

On June 30, 2017, Sharper Corporation’s common stock is priced at $34.50 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows.

Common stock—$8 par value, 85,000 shares authorized, 34,000 shares issued and outstanding	$	272,000
Paid-in capital in excess of par value, common stock		100,000
Retained earnings		372,000
Total stockholders’ equity	$	744,000

1. Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares.
a.,b.& c. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.
2. Assume that the company implements a 2-for-1 stock split instead of the stock dividend in part 1. Answer these questions about stockholders’ equity as it exists after issuing the new shares.
a.,b.& c. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.

common stock	before stock dividend/before stock split	impact of stock dividend/impact of stock split	after stock dividend/after stock split
paid in capital
total contributed capital
retained earnings
total stockholders equity
number of common shares outstanding

Answer 1

Stock Dividend	Before Stock Dividend	Impact of Stock Dividend	After Stock Dividend
Common stock	$272,000	272,000	$544,000
Paid in capital in excess of par value	100,000		100,000
Total contributed capital	$372,000	$272,000	$644,000
Retained earnings	372,000	-272,000	100,000
Total stockholders' equity	744000	0	744000
Number of common shares outstanding	34,000	34,000	68,000

Stock Split	Before Stock Split	Impact of Stock Split	After Stock Split
Common stock	$272,000		$272,000
Paid in capital in excess of par value	100,000		100,000
Total contributed capital	372000		372000
Retained earnings	372,000		372,000
Total stockholders' equity	744,000		744000
Number of common shares outstanding	34,000	34,000	68,000