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

question 15

Multiple Choice

Atkins Company had 20,000 shares of $5 par value common stock outstanding prior to a 10% common stock dividend declaration and distribution. 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 and declaration?

• 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.

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Definitions:

New Partner

An individual who joins an existing partnership, bringing in fresh capital or skills and sharing in the business's profits and losses.

Historic Cost

The original monetary value of an asset or transaction at the time it occurred, without adjustments for inflation or other factors.

Partner Withdraws

Amounts taken out of a partnership by a partner for personal use, reducing the partner's capital account in the business.

Capital Account

An account on a nation's balance of payments that records all transactions involving the purchase or sale of assets, or in business, the account showing the net worth of a business entity.