Question

Which statement is true for the declaration and distribution of a property dividend but not a small stock dividend?

Select one:

a. Retained Earnings decreases.

b. Par value per share decreases.

c. Contributed capital increases.

d. Total stockholders' equity does not change.

e. Total assets decrease.

Answer 1

Option E: Total assets decrease

The journal entries for Property dividend would be:

(1) Dividend Due Entry:

Retained Earnings A/c Dr XXXX

To Dividend Payable A/c XXXX

(2) Payment of Dividend Entry:

Dividend Payable A/c Dr XXXX

To Property, Plant and Equipment A/c XXXX

Retained earnings and Property decrease.

The journal entries for Small stock dividend would be:

(1) Dividend Due Entry:

Retained Earnings A/c Dr XXXX

To Dividend Payable A/c XXXX

(2) Payment of Dividend Entry:

Dividend Payable A/c Dr XXXX

To Common Stock A/c XXXX

There is no impact on assets.