Which of the Following Is True with Regard to a Stock

question 120

Multiple Choice

Which of the following is true with regard to a stock dividend?

• A)It results in a transfer of retained earnings to contributed capital.
• B)It increases the number of shares outstanding and involves a pro rata reduction in the par value per share.
• C)It is accounted for in exactly the same manner as a stock split.
• D)It does not require a journal entry.

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Definitions:

Income Before Taxes

A company’s total earnings or profit before income tax expense has been deducted.

Interest Expense

The charges an entity must pay for the use of borrowed capital over a period.

Lease Liability

An obligation representing the present value of future lease payments that a lessee is committed to making under a lease agreement.

Capital Leases

Lease agreements that involve the lessee effectively owning the asset and accruing its benefits and drawbacks, subject to certain criteria.