On October 31, the stockholders' equity section of Pharoah Company consists of common stock $330,000 and retained earnings $896,000. Pharoah is considering the following two courses of action: (1) declaring a 7% stock dividend on the 33,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share. Prepare a tabular summary of the effects of the alternative actions on the components of stockholders' equity, outstanding shares, and par value per share.

Before action $33,000

After stock dividend $35,310

After stock split $146,200

Explanation:

BEFORE ACTION

Stockholder Equity:

Paid In Capital

Common Stock $330,000

In Exess Par Value $0

Total Paid In Capital $330,000

Retained Earnings $896,000

Total StockholderEquity $1,226,000

Oustanding Shares $33,000

AFTER STOCK DIVIDEND

Stockholder Equity:

Paid In Capital

Common Stock $353,100

(7%×330,000+330,000)

In Exess Par Value $6,600

(33,000/5)

Total Paid In Capital $359,700

Retained Earnings $866,300

Total StockholderEquity $1,226,000

Oustanding Shares $35,310

AFTER STOCK SPLITS

Stockholder Equity:

Paid In Capital

Common Stock $330,000

In Exess Par Value $0

Total Paid In Capital $330,000

Retained Earnings $896,000

Total StockholderEquity $1,226,000

Oustanding Shares $146,200

hi : ) i found this so i hope this !

"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"

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