What Effect Does a Stock Dividend Have on the Financial

question 20

Multiple Choice

What effect does a stock dividend have on the financial statements of the company that pays the dividend?

• A)The current market value of the stock "paid" as the dividend must be transferred from the Retained earnings account to the Common stock account and the Additional paid-in capital account.
• B)The par value of the stock"paid" as the dividend must be transferred from the Retained earnings account to the Common stock account and the Additional paid-in capital account.
• C)No entry is made on the financial statements, because stock dividends do not affect the firm's market value.
• D)The retained earnings account will increase and the balance in the Cash account will decrease by the market value of the stock "paid" as the dividend.
• E)The amount in the Common stock account will increase, but the number of common shares outstanding will not change.

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