On January 1, 2012, Culver Corporation had 110,000 shares of its $5 par value ordinary shares outstanding.On June 1, the corporation acquired 10,000 shares to be held in the treasury.On December 1, when the market price of the shares was $8, the corporation declared a 10% share dividend to be issued to shareholders of record on December 16, 2012.What was the impact of the 10% share dividend on the balance of the retained earnings account?

Question

Quizplus · Accepted Answer

The 10% share dividend is calculated on the 100,000 shares outstanding (110,000 - 10,000 treasury shares), resulting in 10,000 new shares. The market price of $8 per share is used to value the dividend, leading to an $80,000 decrease in retained earnings (10,000 shares x $8).

On January 1, 2012, Culver Corporation Had 110,000 Shares of Its