A stock dividend usually causes a transfer of retained earnings to share capital, but not a decrease in the assets of the issuing corporation.

Question

Quizplus · Accepted Answer

A stock dividend does not cause a decrease in the assets of the issuing corporation because it involves the distribution of additional shares of stock to shareholders, rather than a distribution of the company's assets. The transfer of retained earnings to share capital is necessary in order to account for the newly issued shares.

A Stock Dividend Usually Causes a Transfer of Retained Earnings