Questions
BU.210.650.51.FA25 Quiz II- Requires Respondus LockDown Browser
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Smith Car Parts's common stock is currently trading at $40 per share. The number of shares issued and outstanding is 80,000 ($1 par value). The "Retained Earnings" account on the Balance Sheet shows a value of $5,000,000. The company decides to distribute a 10% stock dividend (i.e., a small stock dividend). What is the impact of this 10% stock dividend on "Retained Earnings"?
Options
A.Increase by $320,000
B.Decrease by $320,000
C.Decrease by $8,000
D.Increase by $8,000
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Step-by-Step Analysis
The question asks about the impact of a 10% small stock dividend on Retained Earnings for Smith Car Parts.
First, determine the number of new shares issued: 10% of 80,000 outstanding shares equals 8,000 new shares.
Next, recall how a small stock dividend affects accounting: Retained Earnings is reduced by the market va......Login to view full explanationLog in for full answers
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Smith Car Parts's common stock is currently trading at $40 per share. The number of shares issued and outstanding is 80,000 ($1 par value). The "Retained Earnings" account on the Balance Sheet shows a value of $5,000,000. The company decides to distribute a 30% stock dividend (i.e., a large stock dividend). What is the impact of this 30% stock dividend on "Retained Earnings"?
When a company issues a share dividend all of the following occur except:
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