The directors of Merchant Corporation are considering the issuance of a stock dividend. They have asked you to discuss the proposed action by answering the following questions. Instructions a.    What is a stock dividend? How is a stock dividend distinguished from a stock split (1) from a legal standpoint, and (2) from an accounting standpoint? b.    For what reasons does a corporation usually declare a stock dividend? A stock split? c.    Discuss the amount, if any, of retained earnings to be capitalized in connection with a stock dividend.

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