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4 January, 17:47

DuBois, Inc. announces a large stock dividend of 65% of the 4.96 million outstanding shares of common stock. The current price per share is $13.85. Par value of the stock is $0.01 per share. What effect does this dividend have on retained earnings?

A. $49,600 decrease

B. $32,240 decrease

C. $44,652,000 decrease

D. $11,591,288 decrease

E. None of the above

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Answers (1)
  1. 4 January, 18:03
    0
    Option (B) is correct.

    Explanation:

    Dividend per share:

    = (65% of Par value of the stock)

    = (65% * 0.01)

    = $0.0065

    Hence, the total dividend:

    = (Dividend per share * outstanding shares of common stock)

    = (0.0065 * 4.96 million)

    = $32,240

    Hence, the dividend would cause a decrease in retained earnings.

    Therefore, the correct option is B.
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