A corporation with $10 par common stock issues a large stock dividend.The capitalization of retained earnings is equal to:
A)The par value of the shares to be distributed.
B)The par value of the shares outstanding.
C)The market value of the shares to be distributed.
D)The market value of the shares outstanding.
E)There is no capitalization of retained earnings in the case of a large stock dividend.

Question

Quizplus · Accepted Answer

A stock dividend does not involve the transfer of assets from the company to the shareholders, so the value of the distributed shares will be reflected in the capitalization of retained earnings. The capitalization will be equal to the par value of the shares to be distributed.

A Corporation with $10 Par Common Stock Issues a Large