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: 1. Complete the following chart 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.?BeforeAfter 100% Stock DividendAfter 2-for-1 Stock SplitCommon stock, $1 par value$10,000??Additional paid-in capital  250,000??Total paid-in capital260,000??Retained earnings  150,000??Total stockholders' equity$410,000??Shares outstanding10,000??Par value per share$1??Share price$102??2. What is the primary reason companies declare a large stock dividend or a stock

split?

What will be an ideal response?


Requirement 1

?BeforeAfter 100% Stock DividendAfter 2-for-1 Stock Split
Common stock, $1 par value$10,000$20,000$10,000
Additional paid-in capital  250,000  250,000  250,000
Total paid-in capital260,000270,000260,000
Retained earnings  150,000  140,000  150,000
Total stockholders' equity$410,000$410,000$410,000
Shares outstanding10,00020,00020,000
Par value per share$1$1$0.50
Share price$102$51$51
Requirement 2
 
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.

Business

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