Which of the following statements is correct?

Question

Quizplus · Accepted Answer

When a stock dividend is distributed, no assets leave or enter the corporation. Instead, the corporation transfers a portion of its retained earnings to the Common Stock and Additional Paid-In Capital accounts. The total assets and total equity remain unchanged.

Option B is incorrect because the Common Stock Dividends Distributable account is a temporary account that appears on the balance sheet only until the dividend is distributed.

Option C is incorrect because the total amount debited to Retained Earnings is the fair market value of the shares to be issued, not the par value.

Option D is incorrect because the total amount of the dividend is not debited to the Common Stock account, but is instead allocated between the Common Stock and Additional Paid-In Capital accounts.

Which of the Following Statements Is Correct