Kate's Has 9,000 Shares of Stock Outstanding with a Par

question 36

Multiple Choice

Kate's has 9,000 shares of stock outstanding with a par value of $1.00 per share and a market value of $9 per share. The balance sheet shows $9,000 in the common stock account, $21,000 in the
Capital in excess of par account, and $40,500 in the retained earnings account. The firm just
Announced a 100 percent (large) stock dividend. By what amount will retained earnings change as a
Result of this dividend?

• A) -$9,000
• B) -$8,000
• C) $0
• D) $8,000
• E) $9,000

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Definitions:

Face Value

The nominal value or dollar value printed on a financial instrument, such as a bond or a stock certificate.

Interest Paid

The total amount of interest paid by a borrower to a lender over a particular period for the use of borrowed money.

Bonds Interest Payable

This represents the amount of interest expense that a company owes to its bond investors but has not yet paid.

Annual Bond Interest

The total interest that will be earned on a bond over the course of a year.