A Company Originally Issued 10,000 Shares of $5 Par Value

question 8

Multiple Choice

A company originally issued 10,000 shares of $5 par value common stock at $9 per share. The board of directors declares an 8% stock dividend when the market price of the stock is $10 a share. Which of the following is included in the entry to record the stock dividend?

• A) Retained earnings is debited for $4,000.
• B) Common stock is credited for $7,200.
• C) Common stock is credited for $8,000.
• D) Retained earnings is debited for $8,000.

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Definitions:

Current Shareholders

Individuals or institutions that own shares of stock in a corporation at the present time.

Compensation

The total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed, including wages, salaries, bonuses, and benefits.

Third Market

A trading segment where exchange-listed securities are traded over-the-counter (OTC) between institutional investors, typically by brokerage firms or securities dealers to provide liquidity.

Fourth Market

A market where institutional investors trade securities directly among themselves without the use of a broker.