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    Retained earnings account balance after the stock dividend

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    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

    © BrainMass Inc. brainmass.com June 3, 2020, 7:54 pm ad1c9bdddf
    https://brainmass.com/business/accounting/retained-earnings-account-balance-stock-dividend-116195

    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

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