Dora Company declared and distributed a 10% stock dividend on 20,000 shares of issued and outstanding $5 par value common stock. The market price per share was $9 on the declaration date. Which of the following correctly describes the effect of accounting for the declaration and distribution of the stock dividend?

Additional paid-in capital increased $8,000.

Retained earnings increased $18,000.

Common stock increased $1,000.

Retained earnings decreased $10,000.