When a company declares a stock dividend, which of the following occurs?

Question

Quizplus · Accepted Answer

When a company declares a stock dividend, retained earnings is reduced since a portion of earnings is distributed to the shareholders in the form of additional shares of stock. No liability is created and stockholders' equity is not decreased since the stock dividend is a transfer of existing equity to additional shares of stock. The financing section of the statement of cash flows is not affected by the declaration of a stock dividend.

When a Company Declares a Stock Dividend, Which of the Following