Question

What is the effect of declaring a stock dividend on the liabilities and stockholders' equity section of the balance sheet? a.A decrease in total liabilities and an increase in total stockholders' equity

Answer 1

An increase in total liabilities and a decrease in stockholders' equity

Step-by-step explanation:

When a dividend is declared but not ye paid, it is credited as current liability because it has increased the company liability while retained earnings is being Debited because of the profit distribution.

When it is eventually paid, cash account is credited while dividend liability account is debited.