on december 31 2017 nehpton ltd reported 3 million of common shares and 6 million of 3387248

On December 31, 2017, Nehpton Ltd. reported $3 million of common shares and $6 million of retained earnings. On that date, the company had five million shares authorized and two million outstanding. Management is considering a 10 percent stock dividend or a two-for-one stock split and would like to know the impact on the equity section of the two transactions. Required: a. Prepare the equity section of Nehpton’s balance sheet under the following conditions: i. As originally reported; ii. If management declared a 10 percent stock dividend; iii. If management declared a two-for-one stock split. b. Explain how earnings per share would be affected in each case. Which situation would be most attractive to the shareholders?

 

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