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

A feature common to both stock splits and stock dividends is:

They increase the number of shares outstanding.

They decrease the par value per share and increase retained earnings.

They require the payment of cash to shareholders.

They increase the total stockholders' equity.

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Verified step by step guidance

Understand the concept of stock splits: A stock split increases the number of shares outstanding by dividing existing shares into multiple shares, while reducing the par value per share proportionally. It does not affect retained earnings or require cash payment.

Understand the concept of stock dividends: A stock dividend involves issuing additional shares to shareholders, increasing the number of shares outstanding. It transfers an amount from retained earnings to paid-in capital but does not require cash payment.

Compare stock splits and stock dividends: Both stock splits and stock dividends increase the number of shares outstanding, but they differ in their impact on retained earnings and par value per share.

Eliminate incorrect options: Stock splits and stock dividends do not increase total stockholders' equity, decrease retained earnings, or require cash payments. These options can be ruled out.

Select the correct answer: The feature common to both stock splits and stock dividends is that they increase the number of shares outstanding.