Amber Corp. has 3 million shares outstanding, each selling at $30. If Amber announces a 20% stock dividend, then the transfer from retained earnings is equal to _____.

Question

Quizplus · Accepted Answer

A 20% stock dividend means that Amber Corp. will be issuing 20% more shares to its shareholders. In this case, 20% of 3 million shares is 0.6 million shares. At a price of $30 per share, the total value of the stock dividend is 0.6 million shares x $30 per share = $18,000,000.

The transfer from retained earnings is equal to the value of the stock dividend, which is $18,000,000. Therefore, the correct choice is B.