What is the effect of a stock dividend on stockholders' equity?
A)Stockholders' equity is decreased.
B)Retained earnings is increased.
C)Additional paid-in capital is decreased.
D)Total stockholders' equity stays the same.

Question

Quizplus · Accepted Answer

A stock dividend does not affect the total amount of equity held by stockholders, as it simply results in a transfer of funds from retained earnings to additional paid-in capital. Retained earnings decrease as the dividend is paid out, while additional paid-in capital increases by the same amount, resulting in no net change to the overall equity of the company.

What Is the Effect of a Stock Dividend on Stockholders