Section 2...Stock Dividends

Question 1

Stock Dividends

Answer 1

Step 1 is figure out ownership %:
If you own 0-19%, it’s considered ‘Small Ownership’
Anything above is considered ‘Large Ownership’

Difference between the two:
Only difference is Additional PIC is NOT affected by large ownership

Entry to record under Small Ownership:

Dr: R.E. (F.V. at date of decleration)
Cr: C/S (Par value)
Cr: Additional PIC (Plug)

Entry under Large Ownership:

Dr: R.E. (F.V. at date of decleration)
Cr: C/S

**Notice that total Stockholder’s Equity DOES NOT CHANGE.

Question 2

Dividend Revenue Recognition

Answer 2

NO RECOGNITION of stock dividend revenue.
Only revenue you recognize is from C/S or P/S, not stock dividends.
**However, the shares you received from stock dividends are included in the calculation of dividend revenue.