Directions: Answer the below cases in your OWN words. No points will be given to answers copied from any resource. Legibly write your answers on an A4 paper.

Question 1: Alameda Corporation has paid 60 consecutive quarterly cash dividends (15 years worth). The last six months have been a real cash drain on the company, however, as profit margins have been greatly narrowed by increasing competition.

With a cash balance that is only enough to meet day-to-day operating needs, the president, Vince Ramsey, has decided that a stock dividend instead of a cash dividend should be declared. He tells Alamedas financial vice-president, Janice Rahn, to issue a press release stating that the company is extending its consecutive dividend record with the declaration of a 5% stock dividend. Write the press release convincing the shareholders that the stock dividend is just as good as a cash dividend, he orders. Just watch our share price rise when we announce the stock dividend; it must be a good thing if that happens.

Instructions: What is the effect of a stock dividend on a corporations shareholders equity accounts? Which would you rather receive as a stock holder _a cash dividend or a stock dividend? Why? (2 Marks for the answer, 3 marks for analysis = 5 Marks)