Use the Following Information for Questions
on January 1

Use the following information for questions
On January 1, Canary Co. had total shareholders' equity as shown below when their shares were selling at $25 per share. $\begin{array}{ll}\text { Common shares (125,000 shares) } & \$ 2,500,000 \\\text { Retained earnings } & 4,000,000 \\\quad \text { Total shareholders' equity } & \$ 6,500,000\end{array}$
-Assume the company declared and issued a 50% stock dividend.The effect of this dividend would:

A) Increase common shares by $1,250,000 and shares issued and outstanding by 62,500
B) Increase common shares by $1,250,000 with no change in the number of issued and outstanding shares
C) Leave total shareholders' equity unchanged but increase the number of shares issued and outstanding to 187,500
D) Reduce retained earnings by $2,000,000 and double the number of shares issued and outstanding