Which of the following is true about a stock dividend.
A)Assets decrease and owners' equity decreases
B)Assets increase and Liabilities increase
C)Contributed Capital increases and Retained earnings decreases
D)Liabilities decrease and Contributed Capital Increases

Question

Quizplus · Accepted Answer

A stock dividend is a distribution of additional shares to existing shareholders, which means it does not involve cash or any other asset, hence there is no change in assets or liabilities. However, since additional shares are being distributed, there is an increase in the contributed capital account and a decrease in the retained earnings account, making option C the correct choice.

Which of the Following Is True About a Stock Dividend