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Cash versus stock dividend  Milwaukee Tool has the following​ stockholders' equity account. The​ firm's common stock...

Cash versus stock dividend  Milwaukee Tool has the following​ stockholders' equity account. The​ firm's common stock currently sells for ​$3.98 per share.

Preferred stock

 ​$91,000
Common stock

​(100,000 shares at $1.07 par)

107,000

​Paid-in capital in excess of par

211,000

Retained earnings

320,000

Total​ stockholders' equity

$729,000

a. Show the effects on the firm of a cash dividend of $0.10 per share.

b. Show the effects on the firm of a 55​% stock dividend.

c. Compare the effects in parts a and b. What are the significant differences between the two methods of paying​ dividends?

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