Asked by
Ellie Mwangi
on Dec 16, 2024
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Eggers Inc. has retained earnings of $1600000 and total stockholders' equity of $4000000. It has 400000 shares of $5 par value common stock outstanding which is currently selling for $30 per share. If Eggers declares a 10% stock dividend on its common stock:
A) net income will decrease by $200000.
B) retained earnings will decrease by $200000 and total stockholders' equity will increase by $200000.
C) retained earnings will decrease by $1200000 and total stockholders' equity will increase by $1200000.
D) retained earnings will decrease by $1200000 and total paid-in capital will increase by $1200000.
Retained Earnings
The portion of net earnings not distributed as dividends to shareholders but retained by the company for reinvestment or debt payment.
Stock Dividend
A dividend payment made in the form of additional shares rather than a cash payout, increasing the total number of shares owned.
Total Stockholders' Equity
The total value of a company's assets that are claimable by its shareholders, excluding liabilities.
- Assess the economic impacts of pronouncing and distributing both cash and stock dividends.
- Gain insight into the significance and consequence of retained earnings, as well as the constraints and adjustments involved, in the distribution of dividends.
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Learning Objectives
- Assess the economic impacts of pronouncing and distributing both cash and stock dividends.
- Gain insight into the significance and consequence of retained earnings, as well as the constraints and adjustments involved, in the distribution of dividends.