A stock dividend transfers:
A)Contributed capital to retained earnings.
B)Retained earnings to contributed capital.
C)Retained earnings to assets.
D)Contributed capital to assets.
E)Assets to contributed capital.

Question

Quizplus · Accepted Answer

A stock dividend transfers retained earnings to contributed capital, as the company is issuing additional shares to its shareholders without receiving any new assets or cash in return. This increases the number of outstanding shares and reduces the value of each share, but the total value of the shareholders' equity remains the same. Therefore, the retained earnings are transferred to the contributed capital account, as the earnings are used to finance the additional shares.

A Stock Dividend Transfers