How will shareholders’ equity be affected by this stock dividend?

A company announced a stock dividend under which 1.000.000 shares will be issued to the holders of the 10.000.000 shares that are currently outstanding. The stock which has a par value of $1 per share, traded at $10 on the dividend declaration date.

How will shareholders’ equity be affected by this stock dividend?
A . Retained earnings will decrease by $1.000.000
B. Retained earnings will decrease by $9.000.000
C. Paid-in capital will increase by $9,000.000
D. Common stock will increase by $10.000.000

View Answer

Answer: C