Which of the following statements with regard to large stock dividends is true?
A)As a result of the stock dividend,retained earnings is reduced by the par value of the stock issued.
B)Retained earnings is reduced by the market value of the stock issued in the stock dividend.
C)If the market price of the stock before a 50% stock dividend is $30,after the stock dividend it will be $45.
D)As the result of a 50% stock dividend,a stockholder who had previously held 20 shares will then hold 40 shares.

Question

Quizplus · Accepted Answer

When a large stock dividend is declared, the retained earnings of the company are reduced by the par value of the additional shares issued. The market value of the stock before and after the stock dividend may fluctuate but does not directly affect the reduction in retained earnings or the increase in shares held by stockholders. Option C and D are therefore incorrect.

Which of the Following Statements with Regard to Large Stock