Question

Marigold corp. has 634000 shares of $10 par value common stock outstanding. during the year marigold declared a 13% stock dividend when the market price of the stock was $46 per share. two months later marigold declared a $0.60 per share cash dividend. as a result of the dividends declared during the year, retained earnings decreased by: $ 505000. $3791320. $ 429852. $4221172.

Answer 1

No. of shares outstanding before stock dividend = 634000

Price per share = $46

Stock dividend issued (shares issued) = 634000 x 13%

= 82,420

Value of stocks issued as stock dividend = 82420 x $46 = $3,791,320

No. of shares outstanding after stock dividend = 634,000 +82,420

=716420

Cash dividend = 716420 x 0.60

= 429,852

Total reduction in retained earnings = total value of dividend issued

= $3,791,320 + $429,852

= $4,221,172