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Which of the following dividends has no effect on total owners' equity?

a. property dividend
b. stock dividend
c. cash dividend

1 Answer

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Final answer:

Out of the dividend options provided, a stock dividend has no effect on total owners' equity because it simply redistributes equity within the shareholders' section on the balance sheet.

Step-by-step explanation:

When considering the effect of dividends on total owners' equity, it's important to understand the nature of different types of dividends. A cash dividend is a payment made out of a company's earnings to shareholders. This payout reduces the company's retained earnings, which is a component of shareholders' equity on the balance sheet, thus reducing the total owners' equity.

A property dividend involves the distribution of assets other than cash, such as inventory or investments, which also reduces the company's assets and its total equity. In contrast, a stock dividend results in the issuance of additional shares to shareholders. The value of the stock dividend is transferred from retained earnings to paid-in capital within shareholders' equity, essentially moving amounts within the equity section but not reducing it. Thus, a stock dividend does not have a net effect on total owners' equity because it’s just a redistribution of the company's equity.

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