The stockholders’ equity of Gaffney Company at November 30, 2010, is presented below.
Common stock, par value $5, authorized 200,000 shares, 100,000 shares issued and outstanding | $500,000 |
Paidin capital in excess of par | 100,000 |
Retained earnings | 300,000 |
| Â | $900,000 |
On December 1, 2010, the board of directors of Gaffney Company declared a 5% stock dividend, to be distributed on December 20. The market price of the common stock was $10 on December 1 and $12 on December 20. What is the amount of the change to retained earnings as a result of the declaration and distribution of this stock dividend?
1. $0
2. $40,000
3. $50,000
4. $60,000
5. None of the above
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