If a Firm Has Retained Earnings of $20 Million, a Common

question 53

Multiple Choice

If a firm has retained earnings of $20 million, a common shares account of $25 million, and additional paid-in-capital of $15 million, how much would be transferred in (or out) of these accounts in response to a 15 percent stock dividend, respectively?

• A) -15%, 0%, +15%
• B) -15%, +15%, 0%
• C) -30%, +15%, +15%
• D) -30%, +30%, +30%

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Definitions:

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and stockholders' equity at a specific point in time.

Net Sales

The revenue from goods or services sold after deducting returns, allowances for damaged or missing goods, and any discounts allowed.

Cost of Goods Sold

The specific expenses borne for the production of products a company sells, covering materials and workforce.

Income Tax Expense

The cost associated with taxes on earnings, calculated based on the applicable tax rates and laws.