Small stock dividends are recorded by debiting Retained Earnings for the par value per share.

Question

Quizplus · Accepted Answer

Small stock dividends are recorded by debiting Retained Earnings for the market value, rather than the par value, per share. This is because small stock dividends do not have a significant impact on the company's financial position and are usually distributed as a way to reward shareholders. Therefore, the market value of the shares is a better representation of the economic value of the dividend than the par value.

Small Stock Dividends Are Recorded by Debiting Retained Earnings for the Par