Atkins Company Had 20,000 Shares of $5 Par Value Common

question 61

Multiple Choice

Atkins Company had 20,000 shares of $5 par value common stock outstanding prior to declaring a 10% common stock dividend.The market value of the common stock on the declaration date was $11.Which of the following statements correctly describes the effect of the common stock dividend?

• A)Retained earnings decreased $22,000.
• B)Retained earnings decreased $10,000.
• C)Total stockholders' equity decreased $22,000.
• D)Total stockholders' equity decreased $10,000.

---

Definitions:

Residual Income

Residual income is the amount of net income generated in excess of the minimum rate of return. It's often used to assess the performance of business units.

Invested Assets

Resources or funds that have been allocated for investment purposes in various types of assets, such as stocks, bonds, or real estate, aiming for potential returns.

Investment Turnover

A measure of a company's efficiency in using its investments to generate sales, usually calculated as sales divided by average invested assets.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the cost of the investment.