Asked by Johnny Gomez on May 01, 2024
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Katie Company had 40,000 shares of $2 par value common stock outstanding prior to a 40% common stock dividend declaration and distribution.The market value of the common stock on the declaration date was $10.Which of the following statements incorrectly describes the effect of recording the common stock dividend?
A) Retained earnings decreased $32,000.
B) Additional paid-in capital remained the same.
C) Additional paid-in capital increased $128,000.
D) Total stockholders' equity remained the same.
Common Stock Dividend
A portion of a company's earnings distributed to common shareholders, typically in the form of cash or additional shares.
Retained Earnings
The portion of a company's profit that is held or retained and saved for future use, reinvestment in the business, or to pay debt, rather than being paid out as dividends.
Additional Paid-In Capital
The excess amount paid by investors over the par value of shares, reflecting the additional capital contributed to a corporation.
- Gain insight into the fiscal outcomes and bookkeeping methods for dividends issued on common stock.
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Learning Objectives
- Gain insight into the fiscal outcomes and bookkeeping methods for dividends issued on common stock.
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