A Firm Has Retained Earnings of $11 Million, a Common

A firm has retained earnings of $11 million, a common shares account of $2 million, and additional paid-in-capital of $6 million, and the firm just paid a 5 percent stock dividend. Assume that fair market value is reflected in the relative size of both the common shares account and the additional paid-in-capital account. Which of the following statements is correct?

A) Retained earnings will increase by $400,000.
B) Common shares will increase by $266,667.
C) Additional paid-in-capital will increase by $300,000.
D) None of the statements are correct.