How Does the Declaration and Distribution of a Stock Dividend

question 29

Multiple Choice

How does the declaration and distribution of a stock dividend affect a firm?

• A)decreases stockholders' equity
• B)increases stockholders' equity
• C)no change in total stockholders' equity or assets
• D)decreases total stockholders' equity and total assets

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Definitions:

Capital

Capital refers to financial assets or resources that businesses use to fund their operations and invest in their growth, such as cash, machinery, and buildings.

Withdrawals

The act of taking out cash or other assets from a business by the owner for their personal use.

Capital

Capital refers to financial assets or the financial value of assets, such as funds held in deposit accounts, as well as the physical factors of production including machinery and buildings.

Prepaid Insurance Expense

The portion of insurance premiums that have been paid in advance and are recognized as an asset until the insurance coverage relates to future periods.