The directors of Lenox Corporation are considering issuing a stock dividend. Required:

The directors have asked you to discuss the proposed action by answering the following questions:

a. What is a stock dividend? How is a stock dividend distinguished from a stock split from a legal standpoint? From an accounting standpoint?

b. For what reasons does a corporation usually declare a stock dividend?

A stock split?

c. Discuss the amount, if any, of retained earnings to be capitalized in con¬ nection with a stock dividend.