What Is the Effect of a Stock Dividend on Stockholders

question 116

Multiple Choice

What is the effect of a stock dividend on stockholders' equity?

• A)Stockholders' equity is decreased.
• B)Retained earnings is increased.
• C)Additional paid-in capital is decreased.
• D)Total stockholders' equity stays the same.

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Definitions:

Fixed Manufacturing Costs

Expenses related to the production process that do not vary with the volume of production, such as salaries of supervisors and rent of the factory.

Markup

The amount added to the cost of goods to cover expenses and generate profit.

Estimated Costs

The anticipated expenses associated with a project or production, calculated before actual expenses are known.

Cost-Plus Approach

A pricing strategy where the selling price is determined by adding a specific markup to the cost of the product or service.