ACC 109 Exam 2
Retained earnings that are restricted are unavailable for dividends.
True
Bento, Inc. had 500,000 shares of common stock outstanding before a stock split occurred, and 1,500,000 shares outstanding after the stock split. The stock split was
1,500,000/500,000 3 3:1 stock split
Which one of the following events would not require a formal journal entry on a corporation's books?
2:1 stock split
When stock dividends are distributed,
Common Stock Dividends Distributable is decreased.
A corporation is not committed to a legal obligation when it declares A. a cash dividend. B. either a cash dividend or a stock dividend. C. a stock dividend. D. a distribution date.
D. a distribution date.
Regular dividends are declared out of A. Pd-in capital in excess of par B. treasury stcok C common stock D retained earnings
D. retained earnings
A retained earnings statement shows the same information as a corporation income statement.
False
Which of the following statements about a cash dividend is incorrect?
Shareholders usually vote to determine the amount of income to be distributed in the form of a div
Which one of the following is not necessary in order for a corporation to pay a cash dividend?
approval of stockholders
If a stockholder receives a dividend that reduces retained earnings by the fair value of the stock, the shareholder has received a
small stock dividend
a prior period adjustment for understatement of net income will
be credited to the RE account
Stock dividends and stock splits have the following
split: no change dividend: decrease
dividends are predominantly paid in
cash
of the various types of dividends, the two most common are
cash and small stock
common stock dividends distributable is classified as
stockholders' equity account
dividends payable is classified as
current liability
The date a cash dividend becomes a binding legal obligation to a corporation is the
declaration date
The date on which a cash dividend becomes a binding legal obligation is on the
declaration date
The cumulative effect of the declaration and payment of a cash dividend on a company's balance sheet is to
decrease stockholders' equity and total assets.
The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to
decrease total assets and stockholders' equity
The effect of a stock dividend is to
decrease total assets and stockholders' equity.
A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock
false
A corporation incurs income tax expense only if it pays dividends to stockholders.
false
A detailed stockholders' equity section in the balance sheet will list the names of individuals who are eligible to receive dividends on the date of record
false
Common Stock Dividends Distributable is reported as additional paid-in capital in the stockholders' equity section
false
Earnings per share is calculated by dividing net income by the weighted-average number of shares of preferred stock and common stock outstanding
false
Earnings per share is reported for both preferred and common stock.
false
Income tax expense and the related liability for income taxes payable are recorded when taxes are paid.
false
Net income of a corporation should be closed to retained earnings and net losses should be closed to paid in capital
false
Preferred dividends paid are added back to net income in calculating EPS for common shareolders
false
Prior period adjustments to income are reported in the current year's
false
Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends
false
Retained earnings represents the amount of cash available for dividends.
false
Return on common stockholders' equity is computed by dividing net income by ending stockholders' equity
false
The amount of a cash dividend liability is recorded on the date of record because it is on that date that the persons or entities who will receive the dividend are identified.
false
Each of the following statements is correct except that earnings per share is reported
for both common and preferred stock.
The declaration and distribution of a stock dividend will
have no effect on total assets
The declaration of a stock dividend will
increase paid-in capital
which of the following show the proper effect of a stock split and a stock dividend?
item: par value per share Stock split: decrease Stock dividend: no change
The formula for computing earnings per share is net income
less preferred dividends divided by the weighted-average number of common shares outstanding
a small stock dividend is defined as
less than 20-25% of the corporation's issued stock
a stock split
may occur in the absence of retained earnings
Identify the effect the declaration and distribution of a stock dividend has on the par value per
no effect
on the dividend record date
no entry is required
prior period adjustments are reported
on the current year's retained earnings statement
If the board of directors authorizes a $1,000,000 restriction of retained earnings for a future....
reduce the amount of retained earnings available for dividend declarations.
A prior period adjustment that corrects income of a prior period requires that an entry be made to?
retained earnings
which of the following statements regarding the date of a cash dividend declaration is not accurate?
the dividend can be rescinded once it has been declared
which of the following is not a significant date with respect to dividends
the incorporation date
The per share amount normally assigned by the board of directors to a small stock dividend is
the market value
The per share amount normally assigned by the board of directors to a large stock dividend is
the par or stated value of the stock
A 10% stock dividend will increase the number of shares outstanding but the par value will stay the same
true
A correction in income of a prior period involves either a debit or credit to the Retained Earnings account.
true
A debit balance in the Retained Earnings account is identified as a deficit.
true
A dividend based on paid-in capital is termed a liquidating dividend.
true
A major difference among corporations, proprietorships, and partnerships is that a corporation's income statement reports income tax expense.
true
A prior period adjustment is reported as an adjustment of the beginning balance of Retained earnings
true
Common Stock Dividends Distributable is shown within the Paid-in Capital subdivision of the stockholders' equity section of the balance sheet
true
EPS is reported for common stock
true
Earnings per share indicates the net income earned by each share of outstanding common stock
true
Income tax expense usually appears as a separate section on a corporation income statement.
true
Many companies prepare a stockholders' equity statement instead of presenting a detailed stockholders' equity section in the balance sheet.
true
Most companies are required to report earnings per share on the face of the income statement.
true
cash dividends are not a liability to the corporation until they are declared by the BOD
true
dividends may be declared and paid in cash or stock
true
corporation income tax expense is
usually accrued in the adjusting entry process