What Is the Correct Treatment of a Stock Dividend Issued

question 77

Multiple Choice

What is the correct treatment of a stock dividend issued in mid-year when computing the weighted-average number of common shares outstanding for earnings per share purposes?

• A) The stock dividend should be weighted by the length of time that the additional number of shares are outstanding during the period.
• B) The stock dividend should be included in the weighted-average number of common shares outstanding only if the additional shares result in a decrease of 3 percent or more in earnings per share.
• C) The stock dividend should be weighted as if the additional shares were issued at the beginning of the year.
• D) The stock dividend should be ignored since no additional capital was received.

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