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:

Failure Rates

The proportion or frequency at which a process, system, or product fails to perform its intended function.

New Businesses

Enterprises that have been recently established, entering the market with fresh offerings.

Operation Years

A term referring to the period during which an organization, project, or piece of equipment has been operating or functioning.

Family Businesses

Enterprises that are owned and often managed by multiple family members, typically passing leadership from one generation to the next.