Chapter 11 Multiple Choice Activity

Corporation issue stock dividends

to satisfy stockholder's dividends expectations without spending cash to increase the marketability of its stock by increasing the number of shares outstanding and thereby decreasing the market price per share to emphasize that a portion of stockholder's equity has been permanently reinvested in the business and therefore is unavailable for cash dividends

A stock dividend results in

both a decrease in retained earnings and an increase in paid-in capital

Upon receiving a stock dividend

both a stockholder owns more shares and a stockholder's interest has not changed.

A small stock dividend

both that it is less than 20%-25% of the corporation's issued stock and is recorded at market value per share

Dividends can take the following forms:

cash property stock

All of the following statements are true concerning treasury stock:

is a generally accounted for by using the cost method does not change the number of shares issued is the company reacquiring its own shares

All of the following are true about a corporation:

must abide by the laws is a legal entity must pay taxes

Proof of stock ownership is evidenced by a printed or engraved form known as a

stock certificate

In order to pay a cash dividend:

the corporation must have adequate retained earnings the board of directors must declare a dividend the corporation must have adequate cash

When issuing cash dividends, the board of directors commits the corporation to a binding legal obligation on

the declaration date