A stock dividend
A)results in a transfer of retained earnings to contributed capital.
B)increases the number of shares outstanding and involves a pro rata reduction in the par value per share.
C)is accounted for in exactly the same manner as a stock split.
D)results in a transfer of retained earnings to contributed capital and also increases the number of shares outstanding and involves a pro rata reduction in the par value per share.

Question

Quizplus · Accepted Answer

The declaration and distribution of a stock dividend affects stockholder equity accounts only; retained earnings decreases, common stock and capital in excess of par (the sum of these two accounts is contributed capital) increases in total by an amount equal to the retained earnings decrease.

A Stock Dividend