When stock dividends are distributed
A) Common Stock Dividends Distributable is decreased.
B) Retained Earnings is decreased.
C) Paid-in Capital in Excess of Par is debited if it is a small stock dividend.
D) no entry is necessary if it is a large stock dividend.

Question

Quizplus · Accepted Answer

When stock dividends are distributed, Common Stock Dividends Distributable is decreased as the amount is now being transferred to Common Stock. Retained Earnings is not decreased as it is not used to pay for dividend distributions. Paid-in Capital in Excess of Par is only debited if it is a small stock dividend, but not in all cases, therefore it is not a general entry for all stock dividends. No entry is necessary for a large stock dividend because it does not affect the company's financial position significantly.

When Stock Dividends Are Distributed