If a firm has retained earnings of $20 million, a common shares account of $25 million, and additional paid-in-capital of $15 million, how much would be transferred in (or out) of these accounts in response to a 15 percent stock dividend, respectively?

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Quizplus · Accepted Answer

In a stock dividend, retained earnings are reduced by the market value of the new shares issued, while common shares and additional paid-in-capital are increased by the same amount. A 15% stock dividend would reduce retained earnings by 15% of the total equity and increase both common shares and additional paid-in-capital by 15% of the total equity.

If a Firm Has Retained Earnings of $20 Million, a Common