A stock dividend transfers:
A)contributed capital to retained earnings.
B)retained earnings to assets.
C)contributed capital to assets.
D)retained earnings to contributed capital.

Question

Quizplus · Accepted Answer

A stock dividend is a distribution of additional shares of a company's stock to existing shareholders. The transfer of stock from the company to the shareholder does not change the overall value of the company's assets or liabilities. Therefore, no transfer occurs between contributed capital and assets. However, the transfer of shares from the company to the shareholder requires a reduction in retained earnings (since the company is giving away more ownership in the form of shares) and an increase in contributed capital (since the company is transferring ownership to shareholders via the issuance of shares). Thus, a stock dividend transfers retained earnings to contributed capital.

A Stock Dividend Transfers