University of the West Indies

MS 15D Financial Accounting

Tutorial #6 – Stockholder’s Equity

Note - Correction to the lecture notes: a stock dividend does not result in a reduction of the par value,
only a reduction of the market price.

1. Distinguish between paid-in capital and retained earnings of a corporation. Why is such a
distinction useful?
2. What is the purpose of a stock split?
3. Explain the significance of the following dates relating to cash dividends: date of declaration,
date of record and date of payment.
4. Distinguish between a stock split and a stock dividend. Is there any reason for the difference in
accounting treatment of these two events?

a)