Rayan Company has 420, 000 shares of $ 10 par. 3 value ordinary shares outstanding. During the year Rayan declared a 5% share dividend when the market price of the shares was $ 36 per share. Three months later Rayan declared a $. 60 per share cash dividend. As a result of the dividends declared during the year, retained earnings [ * decreased by

The retained earnings decreased by $1,020,600

Step-by-step explanation:

Given that Rayan Company has 420,000 shares of $ 10 par. Rayan then declared a 5% share dividend when the market price of the shares was $36 per share.

Let's calculate the shares issued as stock dividends below:

Issued shares = stock dividends * outstanding shares

= 5% * 420,000

= 21,000

21,000 shares were issued.

Let's calculate the stock dividends.

Stock dividends = issued shares * market price per share

= 21,000 * $36

= $756,000

Stock dividends is $756,000

Let's calculate the amount of cash dividends, since the company declared a $0.60 per share cash dividend after 3 months. We have:

Cash dividend = cash dividend per share * new number of shares.

= $0.60 * (420,000 + 21,000)

= $0.60 * 441,000

= $264,600

Cash dividends paid is $264,600

The find the decrease in retained earnings, we have:

Decrease in Retained earnings = cost of stock dividend + cash dividend.

= $756,000 + $264,600

= $1,020,600

Therefore, the retained earnings decreased by $1,020,600