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

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Multiple Choice

Which of the following statements regarding stock dividends is false?

Stock dividends distribute additional shares to existing shareholders.

Stock dividends do not affect the total assets of a company.

Stock dividends increase the total stockholders' equity of a company.

Stock dividends reduce the retained earnings account.

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Verified step by step guidance

Understand the concept of stock dividends: Stock dividends are a distribution of additional shares to existing shareholders, typically expressed as a percentage of the shares they already own. They do not involve cash payments and do not affect the company's total assets.

Analyze the impact of stock dividends on retained earnings: When stock dividends are issued, the retained earnings account is reduced by the fair market value of the shares distributed. This is because retained earnings are reclassified into paid-in capital accounts.

Examine the effect on total stockholders' equity: Stock dividends do not increase or decrease the total stockholders' equity. Instead, they redistribute equity within the accounts, moving amounts from retained earnings to paid-in capital.

Evaluate the statement 'Stock dividends increase the total stockholders' equity of a company': This statement is false because stock dividends do not change the total stockholders' equity; they only reallocate amounts within equity accounts.

Confirm the correct answer: Based on the analysis, the false statement is 'Stock dividends increase the total stockholders' equity of a company,' as stock dividends do not affect the total stockholders' equity.