The board of directors of the Theater Visions Corporation is trying to establish the dividends policy for 2016 for the company. The board has asked you, the vice president of finance, to attend the meeting in order to get your input. You were asked to discuss and evaluate stock dividends from the perspective of (1) the stockholders, and (2) the issuing corporation's viewpoint.
Required:
a. Discuss the disadvantages associated with stock dividends from the stockholder's perspective.
b. Discuss the advantages associated with a stock dividend from the issuing corporation's viewpoint.
c. For financial accounting purposes, explain how the cost of a stock dividend is measured at the date of declaration.