On October 1, 2011, Chief Corporation declared and issued a 10% stock dividend. Prior to this date, Chief had 80,000 shares of $5 par common stock outstanding. The market value of Chief Corporation on the date of declaration was $10 per share. As a result of this dividend, Chief’s retained earnings will:

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On October 1, 2011, Chief Corporation declared and issued a 10% stock dividend. Prior to this date, Chief had 80,000 shares of $5 par common stock outstanding. The market value of Chief Corporation on the date of declaration was $10 per share. As a result of this dividend, Chief’s retained earnings will:

A. Decrease by $80,000.
B. Not change.
C. Decrease by $40,000.
D. Increase by $80,000.

Answer: A

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