On July 1, Davidson Corporation had the following capital structure:

On July 1, Davidson Corporation had the following capital structure:

  

Common stock ( $4 par value)	$	684,000
Additional paid-in capital		960,000
Retained earnings		800,000
Treasury stock		0

Required:

Complete the table below for each of the two following independent cases: (Round "Par value per share" answers to 2 decimal places.)

Case 1: The board of directors declared and issued a 40 percent stock dividend when the stock was selling at $6 per share.

Case 2: The board of directors announced a 6-for-5 stock split (i.e., a 20 percent increase in the number of shares). The market price prior to the split was $6 per share.

Explanation:

Comments: Neither the stock dividend nor stock split changed total stockholders’ equity because neither involved the disbursement of assets. The stock dividend transferred funds out of retained earnings to the common stock account; it increased the number of shares outstanding but did not change the par value per share. The stock split did not change any account balances; its only effects were to (1) increase the number of shares outstanding and (2) decrease the par value per share.