Davidson Company Has 10,000,000 Common Shares Issued and 500,000 Shares

question 73

Multiple Choice

Davidson Company has 10,000,000 common shares issued and 500,000 shares of treasury stock.The stock's par value is $2 per share and its current market price is $25 per share.Which of the following is correct when a 15% stock dividend is declared and distributed?

• A)Retained earnings will decrease $37.5 million.
• B)Retained earnings will decrease $35.625 million.
• C)Retained earnings will decrease $3 million.
• D)Retained earnings will decrease $2.85 million.

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