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Small and large stock dividends have no effect on the Common Stock account. True of False

Small and large stock dividends have no effect on the Common Stock account.

True of False

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Answer #1

Answer : False

Explanation : On issuance of small stock dividend or large stock dividends Common Stock account is crdited with an amount equal to the par value of the shares issuesd as stock dividend. Thus Small and large stock dividends have effect on the Common Stock account.

However small and large stock dividends have no effect on the shareholder's equity value . The stock dividend implies decrease in retained earnings & increase in value of paid in capital. Thus the overall shareholder's equity stays uneffected from treatement of stock dividends

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