Share
Explore BrainMass

Retained earnings account balance after the stock dividend

Assume a firm has declared a 20% stock dividend on its 1 million shares of outstanding $5 par value common stock. If the market value of the stock at the date of the stock dividend is $14 per share and the retained earnings account balance before the stock dividend was $7,600,000, what is the retained earnings account balance after the stock dividend?

a.
$3,600,000
b.
$1,960,240
c.
$7,600,000
d.
$4,800,000

Solution Preview

The correct answer is (d) 4,800,000. Here is the rationale:

The company issued a 20% stock dividend. 20% of 1,000,000 = ...

Solution Summary

The solution answers a multiple choice question related to retained earnings and provides full explanations for the question asked.

$2.19