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

You own 200 shares of the 100,000 outstanding shares of Big Company. Big Company declared a stock dividend of 5% when the market price per share was $55. Which of the following is true?

Your ownership percentage in Big Company is larger than it was before the stock dividend

Your ownership percentage in Big Company is smaller than it was before the stock dividend

Your ownership percentage in Big Company is equal to what it was before the stock dividend

The number of shares you own in Big Company is equal to what it was before the stock dividend

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Verified step by step guidance

Understand the concept of a stock dividend: A stock dividend is a payment made in the form of additional shares, rather than a cash payout. It increases the number of shares outstanding but does not change the proportionate ownership of existing shareholders.

Calculate the number of new shares issued: A 5% stock dividend means that for every 100 shares, 5 additional shares are issued. For 100,000 outstanding shares, the company will issue 5,000 new shares (100,000 * 0.05).

Determine the new total number of shares: Add the new shares to the existing shares to find the new total number of shares outstanding. This will be 100,000 + 5,000 = 105,000 shares.

Calculate your new number of shares: As a shareholder of 200 shares, you will receive 5% more shares. This means you will receive 200 * 0.05 = 10 additional shares, making your total 210 shares.

Analyze the ownership percentage: Before the dividend, your ownership percentage was (200 / 100,000) * 100%. After the dividend, your ownership percentage is (210 / 105,000) * 100%. Since both percentages are equal, your ownership percentage remains unchanged.