At the declaration date, the stock dividend account is increased by the fair market value of the shares to be issued.

Question

Quizplus · Accepted Answer

The stock dividend account is increased by the fair market value of the shares to be issued because the company is essentially issuing new shares to its shareholders. The fair market value of the shares is the amount that the company would receive if it sold the shares on the open market.

At the Declaration Date, the Stock Dividend Account Is Increased