40 A company declares a 35% lar e stock dividend when there were 2.6 million com

Question

40 A company declares a 35% lar e stock dividend when there were 2.6 million common shares outstanding with a $1 par value. The current market price s the effect of the stock dividend? 3 per common share. Which of the follow ng i be O Retained earnings will decrease by $11.83 mlion and common stock will increase by $1183 million. O Retained earnings will decrease by $11.83 million, common stock will increase by $11.83 million and additional paid-in capital will increase by $30.4 million O Retained earnings will decrease by $0.91 mllion and common stock will increase by $0.91 million. O Retained earnings will decrease by $0.91 million and additional paid-in capital will increase by $0.91 million.

Explanation / Answer

Stock dividend = 2.6*35%*1= $0.91 million Retained earnings will decrease by $0.91 million and common stock will increase by $0.91 million

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