If a stockholder receives a dividend that reduces retained earnings by the fair value of the stock the stockholder has received a

Question

Quizplus · Accepted Answer

When a stockholder receives a dividend that reduces retained earnings by the fair value of the stock the stockholder has received, it is called a small stock dividend. In a small stock dividend, the stockholder receives additional shares of stock instead of cash. The reduction of retained earnings is based on the fair value of the stock, which is usually less than 20% of the total outstanding shares of the corporation.

If a Stockholder Receives a Dividend That Reduces Retained Earnings