How would the declaration of a 10% stock dividend affect each of the following amounts (after the accounts are closed at period-end)?

Question

Quizplus · Accepted Answer

Small stock dividends are recorded at the market value of the shares issued, causing retained earnings to decrease and paid-in capital to increase by this amount. Since retained earnings and paid-in capital are both included in total stockholders' equity, there is no effect because the increase and the decrease offset each other.

How Would the Declaration of a 10% Stock Dividend Affect