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
| ? | Before | After 100% Stock Dividend | After 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 capital | 260,000 | 270,000 | 260,000 |
| Retained earnings | 150,000 | 140,000 | 150,000 |
| Total stockholders' equity | $410,000 | $410,000 | $410,000 |
| Shares outstanding | 10,000 | 20,000 | 20,000 |
| Par value per share | $1 | $1 | $0.50 |
| Share price | $102 | $51 | $51 |
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.
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