When a Stock Dividend Is Small, for Example a 10

question 38

Multiple Choice

When a stock dividend is small, for example a 10% stock dividend,

• A) Retained earnings is not reduced because the dividend is immaterial.
• B) Retained earnings is reduced by the fair value of the stock.
• C) Retained earnings is reduced to the par value of the stock.
• D) Paid-in capital in excess of par value is unaffected.

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Definitions:

Conforming Goods

Goods that meet the specifications and terms as stated in a contract of sale.

Substantial Performance

A legal concept where a party has completed a majority of their obligations under a contract, warranting payment with possible deductions for uncompleted work.

Contract

A legally binding agreement between two or more parties that is enforceable by law.

Defective

Referring to a product or item that is flawed, damaged, or fails to meet quality standards.