hello there,
Is the reason that stock dividends do not affect par value because they are usually issue from treasury stock (therefore already accounted for in par value)? Just making sure i get the technicalities between stock dividends and splits.
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Hi @Geoffrey_Beer - good question. First, I wouldn’t expect the details below to be tested, so don’t sweat it for the exam.
Stock dividends are usually created and distributed like they are in a primary offering - from authorized, but non-issued shares (although they’re considered ‘issued’ once the stock dividend is distributed). In terms of the balance sheet, corporations usually shift the par value of the shares (which is unchanged from the pre-stock dividend level) from retained earnings to permanent paid-in capital.
I hope this helps!
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