Final answer:
The amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend is c. $8,800.
Step-by-step explanation:
When a stock dividend is declared, a company transfers an amount from the retained earnings account to the paid-in capital accounts. The transfer is typically equal to the fair market value of the additional shares issued. To calculate the transfer amount, we first need to determine the number of additional shares issued as a result of the dividend. In this case, the company issued a 2% stock dividend. To find the number of additional shares, we multiply the number of shares outstanding (40,000) by the stock dividend rate (2%): 40,000 x 2% = 800 additional shares.
Next, we calculate the fair market value of the additional shares. The market price per share at the time of the dividend was $11. Therefore, the fair market value of each additional share is $11.
Finally, to calculate the total amount transferred from the retained earnings account to the paid-in capital accounts, we multiply the number of additional shares (800) by the fair market value per share ($11): 800 x $11 = $8,800.