A stock dividend does not affect the total amount of stockholders' equity.

Question

Quizplus · Accepted Answer

A stock dividend is a distribution of additional shares to existing shareholders in proportion to their current holdings. Since the total number of shares increases proportionally with the distribution of the stock dividend, the value per share decreases. However, the overall value of the shareholders' equity remains the same as the increase in the number of shares is offset by the decrease in the value per share. Therefore, a stock dividend does not affect the total amount of stockholders' equity.

A Stock Dividend Does Not Affect the Total Amount of Stockholders