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Multiple Choice Question 100 On January 1, 2018, Waterway Industries had 116000 shares of its $5...

Multiple Choice Question 100

On January 1, 2018, Waterway Industries had 116000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 9800 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $13, the corporation declared a 16% stock dividend to be issued to stockholders of record on December 16, 2018. What was the impact of the 16% stock dividend on the balance of the retained earnings account?

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Answer #1
Shares outstanding as on December 16, 2018 = 116000 - 9800 106200
Amount of Stock dividend = Shares outstanding as on December 16, 2018 * Market price * Stock dividend % = 106200 * 13 * 16% 220896
The impact of the 16% stock dividend on the balance of the retained earnings account is that : It will decrease by $220896
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