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 stock dividend is recorded with a transfer from:

Retained Earnings to Common Stock and Additional Paid-in Capital

Common Stock to Retained Earnings

Cash to Retained Earnings

Additional Paid-in Capital to Cash

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Verified step by step guidance

Understand the concept of a stock dividend: A stock dividend is a distribution of additional shares to shareholders instead of cash. It does not affect the total equity but reallocates amounts within equity accounts.

Identify the accounts involved: When a stock dividend is declared, the company transfers an amount from Retained Earnings to Common Stock and Additional Paid-in Capital. This reflects the issuance of new shares and reduces retained earnings.

Determine the journal entry: The journal entry for recording a stock dividend typically involves debiting Retained Earnings and crediting Common Stock and Additional Paid-in Capital. This ensures the equity section of the balance sheet is updated correctly.

Clarify why other options are incorrect: For example, transferring from Common Stock to Retained Earnings or Cash to Retained Earnings does not align with the accounting treatment for stock dividends. Stock dividends do not involve cash transactions or reverse entries between Common Stock and Retained Earnings.

Review the impact on financial statements: A stock dividend reduces Retained Earnings but increases Common Stock and Additional Paid-in Capital. The total equity remains unchanged, but the composition of equity is adjusted.