Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Stock Dividends

Financial Accounting

12. Stockholders' Equity

Stock Dividends

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Multiple Choice

Which of the following statements is correct regarding stock dividends and stock splits?

Stock dividends increase the number of shares outstanding and decrease retained earnings, while stock splits increase the number of shares outstanding but do not affect retained earnings.

Stock dividends and stock splits both reduce the par value per share and increase total stockholders' equity.

Both stock dividends and stock splits decrease total stockholders' equity.

Stock splits increase retained earnings, while stock dividends have no effect on retained earnings.

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Verified step by step guidance

Understand the concept of stock dividends: Stock dividends involve distributing additional shares to existing shareholders based on their current holdings. This increases the number of shares outstanding but decreases retained earnings because the value of the dividend is transferred from retained earnings to paid-in capital.

Understand the concept of stock splits: Stock splits involve dividing existing shares into multiple shares, which increases the number of shares outstanding but does not affect retained earnings or total stockholders' equity. The par value per share is reduced proportionally.

Analyze the impact on total stockholders' equity: Stock dividends do not change total stockholders' equity because the transfer is within equity accounts. Stock splits also do not affect total stockholders' equity since no value is transferred.

Evaluate the par value per share: Stock splits reduce the par value per share proportionally to the increase in the number of shares. Stock dividends do not directly affect the par value per share.

Compare the statements provided: Based on the definitions and impacts of stock dividends and stock splits, identify the correct statement that aligns with the concepts explained above.