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Johnmark1900
Johnmark1900, Associate Degree
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On October 31, the stockholders equity section of Omar Company

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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.

Before

Action

After

Stock

Dividend

After

Stock

Split

Stockholders’ equity

Paid-in capital

Common stock

In excess of par value

Total paid-in capital

Retained earnings

Total stockholders’

  equity

$  600,000

0

600,000

900,000

$1,500,000

$  630,000

12,000

   642,000

858,000

$1,500,000

(1)

(2)

$  600,000

0

   600,000

900,000

$1,500,000

Outstanding shares

    60,000

    63,000

   120,000

Book value per share

    $25.00

    $23.81

    $12.50

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