The declaration and issuance of a stock dividend larger than 25% generally
A) increases common shares outstanding and increases total shareholders' equity.
B) increases retained earnings and increases total shareholders' equity.
C) may increase or decrease common shares but does not change total shareholders' equity.
D) decreases retained earnings but does not change total shareholders' equity.

Question

Quizplus · Accepted Answer

A stock dividend larger than 25% is considered a large stock dividend and results in a decrease in retained earnings as the value of the dividend is transferred from retained earnings to common stock. However, it does not change the total shareholders' equity because it is essentially a reallocation within shareholders' equity.

The Declaration and Issuance of a Stock Dividend Larger Than