A company issues a 4% stock dividend when the price of the stock was $6 per share. The company has 20 million common shares outstanding prior to the stock dividend. How should the company account for this stock dividend?

Multiple Choice

• Debit retained earnings; Credit common shares

• Debit cash; Credit common shares

• Debit retained earnings; Credit contributed surplus

• Debit common shares; Credit contributed surplus

Stock splits and stock dividends have the following effects on retained earnings:

Multiple Choice

• Stock splits increase retained earnings, while stock dividends have no impact.

• Stock dividends decrease retained earnings, while stock splits have no impact.

• Stock splits and stock dividends both lead to a decrease in retained earnings

• Stock splits and stock dividends have no impact on retained earnings.

On October 1, 2020, you borrow $200,000 at 6% interest and record the promissory note. In April and again in October of the following year, you are required to pay half the annual interest to your creditors. On December 31, 2020, your journal entry for the quarter should:

Multiple Choice

• debit interest expense $3,000; credit interest payable $3,000.

• debit cash $3,000; credit accrued interest $3,000.

• debit interest expense $6,000; credit cash $6,000.

• debit interest expense $6,000; credit notes payable $6,000.