On May 1, 2008, Kent Corp. declared and issued a 10% common stock dividend. Prior to this dividend, Kent had 100,000 shares of $1 par value common stock issued and outstanding. The fair value of Kent 's common stock was $20 per share on May 1, 2008. As a result of this stock dividend, Kent's total stockholders' equity
A) increased by $200,000.
B) decreased by $200,000.
C) decreased by $10,000.
D) did not change.

Question

Quizplus · Accepted Answer

Stock dividends redistribute a portion of the company's retained earnings to its common stock equity but do not affect the total stockholders' equity. The value is transferred from retained earnings to common stock and additional paid-in capital, keeping the total equity unchanged.