Atkins Company had 20,000 shares of $5 par value common stock outstanding prior to a 10% common stock dividend declaration and distribution.The market value of the common stock on the declaration date was $11.Which of the following statements correctly describes the affect of the common stock dividend and declaration?
A)Retained earnings decreased $22,000.
B)Retained earnings decreased $10,000.
C)Total stockholders' equity decreased $22,000.
D)Total stockholders' equity decreased $10,000.

Question

Quizplus · Accepted Answer

The decrease in retained earnings ($22,000) equals the market value of the common shares issued (20,000 F1F1F1S1F1F1F10 10%) F1F1F1S1F1F1F10 $11, the increase in retained earnings. So there is no effect on stockholders' equity.

Atkins Company Had 20,000 Shares of $5 Par Value Common