50% dividend is declared
- This is a large dividend so use par to capitalize retained earnings. Rationale is that the market value is no longer reliable with such a drastic increase in the number of shares.
- (Same example) Number of shares involved:
- 600 shares x 50% = 300 new shares issued.
- Amount of retained earnings involved is 300 new shares times the $20 par value or $6,000.