Which of the Following Statements Concerning Stock Dividends Is Correct

question 95

Multiple Choice

Which of the following statements concerning stock dividends is correct?

• A) The declaration of a stock dividend should not be recorded as a liability even though it has not yet been issued.
• B) The issuance of a stock dividend increases total stockholders' equity.
• C) Courts generally have held that stock dividends, once declared, are irrevocable by the board of directors; therefore, a stock dividend declared, but not yet issued is a liability.
• D) A stock dividend cannot use treasury stock.

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Definitions:

Lump Sum Payment

A single payment made at a particular time, as opposed to several smaller payments or installments.

Compounded Annually

A method of calculating interest where the interest earned over a period is added to the principal, and the total becomes the base for the calculation of the next period's interest.

Lump Sum Payment

A payment made in a single lump sum amount, often used in the context of paying off debts or settling transactions.

Sinking Fund

A reserve fund established by setting aside revenue over a period of time to fund a future capital expense or repay a long-term debt.