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On june 1, 20x5, jomax corporation had 60,000 shares of $10 par value common stock outstanding. on june 2, 20x5, jomax declared a 40 percent stock dividend to be distributed on july 5, 20x5, to shareholders of record on june 15, 20x5. what amount of retained earnings should be transferred to contributed capital because of this dividend?

Answer :

MissPhiladelphia
I've answered a similar question like this and it has the complete question with a choice, and these choices are the following: 

A. None
 B. Par value per share multiplied by the number of dividend shares 

C. Market value of the stock at the date of distribution multiplied by the number of dividend shares 

D. Market value of the stock at the date of declaration multiplied by the number of dividend shares

In the problem, about the value of stocks, the amount of retained earnings should be computed by multiplying the value of shares and the number of dividend shares. Thus the answer in the choices should be letter B. 

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