Which of the following correctly describes the effect of declaring and distributing a common stock dividend?

A) Total stockholders' equity decreases.
B) Total stockholders' equity remains the same.
C) The number of shares outstanding increases while the par value of each share decreases.
D) The number of shares outstanding decreases while the par value of each share increases.

Common Stock Dividend

A payment made by a corporation to its shareholders, usually in the form of cash or additional shares, as a portion of the profits.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing ownership interest in the company.

Shares Outstanding

The total number of shares of a company's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.