Question

A small stock dividend is defined as A. less than 20–25% of the corporation's issued stock. B. between 50% and 100% of the corporation's issued stock. C. less than 30% but greater than 25% of the corporation's issued stock. D. more than 30% of the corporation's issued stock.

Answer 1

Answer: Option (A) is correct.

Explanation:

It is defined as the distribution of the dividend of less than 25% of company's outstanding shares to the current stockholders. On the basis of current investors ownership percentage, there is an increase in the outstanding shares (less than 26%) by distributing new shares to them. In a distribution of stock dividend, a portion of retained earnings is transferred to the capital accounts on the balance sheet.