006 Stock Dividends and Splits Flashcards
1
Q
Define “stock dividend”.
A
A distribution by a firm of its stock to its shareholders in proportion to their existing holdings.
2
Q
What is a small stock dividend?
A
Percent of dividend is less than 20-25%.
3
Q
How is a small stock dividend accounted for?
A
Capitalize retained earnings at market price.
4
Q
What is the date used to establish market price for small stock dividends?
A
Declaration date.
5
Q
What is a large stock dividend?
A
Percent of dividend is greater than 20-25%.
6
Q
How is a large stock dividend accounted for?
A
Capitalize retained earnings at par value.
7
Q
How is a stock split accounted for?
A
No accounting entry needed.
