Difference between a stock dividend and a stock split

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Reference no: EM1312934

Explanation about the main differences between a stock dividend and a stock split.

On January 1, 2007, Frederiksen Inc.'s Stockhlders' Equity category appeared as follows:

Preferred stock, $80 par value, 7%

 

3000 shares issues and outstanding

$240,000

Common stock, $10 par value,

 

15,000 shares issued and outstanding

150,000

Additional paid-in capital-Preferred

60,000

Additional paid-in capital-Common

225,000

Total contributed capital

$675,000

Retained earnings

2,100,000

Total stockholders' equity

$2,775,000

 
The preferred stock is noncumulative and nonparticipating. During 2007, the following transactions occurred:
a)On March 1, declared a cash dividend of $16,800 on preferred stock. Paid the dividend on April 1.
b)On June 1, declared a 5% stock dividend on common stock. The current market price of the common stock was $18. The stock was issued on July 1.
c)On September 1, declared a cash dividend of $0.50 per share on the common stock; paid the dividend on October 1.
d)On December 1, issued a 2-for-1 stock split of common stock, when the stock was selling at $50 per share.

Question:

Write a paragraph that explains the difference between a stock dividend and a stock split.

Reference no: EM1312934

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