Use the Following Information for Questions Below
on January 1,The $( 125,000$

Use the following information for questions below
On January 1,The Blue Azul Diving Co.had total shareholders' equity as shown below when their shares were selling at $25 per share:
Common shares $( 125,000$ shares) $\ldots \ldots \ldots \ldots . \$ 2,500,000$
Retained earnings $\ldots \ldots \ldots \ldots . 4,000,000$
Total shareholders' equity $\ldots \ldots \ldots \ldots . \$ 6,500,000$
-Assume the company declared and issued a 10% stock dividend and that the market price remained constant.The effect of this dividend would

A) increase common shares by $312,500.
B) increase common shares by $250,000.
C) decrease retained earnings by $250,000.
D) increase common shares by $400,000.