Bryan & Bales has just declared a 15% stock dividend. The current price of the stock is above the par value. All other things being equal, which of the following account balances will be affected by the stock dividend?

Question

Quizplus · Accepted Answer

When a company declares a stock dividend, it issues additional shares to current shareholders, which affects several accounts on its balance sheet. The Common Stock account increases because the company issues additional shares. The Paid in Excess (or Additional Paid-In Capital) account may increase if the stock is issued at a value above its par value. Retained Earnings decrease because the value of the stock dividend is transferred out of this account to pay for the newly issued shares. Therefore, all of these account balances will be affected by the stock dividend.

Bryan & Bales Has Just Declared a 15% Stock Dividend