A Firm Has Retained Earnings of $11 Million, a Common

question 1

Multiple Choice

A firm has retained earnings of $11 million, a common shares account of $2 million, and additional paid-in-capital of $6 million, and the firm just paid a 15 percent stock dividend. Assume that fair market value is reflected in the relative size of both the common shares account and the additional paid-in-capital account. Which of the following statements is correct?

• A) Retained earnings will decrease by $1,200,000.
• B) Common shares will increase by $300,000.
• C) Additional paid-in-capital will increase by $900,000.
• D) All of the statements are correct.

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Definitions:

Descriptive Statistics

Statistical methods that summarize and describe the features of a dataset through metrics such as mean, median, mode, and standard deviation, without drawing conclusions about the population from which the sample was drawn.

Inferential Statistics

Statistical methods that allow researchers to make predictions or inferences about a population based on a sample.

Large Sample Sizes

The use of a substantial number of participants or observations in research to increase the validity and reliability of the findings.

Inferential Statistics

It is the branch of statistics that deals with drawing conclusions and making predictions about a population based on a sample.