Question

Answer the following as True or False.
1. Declaring and paying a stock dividend decreases both Retained Earnings and Stockholders' Equity in total on the balance sheet.
2. Stock splits have no impact on Stockholders' Equity, but do change the par value of the stock.
3. Treasury Stock is considered a contra-equity account and therefore decreases the company's total Stockholders' Equity balance.

Answer 1

Answer:

1. False

2. True

3. True

Explanation:

In Accounting, declaring and paying a stock dividend only decreases Retained Earnings but not Stockholders' Equity on the balance sheet because it has no effect on the cash position of an organization.