A corporation should account for the declaration of a 10 percent stock dividend by
A)transferring from retained earnings to contributed capital an amount equal to the legal capital represented by the dividend shares.
B)transferring from retained earnings to contributed capital an amount equal to the market value of the dividend shares.
C)transferring from retained earnings to contributed capital whatever amount the board of directors deems appropriate.
D)making only a memorandum entry in the general journal.

Question

Quizplus · Accepted Answer

When a corporation declares a stock dividend, it transfers from retained earnings to contributed capital an amount equal to the market value of the dividend shares. This reflects the distribution of additional shares to shareholders without receiving any new investment in return, effectively transferring value from retained earnings to contributed capital.

A Corporation Should Account for the Declaration of a 10