Both large and small stock dividends will cause a decrease in retained earnings for the market value of the shares issued at the date the dividend is declared.

Question

Quizplus · Accepted Answer

A stock dividend decreases retained earnings by the fair market value of the shares issued only if it is a small stock dividend (typically less than 20-25%). Large stock dividends decrease retained earnings by the par or stated value of the shares issued.

Both Large and Small Stock Dividends Will Cause a Decrease