question archive Brooks Brothers has done very well the past year and its stock price is now trading over $100 per share
Brooks Brothers has done very well the past year and its stock price is now trading over $100 per share
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Brooks Brothers has done very well the past year and its stock price is now trading over $100 per share. Management is considering either a 100% stock dividend or a 2-for-1 stock split.
Required: Complete the following table comparing the effects of a 100% stock dividend versus a 2-for-1 stock split on the stockholders' equity accounts, shares outstanding, par value, and share price. (Round "Par value per share" to 2 decimal places.)
| ....... | Before | After 100% stock Dividend | After 2 for 1 stock split |
| Common stock, $1 par value | $10,000 | ||
| Additional paid in capital | $250,000 | ||
| total paid in capital | $260,000 | 0 | 0 |
| retained earnings | $150,000 | ||
| Total stockholder's equity | $410,000 | 0 | 0 |
| Shares outstanding | $10,000 | ||
| Par value per share | $1.00 | ||
| Share price | $102 |
The primary reason companies declare a large stock dividend or a stock split is to lower the trading price of the stock to a more acceptable trading range, making it attractive to a larger number of potential investors.
True or false?
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Answer:
2.
The primary reason to declare a stock split or a large stock dividend is:
To reduce the market price of the stock with an intention to make the stocks more attractive.
To increase the potential number of shares.
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