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Question
Use the following information to answer the following question(s).Your firm is planning to pay a 15% stock dividend. The market price for the stock has been $84. The table below presents the equity portion of your firm's balance sheet before the dividend.
| Common stock | |
| Par value | |
| (1 million shares | |
| outstanding; $4 par value) | $4,000,000 |
| Paid-in capital | 16,000,000 |
| Retained earnings | 30,000,000 |
| Total equity | $50,000,000 |
Which of the following would result from payment of the stock dividend?
A) Total equity would remain at $50,000,000.
B) Total equity would increase to $57,500,000.
C) Total equity would decrease to $43,478,261.
D) The effect on the equity account would depend on the market's reaction to the dividend.
Answer
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