The Earth Shoe Company, Whose Stock Has a Market Value

question 132

Multiple Choice

The Earth Shoe Company, whose stock has a market value of $20, has the following common equity accounts on its balance sheet: 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)None of the above

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Definitions:

Freight Costs

Expenses incurred by a company to ship its products to customers, usually varying based on distance and weight.

Inventory Account

An accounting record that tracks the cost of goods available for sale or used in production.

Perpetual Inventory System

An accounting method that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Gross Profit

The difference between the revenue generated from selling goods or services and the cost of those goods sold, excluding other operating expenses.