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What amount of retained earnings is capitalized for a small stock dividend? Please explain.

What amount of retained earnings is capitalized for a small stock dividend? Please explain.

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Answer #1

Under long stock dividend Retained earning is capitalized on par value so if stock dividend is more than 25% that is called long Stock dividend and is capitalized on par value.

While Under small stock dividend Retained earning is capitalized on market value so if stock dividend is less than 25% that is called small Stock dividend and is capitalized on market value.

Retained earning capitalized = Share outstanding*Small Stock dividend rate*market value per share

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