 In this presentation, we will take a look at multiple choice questions related to corporations. First question, a stock dividend is recorded with a debit to paid in capital, b debit to retained earnings, c credit to retained earnings, d credit to paid in capital, or e does not affect any account. So let's go through this again and we will use the process of elimination to narrow this down. A stock dividend is recorded with either a debit to paid and note I won't do this right now but if you see a question that has to do with a journal entry which this does then you may want to try to actually record the journal entry first and then go through it. We're going to use the process of elimination so I won't do that now but just note that that's the best way to do it because often times they're only going to give you as we do here half the journal entry and so we'll get the debits and credits mixed up which we could verify fairly easily if we actually write down the debit and credit so I would suggest if you can think through the journal entry to actually write that down first. So A says debit to paid in capital. So a stock dividend is recorded with so if we have a stock dividend we're going to hit paid in capital. We might think that paid in capital usually when we have a distribution paid in capital is when we issue stock paid in capital is sometimes affected in the equity section so I'll keep that for now. B says debit to retained earnings and when we do a dividend usually retained earnings something happens to it so I'll keep that for now. C says credit to retained earnings and again here's these two are the same B and C except for a debit and credit. So that would indicate that maybe it's one of those two since they're the same except for the difference between debit and credit. And then D says credit to paid in capital and again A and D are the exact same except for the difference between debit and credit so I'll keep that. And then E we're not narrowing anything down too much here but E says it does not affect any account and that's unlikely that seems like just something they ran out of answers because these two are opposite so they had one left so that looks like they just kind of put that in there because it didn't because they were done here so we'll cross that out. So now we'll see if we can record this so we'll go through this again. A stock dividend is recorded with now a dividend basically is we're going to distribute some of the earnings to the owners in the form of a dividend. So when we do that in this case we're going to do it however by issuing stock when we issue a normal dividend you would think the credit would be cash you know the credit wouldn't be cash would be a payable at the point of time that we issue it. We'd have a payable of some amount on the credit side and then we would have a debit to either dividends or just retained earnings it's coming out of the earnings and that's going to be the normal type of operation. Now whether it be cash or whether it be stocks we're still going to have three dates the date that we decide to do it and the date that we're going to whoever is a stockholder at that point is going to be the one that gets the dividend and then a date of payment. So that means that whether we pay cash or dividend we're still going to go to like this payable when we initially record the dividend. So that means it's not going to be paid in capital because it's not going to be paid in capital because that's going to be like the related to the issuing of stock wouldn't be that anyways because it would be common stock. So it doesn't look like it's going to be A or D we're left with B and C which is retained earnings which makes sense and then it's just a question is it going to go it's going to be debited or accredited and writing down the journal which we helps with that it also just note that retained earnings like most normal equity accounts is a credit balance account if we're paying out of retained earnings to the owners it's going to go down so we're going to do the opposite thing to it which will be a debit so we're going to debit retained earnings final answer B final answer a stock dividend is recorded with B debit to retained earnings next question stock reacquired A capital stock B treasury stock C asset stock D preferred stock or E callable stock okay let's go through the process of elimination stock reacquired A capital stock so if we reacquired the stock it's probably something different than just like the normal stock right now it's capital stock is a stock that we issue to out to the market so if we whoever own stock generally owns capital stock if we buy it our own stock back it's probably going to call something different than capital that's kind of weird to for that to happen so we're gonna say that that's not it B says treasury stock and treasury stock sound it probably sounds familiar you've probably heard the term treasury stock so maybe that's it you know that sounds like a special different type of stock C says stock assets stock which that doesn't sound like anything really that I mean normal stocks or assets if we buy another stock for a different company then we would buy an investment that would be an asset but if we buy our own stock and then assets doesn't even sound like a thing so I'm gonna say that doesn't sound like it and then D says preferred stock which again that's like a term that's another stock term we've probably heard of so that might be hmm maybe that's it and then E says callable stock and again that sounds like a thing you know you callable stock so maybe that would be it so I'm gonna keep B D and E go through it again stock reacquired is either B D or E either treasury stock or preferred stock or callable stock and of those three you kind of just got to know what you know what the term is and in this case it's going to be treasury stock so treasury stock is going to be what we bought back so if the company issue stock out there buys their own stock back we're gonna debit treasury stock which is in the equity section a contract equity account and we will credit cash for that purchase which is kind of an unusual thing to happen treasury stock is us owning basically our own stock stock that we had issued previously and then purchased back final answer stock reacquired be treasury stock