A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9. Subsequently, the company declared a 2% stock dividend on a date when the market price was $10 per share. The effect of the declaration and issuance of the stock dividend is to:

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Business

Andy

15 July, 23:14

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9. Subsequently, the company declared a 2% stock dividend on a date when the market price was $10 per share. The effect of the declaration and issuance of the stock dividend is to:

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Audrey · Answer 1

Based on the information provided within the question it can be said that the main reason that this is done is to effectively cause a decrease in retained earnings as well as increasing common stock and increasing paid-in capital. Which will all be effects of the declaration and issuance of the stock dividend, as can be seen in this question.