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 2,000,000 1,200,000 $3,600,000 Paid-in capital excess of par Retained earnings Total shareholders' equity 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? $1,360,000. $1,540,000 $1,860,000 $1,920,000