When a corporation issues a small stock dividend, which of the following is false?

Question

Quizplus · Accepted Answer

a. Cash decreases.
When a corporation issues a small stock dividend, it does not pay out cash to shareholders. Instead, it issues additional shares of stock. Therefore, the company's cash balance is not affected by the issuance of a small stock dividend. The correct impacts of a small stock dividend are as follows:
b. Total stockholders' equity remains the same. This is true because the issuance of a small stock dividend simply reallocates a portion of retained earnings to the capital stock accounts. The overall equity of the shareholders does not change; it is just distributed differently between retained earnings and paid-in capital.
c. The capital stock accounts increase. This is true because additional shares are issued, which increases the common stock or preferred stock account, depending on the type of shares issued.
d. Retained earnings is decreased. This is true because the value of the stock dividend is transferred out of retained earnings and into the capital stock accounts. This reflects the distribution of a portion of the company's earnings to shareholders in the form of additional shares rather than cash.

When a Corporation Issues a Small Stock Dividend, Which of the Following