On June 30, 2005, Scizzory Corporation's common stock is priced at $31 per share before any stock
dividend or split, and the stockholders' equity section of its balance sheet appears as follows:
Common stock—$10 par value, 60,000 shares
authorized, 25,000 shares issued and outstanding.. . $250,000
Contributed capital in excess of par value, common stock.. . 100,000
Total contributed capital.. . 350,000
Retained earnings.. . 330,000
Total stockholders' equity.. . $680,000
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. What is the retained earnings balance? $775,000
b. What is the amount of total stockholders' equity? $680,000
c. How many shares are outstanding? 35,000
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. What is the retained earnings balance? 330,000
b. What is the amount of total stockholders' equity? 680,000
c. How many shares are outstanding? 70,000
I am really confused, please help me.
