Stock dividends and stock splits are common forms of corporate share distribution to shareholders. Consider each of the numbered statements below, and decide whether it:

A. Applies to both stock dividends and stock splits.

B. Applies to stock splits only.

C. Applies to stock dividends only.

D.Applies to neither.

(In each instance, assume the issuing corporation has only one class of shares.)

Instructions

Print next to the number of each statement below, the single capital letter of the description which applies to the statement.

Statements

There is no transfer between retained earnings and share capital accounts.

There is no change in the total shareholders' equity of the issuing corporation.

The retained earnings account is increased.

Book value decreases.

Retained earnings in the amount of the distribution are transferred to share capital.

Book value increases.

The total number of shares outstanding is increased.

The distribution is a multiple as compared to a percentage of the number of shares previously outstanding