Enter 1, 2, 3, or 4 that represents the correct answer. The declaration and issuance of 12% stock dividend (when fair value of the share is greater than the par):

1. increases common shares outstanding and decreases total stockholders' equity.

2. decreases retained earnings and increases paid-in capital in excess of par.

3. does not change total stockholders equity and does not change paid-in capital in excess of par.

4. may increase or decrease paid-in capital in excess of par but does not change total stockholders' equity.