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A stock dividend distributable is classified as a long-term liability because it will not be liquidated using current assets.

1) True
2) False

User Osa E
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Final answer:

A stock dividend distributable is not classified as a long-term liability but as equity since it involves the distribution of additional company stock rather than current assets. Option 2.

Step-by-step explanation:

The statement that a stock dividend distributable is classified as a long-term liability is false(2). A stock dividend distributable is actually classified as equity, not as a liability, because it represents a distribution of additional shares of the company's stock to shareholders and does not involve cash or other assets leaving the company. When a company declares a stock dividend, it transfers an amount from retained earnings to paid-in capital. Since the distribution is in the form of additional stock rather than cash, it doesn't impose a demand on the company's current assets, so it's not considered a liability at all, but an equity transaction.

User Harinath
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