A large stock dividend:
A)Results in a transfer of retained earnings to common stock and additional paid-in capital.
B)Reduces the par value per share by the percentage of the additional shares issued.
C)Is accounted for in exactly the same manner as a stock split.
D)Results in a transfer of retained earnings to the common stock account.

Question

Quizplus · Accepted Answer

A large stock dividend results in the transfer of retained earnings to the common stock account. This is because a large stock dividend involves distributing additional shares of common stock to existing shareholders, and the company must transfer earnings from retained earnings to the common stock account to account for the additional shares. A large stock dividend does not affect par value or require the creation of additional paid-in capital. Although a large stock dividend may have similar effects to a stock split, the accounting treatment is different.

A Large Stock Dividend