Lakeview Company Reported the Following Amounts on Its Balance Sheet

Essay

Lakeview Company reported the following amounts on its balance sheet at December 1, 2017: $\begin{array}{lr}\text { Preferred stock, } \$ 2 \text { par, } 3,000 \text { shares issued and outstanding } & \$ 6,000 \\\text { Common stock, } \$ 10 \text { par, } 8 \%, 400 \text { shares issued and outstanding } & 4,000 \\\text { Additional paid-in capital—common } & \underline{22,000} \\\text { Total contributed capital } & \$ 32,000 \\\text { Retained earnings } & \underline{48,000} \\\text { Total stockholders' equity } & \underline{\$ 80,000}\end{array}$

The following transactions occurred during December:

1. Declared a 20% stock dividend on common stock on December 3, when the stock was selling at $12 per share. The stock dividend will be distributed on December 20, 2017.

2. Distributed the common stock dividend on December 20.

3. Approved a 2-for-1 stock split of the common stock on December 28, when the stock was selling for $20 per share.


A) $\text { Show the effect of the transactions on the accounting equation. }$
B) Answer the following questions:
1. How many common shares are outstanding at December 31,2017 ?
2. What effect will the stock split have on the stock's market value?