A stock dividend is recorded with a transfer from:
A)Contributed capital to retained earnings.
B)Retained earnings to contributed capital.
C)Retained earnings to assets.
D)Contributed capital to assets.
E)Assets to contributed capital.

Question

Quizplus · Accepted Answer

A stock dividend represents a distribution of additional shares to existing shareholders, so there is no transfer of assets involved. Instead, the transfer is made between the retained earnings account (where the company holds its earnings from past periods) and the contributed capital account (where the company tracks the capital it has received from shareholders). Specifically, the transfer is from retained earnings to contributed capital, because the stock dividend does not reduce the total amount of earnings held by the company, but rather adjusts the allocation of those earnings among the existing shareholders.

A Stock Dividend Is Recorded with a Transfer From