A stock dividend:Multiple Choiceis accounted for like a stock split.will reduce stockholders' equity similar to a cash dividend.will not change any of the accounts within stockholders' equity.will reduce Retained Earnings similar to a cash dividend.
Question
A stock dividend:Multiple Choiceis accounted for like a stock split.will reduce stockholders' equity similar to a cash dividend.will not change any of the accounts within stockholders' equity.will reduce Retained Earnings similar to a cash dividend.
Solution
A stock dividend will not change any of the accounts within stockholders' equity.
Here's why:
A stock dividend is a dividend payment made in the form of additional shares rather than a cash payout. Company's issued shares are distributed to shareholders. This increases the number of shares outstanding.
Stock dividends reallocate part of a company's retained earnings to its common stock and additional paid-in capital accounts. Therefore, it does not reduce the total stockholders' equity. It just shifts it between accounts.
Cash dividends, on the other hand, are paid out of a company's retained earnings and reduce stockholders' equity.
Similar Questions
A stock dividend ______. (Check all that apply.)Multiple select question.distributes additional shares of stock to existing stockholders on a pro rata basis.causes retained earnings to decrease.increases a stockholders' percentage ownership in the corporation.causes total stockholders' equity to decrease.
Dividend policy of a firm is governed by:(i) Long Term Financing Decision:As we know that one of the financing options is ‘Equity’. Equity can either be raisedexternally through issue of new equity shares or can be generated internally throughretained earnings. For Equity, retained earnings are preferable because they do notinvolve any floatation costs (issue expenses).But whether to retain or distribute the profits, forms the basis of this decision.Further, payment of cash dividend reduces the amount of funds required to financeprofitable investment opportunities thereby restricting its financing options.In this backdrop, the decision is based on the following:1. Whether the organization has opportunities in hand to invest the profit,if retained?2. Whether the return on such investment (ROI) will be higher than theexpectations of shareholders i.e. Ke?
When a company pays a dividend the: Group of answer choices Dividend Paid account will increase with a debit. Dividends Paid account will be increased with a credit. Retained Earnings account will be directly increased with a credit. Dividends Paid account will be decreased with a debit.
Dividends paid: Group of answer choices increase assets. increase expenses. decrease revenues. decrease retained earnings.
A stock dividend is recorded with a transfer from:Multiple ChoiceContributed capital to retained earnings.Retained earnings to contributed capital.Retained earnings to assets.Contributed capital to assets.Assets to contributed capital.
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