When a stock dividend is declared, which of the following accounts is credited?
A) Common Stock
B) Dividends Payable
C) Stock Dividends Distributable
D) Retained Earnings

Question

Quizplus · Accepted Answer

When a stock dividend is declared, the company must transfer the ownership of the newly issued shares from its treasury stock to its shareholders. Therefore, a new account called "Stock Dividends Distributable" is credited to indicate that these shares are now pending distribution to shareholders. It is not appropriate to credit Common Stock since the new shares have not been issued yet. Dividends Payable is used for cash dividends rather than stock dividends, and Retained Earnings is not affected by the declaration of a stock dividend.

When a Stock Dividend Is Declared, Which of the Following