On December 31, 2019, Dallas Starz, Inc., reported its shareholders' equity as follows:

Common Shares, no par value ; authorized 200,000 shares;

Issued and outstanding 120,000 shares $1,350,000

Retained Earnings $ 700,000

$2,050,000

On January 1, 2020, it declared a 10% stock dividend on its common shares when the market value of the common shares was $22 per share before market adjustment.

What was the effect on Dallas' retained earnings as a result of the above transactions?

Select one:

a.

$264,000 decrease

b.

$135,000 decrease

c.

$400,000 increase

d.

$240,000 increase

e.

The market price cannot be determined from the information given