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Which statement correctly distinguishes a stock split from a stock dividend?
AA stock split requires no journal entry, whereas a stock dividend does
BA stock split reduces total equity, whereas a stock dividend does not
CA stock dividend changes par value per share, whereas a split does not
DA stock split pays cash to shareholders, whereas a dividend pays shares
Answer & Solution
Correct answer: A. A stock split requires no journal entry, whereas a stock dividend does
1. A stock dividend is journalised: it moves value from retained earnings to paid-in capital.
2. A stock split only changes par value and share count proportionately, with no entry.
3. Neither event changes total equity, ruling out the equity-reduction claim.
4. A split, not a dividend, reduces par per share; neither pays cash. So only option A is correct.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §6.8 "Stock Splits", p.257_
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