Reference no: EM132495625

On January 1, The Blue Azul Diving Co. had total shareholders' equity as shown below when their shares were selling at $25 per share:

Common shares (125,000 shares)...................... $2,500,000

Retained earnings........................................... 4,000,000

Total shareholders' equity...................... $6,500,000

Question 1: Assume the company declared and issued a 10% stock dividend and that the market price remained constant. The effect of this dividend would

Option a) increase common shares by $312,500.

Option b) increase common shares by $250,000.

Option c) decrease retained earnings by $250,000.

Option d) increase common shares by $400,000.