Which of the following correctly describes the effect of declaring and distributing a common stock dividend?
A)Total stockholders' equity decreases.
B)Total stockholders' equity remains the same.
C)The number of shares outstanding increases while the par value of each share decreases.
D)The number of shares outstanding decreases while the par value of each share increases.

Question

Quizplus · Accepted Answer

When a company declares and distributes a common stock dividend, the total stockholders' equity remains the same. This is because the dividend is paid out of the company's accumulated earnings, which are already reflected in the balance sheet as retained earnings. The number of shares outstanding may increase, but the par value of each share does not necessarily decrease.

Which of the Following Correctly Describes the Effect of Declaring