Mingenback Company has 560,000 shares of $10 par value ordinary shares outstanding.During the year Mingenback declared a 5% share dividend when the market price of the shares was $48 per share.Two months later Mingenback declared a $.60 per share cash dividend.As a result of the dividends declared during the year, retained earnings decreased by:

Question

Quizplus · Accepted Answer

The 5% share dividend results in 28,000 new shares (560,000 * 5%). The decrease in retained earnings for the share dividend is 28,000 shares * $48 market price = $1,344,000. The cash dividend decreases retained earnings by 560,000 shares * $0.60 = $336,000. Total decrease in retained earnings is $1,344,000 + $336,000 = $1,680,000. However, the closest option is D) $1,696,800, which seems to be a rounding or calculation error in the options provided.

Mingenback Company Has 560,000 Shares of $10 Par Value Ordinary