Question

A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 2% stock dividend on a date when the market price was $11 per share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?

a.$4,800
b.$3,200
c.$6,400
d.$8,800

Answer 1

Answer: d.$8,800

Step-by-step explanation:

When dividends are declared, the amount of dividends declared is transferred from the retained earnings account to paid-in capital accounts and this dividend is calculated based on the market price of the stock.

= 40,000 * 2% * 11

= $8,800