2. Compare and contrast the accounting for cash dividends and stock dividends. R

Question

2. Compare and contrast the accounting for cash dividends and stock dividends.

Requirements

R1. In the space provided, insert either “Cash dividends,” “Stock dividends,” or “Both cash dividends and stock dividends” to complete each of the following statements:

a. ____________ decrease Retained earnings.

b. ____________ has(have) no effect on a liability.

c. ____________ increase paid-in capital by the same amount that they decrease Retained earnings.

d. ____________ decrease both total assets and total stockholders’ equity, resulting in a decrease in the size of the company.

Explanation / Answer

A CASH DIVIDEND

B STOCK DIVIDEND

C CASH DIVIDEND

D BOTH CASH AND STOCK DIVIDEND

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