The directors declare a 5% stock dividend when the market value is $10. The reduction of retained...

Bell Company has 2 million shares of common stock with par of $10. Additional paidin capital totals $15 million, and retained earnings is $15 million. The directors declare a 5% stock dividend when the market value is $10. The reduction of retained earnings as a result of the declaration will be

1. $0.

2. $1 million.

3. $800,000.

4. $600,000.

5. None of the above.