Cash dividends on the $10 par value common stock of Ray Company were as follows:
|
1st quarter of 2007 |
$800,000 |
|
2nd quarter of 2007 |
900,000 |
|
3rd quarter of 2007 |
1,000,000 |
|
4th quarter of 2007 |
1,100,000 |
The 4th quarter cash dividend was declared on December 21, 2007 to stockholders of record on December 31, 2007. Payment of the 4th quarter cash dividend was made on January 18, 2008.
In addition, Ray declared a 5% stock dividend on its $10 par value common stock on December 3, 2007 when there were 300,000 shares issued and outstanding and the market value of the common stock was $20 per share. The shares were issued on December 24, 2007. What was the effect on the stockholders’ equity accounts of Ray Company as a result of the preceding transactions?
|
Common Stock |
Additional Paid in Capital |
Retained Earnings |
|
a. $ 0 |
$0 |
$3,800,000 dr |
|
b. $150,000 cr |
$0 |
$3,950,000 dr |
|
c. $150,000 cr |
$150,000 cr |
$4,100,000 dr |
|
d. $300,000 cr |
$300,000 dr |
$3,800,000 dr |