C is corrent. The solutions approach is to prepare the journal entries affecting the three accounts. First the cash dividends should be recorded as a $3,800,000 debit to retained earnings with a credit to cash and dividends payable as illustrated below. Next make the entry for the issuance of a 15,000 share (300,000 shares × 5%) stock dividend when the market price is $20/share and par value is $10/share. The entries result in debits to retained earnings of $4,100,000 and credits to common stock and APIC of $150,000 each.| Retained earnings | 3,800,000 | | | Cash | | 2,700,000 | | Dividends payable | | 1,100,000 | | Retained earnings | 300,000 | | | Common stock | | 150,000 | | APIC | | 150,000 |
A is incorrect. The solutions approach is to prepare the journal entries affecting the three accounts. First the cash dividends should be recorded as a $3,800,000 debit to retained earnings with a credit to cash and dividends payable as illustrated below. Next make the entry for the issuance of a 15,000 share (300,000 shares × 5%) stock dividend when the market price is $20/share and par value is $10/share. The entries result in debits to retained earnings of $4,100,000 and credits to common stock and APIC of $150,000 each.| Retained earnings | 3,800,000 | | | Cash | | 2,700,000 | | Dividends payable | | 1,100,000 | | Retained earnings | 300,000 | | | Common stock | | 150,000 | | APIC | | 150,000 |
B is incorrect. The solutions approach is to prepare the journal entries affecting the three accounts. First the cash dividends should be recorded as a $3,800,000 debit to retained earnings with a credit to cash and dividends payable as illustrated below. Next make the entry for the issuance of a 15,000 share (300,000 shares × 5%) stock dividend when the market price is $20/share and par value is $10/share. The entries result in debits to retained earnings of $4,100,000 and credits to common stock and APIC of $150,000 each.| Retained earnings | 3,800,000 | | | Cash | | 2,700,000 | | Dividends payable | | 1,100,000 | | Retained earnings | 300,000 | | | Common stock | | 150,000 | | APIC | | 150,000 |
D is incorrect. The solutions approach is to prepare the journal entries affecting the three accounts. First the cash dividends should be recorded as a $3,800,000 debit to retained earnings with a credit to cash and dividends payable as illustrated below. Next make the entry for the issuance of a 15,000 share (300,000 shares × 5%) stock dividend when the market price is $20/share and par value is $10/share. The entries result in debits to retained earnings of $4,100,000 and credits to common stock and APIC of $150,000 each.| Retained earnings | 3,800,000 | | | Cash | | 2,700,000 | | Dividends payable | | 1,100,000 | | Retained earnings | 300,000 | | | Common stock | | 150,000 | | APIC | | 150,000 |
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