Question

On January 2, 2017, the board of directors of Michael declared a 10% stock dividend to be distributed on February 15, 2017. The market price of Michael Company's common stock was $75 per share on January 2, 2017. On the date of declaration, the retained earnings account should be decreased by

Answer 1

the decrease in the value of the retained earning is $172,500

Step-by-step explanation:

The computation of the decrease in the value of the retained earning is given below:

The dividend of the stock is

= (25,000 shares - 2,000 shares) × 10% × $75

= $172,500

Since there is the stock dividend of $172,500 so it ultimately reduced the retained earning account by $172,500