A company declares a 50% stock dividend when there were 3.8 million common shares outstanding with a $1 par value. The current market price is $19 per common share. Which of the following will be the effect of the stock dividend?

Contributed capital will decrease by $1.90 million and retained earnings will increase by $1.90 million.

Retained earnings will decrease by $1.90 million and contributed capital will increase by $1.90 million.

Retained earnings will decrease by $36.10 million and contributed capital will increase by $36.10 million.

Contributed capital will decrease by $36.10 million and retained earnings will increase by $36.10 million.