In the past year, Cormier Corporation declared a 10% stock dividend, and Fegan, Inc. announced a 2 for 1 stock split. Your parents own 100 shares of each company’s $50 par value common stock. During a recent phone call, your parents ask you, as an accounting student, to explain the differences between the two events.
Instructions:
Write a letter to your parents that explains the effects of the two events to them as stockholders and the effects of each event on the financial statements of each corporation.