Murphy's has shares of stock outstanding with a par value of $1 per share and a market value of $24.60 per share.The balance sheet shows $32,500 in the capital in excess of par account,$12,000 in the common stock account,and $68,700 in the retained earnings account.The firm just announced a stock dividend of 10 percent.What will be the balance in the retained earnings account after the dividend?

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The correct answer is A.The stock dividend will result in a 10% increase in the number of shares outstanding. This will decrease the par value of the stock by 10%, from $12,000 to $10,800. The excess of par value will also decrease by 10%, from $32,500 to $29,250. The retained earnings account will decrease by the amount of the dividend, which is $6,870 (10% of $68,700). Therefore, the balance in the retained earnings account after the dividend will be $68,700 - $6,870 = $61,830.

Murphy's Has Shares of Stock Outstanding with a Par Value