Which of the following actions will increase the balance in the Common Stock account?

Question

Quizplus · Accepted Answer

When a company declares and distributes a stock dividend, the balance in the Common Stock account increases. This is because the company is essentially transferring a portion of retained earnings to the Common Stock account, increasing the number of shares outstanding without changing the total amount of equity.

None of the other options (cash dividend, stock split, and purchase of treasury stock) would increase the balance in the Common Stock account. A cash dividend would decrease retained earnings and decrease the overall equity of the company. A stock split would increase the number of outstanding shares, but also decrease the par value per share, which would not affect the balance in the Common Stock account. A purchase of treasury stock would decrease both cash and equity, since the company is essentially buying back its own shares.

Which of the Following Actions Will Increase the Balance in the Common