Ludwick Inc.has retained earnings of $800,000 and total equity of $2,000,000.It has 200,000 ordinary shares with a $5 par value outstanding, which is currently selling for $30 per share.If Ludwick declares a 10% share dividend on its ordinary shares:

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When a 10% share dividend is declared, 20,000 new shares (10% of 200,000) are issued. These shares are valued at the current market price of $30, not the par value. Therefore, retained earnings decrease by 20,000 shares x $30 = $600,000, and share capital and share premium increase by the same amount, keeping total equity unchanged.