Stock dividends do not decrease total shareholders' equity, reduce total assets of the company, or increase total liabilities upon declaration. Instead, they simply represent a transfer of a portion of company earnings to shareholders in the form of additional shares of stock. This does not affect the overall equity of the company.

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Stock Dividends

Question 26

Multiple Choice

Stock dividends:

A) decrease total shareholders' equity
B) have no effect on total shareholders' equity
C) reduce the total assets of the company
D) increase total liabilities upon declaration

Correct Answer: