Discuss about the recording of the stock dividend

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Question 1: The Mulieri Company was authorized to issue 100,000 shares of common stock with a $10 par value. The company issued 30,000 shares for cash of $15 per share. Later, when the shares were selling for $20 per share on a stock exchange, the company issued another 9,000 shares as a stock dividend. Which of the following statements is true about the recording of the stock dividend ?

Option 1: The total amount of stockholders' equity is not affected but retained earnings is reduced by $90,000

Option 2: Stockholders' equity is reduced by $180,000 and retained earnings is also reduced by $180,000

Option 3: Stockholders' equity is reduced by $90,000 and retained earnings is reduced by $135,000

Option 4: The total amount of stockholders' equity is not effected but retained earnings is reduced by $180,000

Reference no: EM132586477

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