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 is true of a stock dividend?

A stock dividend increases the number of shares outstanding but does not affect total stockholders' equity.

A stock dividend reduces the par value per share.

A stock dividend decreases the total assets of the company.

A stock dividend requires a cash outflow from the company.

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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 of a company's stock to its shareholders, proportional to their existing holdings. It does not involve the payment of cash and does not change the total stockholders' equity.

Analyze the first statement: 'A stock dividend increases the number of shares outstanding but does not affect total stockholders' equity.' This is true because while the number of shares increases, the overall equity remains the same as no cash or other assets are distributed.

Analyze the second statement: 'A stock dividend reduces the par value per share.' This is false because a stock dividend does not change the par value per share. Instead, it reallocates amounts within stockholders' equity, typically from retained earnings to common stock and additional paid-in capital.

Analyze the third statement: 'A stock dividend decreases the total assets of the company.' This is false because a stock dividend does not involve the distribution of assets. It only affects the equity section of the balance sheet.

Analyze the fourth statement: 'A stock dividend requires a cash outflow from the company.' This is false because a stock dividend is a non-cash transaction and does not involve any cash outflow.