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?
The correct answer is (d) 4,800,000. Here is the rationale:
The company issued a 20% stock dividend. 20% of 1,000,000 = ...
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