The balance sheet of Rainbow Company included the following shareholders equity accounts at December 31, 2017:

Paid-in capital:
Common stock, 400,000 shares at $1 par	400,000
Paid-in capital --- excess of par	2,000,000
Retained earnings	1,200,000
Total shareholders equity	$3,600,000

On May 3, 2018, a 5-for-4 stock split was declared and distributed. The stock split was effected in the form of a 25% stock dividend. The market value of the $1 par common stock was $7 per share. On July 5, 2018, a 4% common stock dividend was declared and distributed. The market value of the common stock was $10 per share.

On December 1, 2018, the board of directors declared a cash dividend of $0.50 per share on its common shares, payable on December 28 to shareholders. What is the balance of retained earnings shown on December 31, 2018 balance sheet assuming net income is $800,000 for year 2018 and large stock dividend does not affect retained earnings?

A. 1,360,000

B.1,540,000

C. 1,860,000

D.1,920,000