Masterson Company has 420,000 shares of $10 par value common stock outstanding. During the year Masterson declared a 15% stock dividend when the market price of the stock was $36 per share. Three months later Masterson declared a $.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by

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The stock dividend decreases retained earnings by the market value of the shares issued: 420,000 shares * 15% * $36 = $2,268,000. The cash dividend decreases retained earnings by the cash paid: (420,000 shares + 63,000 new shares from the stock dividend) * $0.60 = $291,600. Total decrease: $2,268,000 + $291,600 = $2,559,600. However, the correct calculation for the cash dividend should be based on the original shares, leading to $2,268,000 + $252,000 = $2,520,000. The closest option is A) $2,683,800, which seems to be a mistake in the options provided.

Masterson Company Has 420,000 Shares of $10 Par Value Common