Question: Which of the following occurs when a corporation’s board of directors a 10% stock dividend? Retained Earnings will be credited for the new shares times the current market value of the stock. Retained Earnings will be debited for the new shares times the current market value of the stock.
What happens when a corporation distributes a stock dividend?
The effect of dividends on stockholders’ equity is dictated by the type of dividend issued. When a company issues a dividend to its shareholders, the value of that dividend is deducted from its retained earnings. 6 Even if the dividend is issued as additional shares of stock, the value of that stock is deducted.
When a stock dividend is declared total stockholders equity will?
A stock dividend has no effect on total stockholders’ equity. A stock dividend decreases total stockholders’ equity. A stock dividend has no effect on total stockholders’ equity. You just studied 20 terms!
When a stock dividend is distributed the account to be credited would be?
On the date that the board of directors declares the dividend, the stockholders’ equity account Retained Earnings is debited for the total amount of the dividend that will be paid and the current liability account Dividends Payable is credited for the same amount.
What happens when a dividend is declared?
After the declaration of a stock dividend, the stock’s price often increases. However, because a stock dividend increases the number of shares outstanding while the value of the company remains stable, it dilutes the book value per common share, and the stock price is reduced accordingly.
How is the dividend paid to shareholders?
Dividends are usually paid in the form of a dividend check. … The standard practice for the payment of dividends is a check that is mailed to stockholders a few days after the ex-dividend date, which is the date on which the stock starts trading without the previously declared dividend.
What is the effect of a stock dividend on the balance sheet?
If a company pays stock dividends, the dividends reduce the company’s retained earnings and increase the common stock account. Stock dividends do not result in asset changes to the balance sheet but rather affect only the equity side by reallocating part of the retained earnings to the common stock account.
What is the purpose of treasury stock?
Treasury stock is formerly outstanding stock that has been repurchased and is being held by the issuing company. Treasury stock reduces total shareholder’s equity on a company’s balance sheet, and it is therefore a contra equity account.
How is treasury stock shown on the balance sheet?
Under the cost method of recording treasury stock, the cost of treasury stock is reported at the end of the Stockholders’ Equity section of the balance sheet. Treasury stock will be a deduction from the amounts in Stockholders’ Equity. … In the general ledger there will be an account Treasury Stock with a debit balance.
What is a 100% stock dividend?
A 100% stock dividend means that you get one share of the “stock dividend” for every share you own. … Simply put, 100% stock dividend is 1:1 or 1 for 1 bonus share, as explained above, if you held 100 shares after 1:1 bonus you would have 200 shares (100 original, another 100 as bonus).
What is a 15% stock dividend?
A stock dividend is the issuance by a corporation of its common stock to shareholders without any consideration. For example, when a company declares a 15% stock dividend, this means that every shareholder receives an additional 15 shares for every 100 shares he already owns.
Which of the following will not affect shareholders equity?
Rationale:The purchase of equipment (asset) with a payment due in 30 days (liability) does not affect stockholders’ equity.