Katie Company had 40,700 shares of $2 par value common stock outstanding prior to a 40% common stock dividend declaration and distribution. The market value of the common stock on the declaration date was $10. Which of the following statements incorrectly describes the effect of recording the common stock dividend?

Additional Paid in capital increased $130,240.

Total stockholders' equity remained the same.

Additional paid-in capital remained the same

Retained earnings decreased $32,560.