Asked by Asive Sibeko on Jun 01, 2024
Verified
A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9. Subsequently, the company declared a 2% stock dividend on a date when the market price was $10 a share. The effect of the declaration and issuance of the stock dividend is to
A) decrease retained earnings, increase common stock, and increase paid-in capital
B) increase retained earnings, decrease common stock, and decrease paid-in capital
C) increase retained earnings, decrease common stock, and increase paid-in capital
D) decrease retained earnings, increase common stock, and decrease paid-in capital
Stock Dividend
A form of dividend payment made by a company to its shareholders in the form of additional shares, rather than cash.
Paid-In Capital
The capital received by a company from investors in exchange for stock, representing funds raised beyond the par value of the shares issued.
- Decode the financial ramifications of varied stock and dividend engagements on an entity's financial accounts.
Verified Answer
ZK
Zybrea KnightJun 04, 2024
Final Answer :
A
Explanation :
Declaring a stock dividend decreases retained earnings by the market value of the shares issued, increases common stock by the par value of the new shares, and increases paid-in capital by the difference between the market value and the par value of the new shares.
Learning Objectives
- Decode the financial ramifications of varied stock and dividend engagements on an entity's financial accounts.
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