When a Company Declares a Stock Dividend,which of the Following

question 119

Multiple Choice

When a company declares a stock dividend,which of the following occurs?

• A)A liability is created.
• B)Retained earnings is reduced.
• C)Stockholders' equity is decreased.
• D)The Financing section of the statement of cash flows is decreased.

---

Definitions:

Allowance for Doubtful Accounts

A contra-asset account that reduces accounts receivable to reflect the estimated amounts that are expected to be uncollectible.

Uncollectible Percentage

An estimated fraction of accounts receivable that a company does not expect to collect.

Aging

A method used in accounting to categorize accounts receivables based on the length of time an invoice has been outstanding.

Allowance Account

An account used in accounting to reduce the value of accounts receivable to a more realistic amount by accounting for potential bad debts.