A Company Declares a 40% Stock Dividend When There Were

question 70

Multiple Choice

A company declares a 40% 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 contributed capital will increase by $1.6 million.
• B) Contributed capital will decrease by $1.6 million and retained earnings will increase by $1.6 million.
• C)Retained earnings will decrease by $32 million and contributed capital will increase by $32 million.
• D)Contributed capital will decrease by $32 million and retained earnings will increase by $32 million.

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Definitions:

Self-actualized Personality

A psychological state or trait in which a person realizes their full potential, acting autonomously and with a sense of fulfilling their capabilities.

Abraham Maslow

An American psychologist best known for creating Maslow's hierarchy of needs, a theory of psychological health predicated on fulfilling innate human needs in priority.

Independence

The state of being self-sufficient and free from outside control, managing one's own affairs without aid or influence.

Creativity

Refers to the ability to generate new and valuable ideas or solutions.