A stock dividend will cause an increase in total contributed capital at the date the dividend is declared.

Question

Quizplus · Accepted Answer

A stock dividend involves the distribution of additional shares of stock to existing shareholders, rather than cash. This results in an increase in the total number of outstanding shares and a proportional decrease in the book value per share, but does not affect the total contributed capital. However, the fair value of the newly issued shares may be more than the par value, and this excess value is transferred from retained earnings to contributed capital. Therefore, a stock dividend can increase the total contributed capital at the date of declaration.

A Stock Dividend Will Cause an Increase in Total Contributed