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Why is this called capitalizing retained earnings

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Reference no: EM131728031

Question - SpaceCo declared and distributed a 20% stock dividend on 5 million, $1 par value, common shares.  The market value on the declaration date was $30 per share. 

Required: 

1) Show the entry for this dividend and 

2) Show the entry necessary if this were instead a 100% stock dividend.  

3) Does total OE change as a result of these entries? 

4) Does any particular shareholder own a higher % of shares immediately following the dividend? 

5) Why is this called "capitalizing" retained earnings?

Reference no: EM131728031

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