A is corrent.Regardless of the size of a stock dividend, RE is decreased and other SE accounts are increased. Since the dividend described in this question is small (< 20-25% of the outstanding shares), the journal entry would be| Retained earnings | (FV) | | | Common stock dividend distributable | | (par value) | | Additional paid-in capital | | (plug) |
Accordingly, RE will decrease and, since all affected accounts are elements of SE, total SE will not change. Note that the entry for a large stock dividend would be| Retained earnings | (par) | | | Common stock dividend distributable | | (par) |
B is incorrect. Regardless of the size of a stock dividend, RE is decreased and other SE accounts are increased. Since the dividend described in this question is small (< 20-25% of the outstanding shares), the journal entry would be| Retained earnings | (FV) | | | Common stock dividend distributable | | (par value) | | Additional paid-in capital | | (plug) |
Accordingly, RE will decrease and, since all affected accounts are elements of SE, total SE will not change. Note that the entry for a large stock dividend would be| Retained earnings | (par) | | | Common stock dividend distributable | | (par) |
C is incorrect. Regardless of the size of a stock dividend, RE is decreased and other SE accounts are increased. Since the dividend described in this question is small (< 20-25% of the outstanding shares), the journal entry would be| Retained earnings | (FV) | | | Common stock dividend distributable | | (par value) | | Additional paid-in capital | | (plug) |
Accordingly, RE will decrease and, since all affected accounts are elements of SE, total SE will not change. Note that the entry for a large stock dividend would be| Retained earnings | (par) | | | Common stock dividend distributable | | (par) |
D is incorrect. Regardless of the size of a stock dividend, RE is decreased and other SE accounts are increased. Since the dividend described in this question is small (< 20-25% of the outstanding shares), the journal entry would be| Retained earnings | (FV) | | | Common stock dividend distributable | | (par value) | | Additional paid-in capital | | (plug) |
Accordingly, RE will decrease and, since all affected accounts are elements of SE, total SE will not change. Note that the entry for a large stock dividend would be| Retained earnings | (par) | | | Common stock dividend distributable | | (par) |
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