The Earth Shoe Company, Whose Stock Has a Market Value

question 70

Multiple Choice

The Earth Shoe Company, whose stock has a market value of $20, has the following common equity accounts on its balance sheet: $\begin{array}{ll}\text { Common stock ( } \$ 1 \text { par, } 1,000,000 \text { shares) } & \$ 1,000,000 \\\text { Contributed capital in excess of par } & \$ 14,000,000 \\\text { Retained earnings } & \$ 52,000,000\\\text { Total common stockholders' equity }&\$67,000,000\end{array}$ ? If the firm declares a 5% stock dividend, what will be the retained earnings figure after the dividend is paid?

• A) $1,000,000
• B) $51,000,000
• C) $14,950,000
• D) $5,000,000

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Definitions:

Income From Operations

Revenue from a company's primary business activities, excluding costs and expenses.

Transfer Price

The price at which goods and services are transferred between departments or related entities within the same organization.

Variable Costs

Costs that vary directly with the level of production or business activity, such as materials and labor costs.

Allocated Fixed Costs

Fixed costs that are distributed across different departments or projects based on determined criteria.