A stock dividend:
A) is the same thing as a stock split.
B) will reduce stockholders' equity just like a cash dividend.
C) will not change any of the accounts within stockholders' equity.
D) will reduce retained earnings just like a cash dividend.

Question

Quizplus · Accepted Answer

A stock dividend involves distributing additional shares of stock to current stockholders instead of cash. This increases the number of outstanding shares and dilutes the value of each individual share, which in turn reduces the retained earnings in stockholders' equity. Therefore, option D is correct. Option A is incorrect because a stock split involves dividing existing shares into multiple shares to decrease the stock price, while a stock dividend involves distributing additional shares. Option B and C are incorrect because a stock dividend does not reduce or change any of the other accounts within stockholders' equity, such as common stock or additional paid-in capital.

A Stock Dividend