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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Definitions:

Nuremberg

A city in the German state of Bavaria, recognized for its significant historical events, including the Nuremberg Trials post-World War II where Nazis were prosecuted.

War Crimes

Violations of the laws or customs of war, including mistreatment of prisoners, genocide, the deliberate destruction of civilian property, and killing civilians.

Truman Doctrine

An American foreign policy strategy announced by President Harry S. Truman in 1947, aimed at containing the spread of communism by providing political, military, and economic assistance to all democratic nations under threat from authoritarian forces.

Subjugation

The action of bringing someone or something under domination or control, often by conquest or force.