During the year, Grey Company issued 4,000 shares with P100 par value in connection with a

share dividend. The market value per share on the date of declaration was P150.
The shareholder’s equity before issuance of the share dividend was as follows:
Share capital, P100 par, 20,000 shares outstanding 2,000,000
Share premium 3,000,000
Retained earnings 1,500,000
What is the retained earnings balance immediately after the share dividend?
a. 1,100,000
b. 1,500,000
c. 2,100,000
d. 900,000
Solution:
Retained earnings before share 1,500,00
dividend 0
Less: Share dividend (4,000x100) 400,000
1,100,00
Retained earnings after share dividend 0