Which of the following is not true about a stock dividend?
A)With a stock dividend,the firm issues a percentage of outstanding stock as new shares to existing shareholders.
B)The overall effect of a stock dividend is to leave total stockholders' equity and each owner's share of stockholders' equity unchanged.
C)In theory,with a stock dividend,total market value considering all outstanding shares should not change.
D)Since the number of shares changes under a stock dividend,any ratio based on the number of shares must be restated.
E)The accounting for a stock dividend,assuming the distribution is relatively small,requires that the par value of the stock be removed from retained earnings.

Question

Quizplus · Accepted Answer

The accounting for a stock dividend, assuming the distribution is relatively small, requires that the amount transferred from retained earnings to paid-in capital be based on the fair market value of the shares issued rather than the par value. Therefore, the par value of the stock is not removed from retained earnings.

Which of the Following Is Not True About a Stock