On June 30, 2018, when Ermler Co.\'s stock was selling at $65 per share, its cap

Question

On June 30, 2018, when Ermler Co.'s stock was selling at $65 per share, its capital accounts were as follows: Capital stock (par value $50; 60,000 shares issued) Premium on capital stock Retained earnings If a 100% stock dividend were declared and distributed, impact on Net Income, Capital Stock, Retained Earnings and Total Stockholders Equity would be $3,000,000 600,000 4,200,000 Net Income Capital Stock Retained Earnings Total Stockholder's Equity $3,000,000 $o S(3,000,000) $(3,000,000) $0 a. $(3,000,000) ,000,000 So $3,000,000 $(3,000,000) b. $0 c. $3,000,000 $(3,000,000) so d $(3,000,000)$0 e. $O $(3,000,000) $(3,000,000) $0 Select one: O a. Choice a b. Choice b c. Choice c d. Choice d e. Choicee

Explanation / Answer

Correct answer is b. choice b

when 100% dividend is payable the amount is transferred from retained earnings to capital stock. Therefore total balance of Retained earnings will decrease by $30,00,000 and common stock will increase by $30,00,000

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