Stock Dividends and Stock Splits
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Stock Dividends and Stock Splits
Stock dividends and stock splits are common forms of corporate stock distribution to stockholders.
Consider each of the numbered statements. You are to decide whether it:
A. Applies to both stock dividends and stock splits.
B. Applies to neither.
C. Applies to stock splits only.
D. Applies to stock dividends only.
E. Applies to stock splits effected in the form of a dividend only.
F. Applies to both stock splits effected in the form of a dividend and a stock dividend.
(In each instance, the issuing company has only one class of stock.)
Instructions
Print next to the number of each statement below, the single capital letter of the description which applies to the statement.
Statements
1.There is no transfer between retained earnings and capital stock accounts, other than to the extent occasioned by legal requirements.
2.There is no change in the total stockholders' equity of the issuing corporation.
3.The retained earnings available for dividends are increased.
4.The par (or stated value) of the stock is unchanged.
5.Subsequent per-share earnings, if any, are decreased.
6.Retained earnings in the amount of the distribution are transferred to capital stock, in some instances in an amount in excess of that required by the laws of the state of incorporation.
7.The individual stockholder's share of net assets is increased.
8.The total number of shares outstanding is increased.
9.The distribution is a multiple as contrasted to a fraction of the number of shares previously outstanding.
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Solution Summary
It is decided whether stock dividends / stock splits/ neither/ both are applicable to the situations given in the statements.
Solution Preview
1. E 4. F 7. B
2. A 5. A 8. A
3. B 6. F 9. C
1.There is no transfer between retained earnings and capital stock accounts, other than to the extent occasioned by legal requirements. E
2.There is no ...
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