The Earth Shoe Company, Whose Stock Has a Market Value

Multiple Choice

The Earth Shoe Company, whose stock has a market value of $20, has the following common equity accounts on its balance sheet: $\begin{array}{ll}\text { Common stock ( } \$ 1 \text { par, } 1,000,000 \text { shares) } & \$ 1,000,000 \\\text { Contributed capital in excess of par } & \$ 14,000,000 \\\text { Retained earnings } & \$ 52,000,000\\\text { Total common stockholders' equity }&\$67,000,000\end{array}$ ? If the firm declares a 5% stock dividend, what will be the retained earnings figure after the dividend is paid?

A) $1,000,000
B) $51,000,000
C) $14,950,000
D) $5,000,000