DORA Company declared and distributed a 10% stock dividend on 20,000 shares of issued and outstanding $5 par value common stock.The market price per share on the declaration date was $9 and was $10 on the distribution date.Which of the following correctly describes the accounting for the declaration and distribution of the stock dividend?
A)Retained earnings decreased $20,000.
B)Capital in excess of par increased $10,000.
C)Common stock increased $18,000.
D)Retained earnings decreased $18,000.

Question

Quizplus · Accepted Answer

The retained earnings decrease ($18,000) equals the number of shares issued (20,000 F1F1F1S1F1F1F10 10%) multiplied by the market price per share ($9) on the declaration date.

DORA Company Declared and Distributed a 10% Stock Dividend on 20,000