Fisher Company has 1,000,000 share of common stock with a par value of $10.Additional paid-in capital totals $10,000,000 and retained earnings is $12,000,000.The directors declare a 6% stock dividend when the market value is $5.The reduction of retained earnings as a result of the declaration will be:
A) $0
B) $300,000
C) $600,000
D) $500,000
E) none of the answers are correct

Question

Quizplus · Accepted Answer

The reduction in retained earnings is calculated by multiplying the number of shares to be issued (6% of 1,000,000 shares = 60,000 shares) by the market value per share ($5), resulting in $300,000.

Fisher Company Has 1,000,000 Share of Common Stock with a Par