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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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What is the effect of a stock dividend on stockholders’ equity?

  1. Stockholders’ equity is decreased.
  2. Retained earnings is increased.
  3. Additional paid-in capital is decreased.
  4. Total stockholders’ equity stays the same

To determine

Concept introduction:

Stock Dividend:

The Stock dividend is the number of shares given as dividend to the shareholders. The Stock dividend is declared first and shares are issued later. There are two journal entries made, one at the time of declaration of stock dividend and another at the time of issuance of shares.

To choose:

The correct statement about the effect of Stock dividend on stockholder’s equity.

Explanation

Explanation for correct answer:

The stock dividend does not affect the Total Stockholder’s equity. Hence the correct option is d.

Explanation for incorrect answers:

a. The stock dividend does not affect the Total Stockholder’s equity...

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