On October 1, 2017, Kraken Corporation declared and issued a 10% stock dividend. Prior to this date, Kraken had 80,000 shares of $5 par common stock outstanding. The market price of Kraken Corporation's common stock on the date of declaration was $10 per share. As a result of this dividend, Kraken's retained earnings will:

1. A)Increase by $80,000.
2. B)Not change.
3. C)Decrease by $40,000.
4. D)Decrease by $80,000.