Problem: The directors of Amman corporation are considering the issuance of a stock dividend. They have ased you to discuss the proposed action by answering the following questions.
Instructions:
a.) What is a stock dividend? How is a stock dividend distinguished from a stock split.
1. From a legal standpoint
2. 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 connection with a stock dividend.