Final answer:
Stock dividends do not lead to a reduction in the balance of the contributed capital account. This is a B. false statement because stock dividends simply reallocate amounts within shareholders' equity, specifically from retained earnings to common stock and additional paid-in capital accounts.
Step-by-step explanation:
Stock dividends do not result in a reduction in the balance of the contributed capital account.
This statement is B. false. When a company issues a stock dividend, it distributes additional shares of its own stock to its current shareholders, proportionally based on the number of shares they already own.
This action transfers a portion of retained earnings to the common stock and additional paid-in capital accounts on the balance sheet, but it does not reduce the total shareholders' equity or contributed capital.
Instead of cash outflow, a stock dividend reallocates part of the company's retained earnings to the common stock and additional paid-in capital accounts.
The overall equity of the company remains the same, though individual accounts within shareholders' equity will reflect the stock dividend distribution.