Chapter 14 Multiple Choice

A corporation differs from a proprietorship and partnership in that

A corporation is considered a separate legal entity for taxation purposes

Corporations issue stock dividends for which of the following reasons

All of them

Which one of the following is NOT necessary in order for a corporation to pay cash dividend

Approval of stockholders

Which of the following statements about a small stock dividends is true?

Fair value per share should be assigned to the stock dividend

On the dividend record date,

No entry required

A stockholder who receives a stock dividend would

Own more shares of stock

A company considers all of the following factors when the setting its dividend, except

Stock price per share

Which of the following statements about dividends is NOT accurate

The board of directors is obligated to declare dividends

Which of the following is NOT a significant date with respect to dividends

The incorporation date

When preferred stock is cumulative, preferred dividends are NOT declared in a period

called dividends in arrears

Dividends are predominantly paid in

cash

A company pays dividends out of

current and retained earnings

The data a cash dividend becomes a binding legal obligation to a corporation is the

declaration date

Entries for cash dividends are required on the:

declaration date and payment date

Dividends on common stock are usually expressed as a

dollar amount per share

Retained earnings are occasionally restricted

due to contractual loan restrictions

For a cash dividend to occur, a corporation must have all of the following EXCEPT

net income

Dividend in arrears relate to

preferred stock with a cumulative dividend feature

Regular dividends are declared out of

retained earnings

Each of the following decreases retained earnings EXCEPT a

stock split