CASE 159 Stock Dividends

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

Required:

1. What is a stock dividend? How is a stock dividend distinguished from a stock split from a legal standpoint? From an accounting standpoint?
2. For what reasons does a corporation usually declare a stock dividend? A stock split?
3. Discuss the amount, if any, of retained earnings to be capitalized in connection with a stock dividend.