The Board of Directors of Atlantic Corp

question 2

Essay

The board of directors of Atlantic Corp. does not know whether to declare and pay a cash dividend or to declare and distribute a stock dividend.
Required:
Complete the following chart to show the overall effect on each financial statement item for a cash dividend and a stock dividend. Enter the letter "I" if the effect of the dividend is to increase the financial statement item, a letter "D" if the effect of the dividend is to decrease the financial statement item, or a letter "N" if there is no overall effect. (Hint: Think of the journal entries that would be prepared for a cash dividend and a stock dividend. The overall effect is the net effect from declaration to final payment or distribution.)

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Definitions:

Movement

In economic terms, it often refers to a change in price or quantity in response to market forces on a graph.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision or choosing among options.

Inputs

Refers to the resources used in the production of goods and services, including labor, capital, and materials.

Impossible Production

A situation in economic theory where the resources available are not sufficient to produce a desired combination of goods and services.