Davidson Company Has 10,000,000 Common Shares Issued and 500,000 Shares

Multiple Choice

Davidson Company has 10,000,000 common shares issued and 500,000 shares of treasury stock.The stock's par value is $2 per share and its current market price is $25 per share.Which of the following is correct when a 15% stock dividend is declared and distributed?

A) Retained earnings will decrease $37.5 million.
B) Retained earnings will decrease $35.625 million.
C) Retained earnings will decrease $3 million.
D) Retained earnings will decrease $2.85 million.