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Rick Co. had 36 million shares of $1 par common stock outstanding at January 1, 2021. In October 2021, Rick Co.'s Board of Directors declared and distributed a 1% common stock dividend when the market value of its common stock was $56 per share. In recording this transaction, Rick would:

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Answer:

Debit retained earnings for $20,160,000

Explanation:

Calculation to determine what Rick would record

First step

Shares to be distributed = .01 × 36 million

Shares to be distributed= 360,000 shares

Now let determine the Retained earnings

Retained earnings: Market value of shares = 360,000 × $56

Retained earnings: Market value of shares= $20,160,000

Therefore In recording this transaction, Rick would:Debit retained earnings for $20,160,000

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