On January 31,2015,Village Bank had 500,000 shares of $2 par value common stock outstanding.On that date,the company declared a 14% stock dividend when the market price of the stock was $37 per share.The immediate effect of this dividend upon Village Bank was:

Question

Quizplus · Accepted Answer

The stock dividend reduces retained earnings by the market value of the new shares issued, which is 14% of 500,000 shares times $37 per share, totaling $2,590,000.

On January 31,2015,Village Bank Had 500,000 Shares of $2 Par