Gilligan Corporation Was Established on February 15, Year 1

Multiple Choice

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: 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?

A) Increase the dividends account and decrease the cash account by $108,500.
B) 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.
C) Decrease the retained earnings account and increase the common stock account by $16,500.
D) 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.