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Retained Earnings

Omega Sports has the following equity accounts on its balance sheet:

Common stock ($.50 par, 900,000 shares)
$ 450,000

Paid in excess
5,580,000

Retained earnings
21,204,000

Total common stockholders' equity
$27,234,000

The current market price of the firm's shares is $20. If the firm declares a 10 percent stock dividend followed by a cash dividend of $0.10 per share, the retained earnings account would change to

a.
$21,060,000

b.
$19,305,000

c.
$25,335,000

d.
$19,404,000

Please show step by steps instruction

Solution Preview

The correct answer is 19,305,000. Here is the explanation:

When the company issued a 10% stock divided, it issues 10% of 900,000 = 90,000 extra shares. The market value is 20 per ...

Solution Summary

The solution solves some multiple choice questions related to retained earnings and provides full explanations for the questions asked.

$2.19