The declaration and issuance of a stock dividend results in a reduction of the issuing corporation's total stockholders' equity.

Question

Quizplus · Accepted Answer

The declaration and issuance of a stock dividend does not result in a reduction of the issuing corporation's total stockholders' equity. Instead, it involves a transfer of a portion of retained earnings to capital stock or additional paid-in capital accounts. As a result, the total stockholders' equity remains the same, but the number of outstanding shares increases, leading to a decrease in the earnings per share and an increase in the number of shares held by each shareholder.

The Declaration and Issuance of a Stock Dividend Results in a Reduction