Question

On January 1, 2015, VITO Corporation had 110,000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 10,000 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $10, the corporation declared a 20% stock dividend to be issued to stockholders of record on December 20, 2015. What was the impact of the 20% stock dividend on the balance of the retained earnings account

Answer 1

the impact is $200,000 decrease

Step-by-step explanation:

The computation of the impact is as follows

= (Total shares - treasury stock) × market price of the stock × dividend percentage

= (110,000 shares - 10,000 shares) × $10 × 20%

= $200,000 decrease

hence, the impact is $200,000 decrease