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Stock dividends almost always create fractional shares. Frequently, the reporting entity pays cash in lieu of issuing the fractional shares and reduces retained earnings for the cash payment. When the balance sheet date is between the date of declaration and the date of distribution, and the amount to be paid in cash is determinable, it is typically classified as dividends payable. The reporting entity may show the charge to retained earnings as a separate item or as part of the stock dividend caption in the statement of stockholders' equity. If the amount is not determinable, the reporting entity generally describes the transaction.
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