Nice International originally issued 105,000 shares of common stock at a price of $22 per share. A year later, it distributed a 12% stock dividend to shareholders. At the time of the stock dividend, the share price had increased to $27 per share. Which of the following statements is true?

Question

Quizplus · Accepted Answer

When a company issues a stock dividend, it distributes additional shares to its shareholders at no cost based on their current holdings. This action does not generate sales revenue, nor does it result in a gain or loss for the company. Instead, it transfers a portion of retained earnings to common stock. Therefore, Nice International will record neither a gain nor a loss from the stock dividend distribution.

Nice International Originally Issued 105,000 Shares of Common Stock at a Price