A Company Declares a 40% Large Stock Dividend When There

question 136

Multiple Choice

A company declares a 40% large stock dividend when there were 4 million common shares outstanding with a $1 par value.The current market price is $20 per common share.Which of the following will be the effect of the stock dividend?

• A)Retained earnings will decrease by $1.6 million and common stock will increase by $1.6 million.
• B)Retained earnings will decrease by $1.6 million and additional paid-in capital will increase by $1.6 million.
• C)Retained earnings will decrease by $32 million and common stock will increase by $32 million.
• D)Retained earnings will decrease by $32 million,common stock will increase by $1.6 million and additional paid-in capital will increase by $30.4 million.

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