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

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following is true about stock dividends and stock splits?

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

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

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

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.

Previous problemNext problem

Verified step by step guidance

Understand the concepts of stock dividends and stock splits: Stock dividends involve issuing additional shares to existing shareholders, which reduces retained earnings but does not affect total stockholders' equity. 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.

Analyze the impact of stock dividends: When a company declares a stock dividend, it transfers an amount from retained earnings to paid-in capital. This reduces retained earnings but does not change the total stockholders' equity.

Analyze the impact of stock splits: A stock split increases the number of shares outstanding and reduces the par value per share proportionally. However, it does not affect retained earnings or total stockholders' equity.

Compare the effects of stock dividends and stock splits: Stock dividends decrease retained earnings and increase the number of shares outstanding, while stock splits only increase the number of shares outstanding without affecting retained earnings.

Conclude the correct statement: Based on the analysis, the correct statement is that 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.