Hernandez Company has 350,000 shares of $10 par value ordinary shares outstanding.During the year, Hernandez declared a 10% share dividend when the market price of the stock was $30 per share.Four months later Hernandez declared a $.50 per share cash dividend.As a result of the dividends declared during the year, retained earnings decreased by

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The 10% share dividend results in 35,000 additional shares (10% of 350,000). The decrease in retained earnings is calculated using the market price: 35,000 shares x $30 = $1,050,000. The cash dividend is $0.50 per share on 385,000 shares (350,000 original + 35,000 new shares), totaling $192,500. The total decrease in retained earnings is $1,050,000 + $192,500 = $1,242,500.

Hernandez Company Has 350,000 Shares of $10 Par Value Ordinary