Gilligan Corporation was established on February 15, Year 1. Gilligan is authorized to issue 500,000 shares of $6.00 par value common stock. As of December 30, Year 1, Gilligan's stockholders' equity accounts report the following balances: Common stock, $6 par, 500,000 shares authorized 55,000 shares issued and outstanding$330,000 Paid-in capital in excess of par - Common 440,000 $770,000 Retained earnings 1,400,000 Total Stockholders' Equity $2,170,000 On December 31, Year 1, Gilligan decides to issue a 5% stock dividend. At the time of issue, the market price of the stock was $22 per share.How will the issuance of the stock dividend affect the financial statements?

Question

A. Decrease the common stock account by $60,500, increase the retained earnings account by $16,500, and increase the paid-in capital in excess of par-Common
B. Decrease the retained earnings account and increase the common stock account by $16,500.
C. Decrease the retained earnings account by $60,500, increase the common stock account by $16,500, and increase the paid-in capital in excess of par-Common account by $44,000.
D. Increase the dividends account and decrease the cash account by $108,500.

Answer 1

Answer: C