Sarina Company Plans to Issue a Large Stock Dividend

Multiple Choice

Sarina Company plans to issue a large stock dividend. In accounting for this transaction, what effects occur to the contributed capital section of stockholders' equity?

A) Common stock increases by the total market value of the dividend.
B) Common stock increases by the number of dividend shares × par value per share, and retained earnings decreases for the same amount.
C) Common stock increases by the number of dividend shares × par value per share, and retained earnings increases for the balance.
D) Retained earnings increases by the number of dividend shares × par value per share, and additional paid-in capital increases for the balance.