The declaration of a stock dividend creates a liability for the corporation.

Question

Quizplus · Accepted Answer

The declaration of a stock dividend does not create a liability for the corporation. It simply transfers a portion of retained earnings or additional paid-in capital to the common stock account. This increases the number of shares outstanding and reduces the market value per share, but does not affect the overall value of the company or create a liability.

The Declaration of a Stock Dividend Creates a Liability for the Corporation