Ch 10

For most companies that issue par-value common stock, which account balance is typically the highest?

additional paid-in capital

Retained earnings of $100,000 represent a corporation's cumulative earnings ______ and is shown on the ______.

not paid out by dividends; balance sheet and statement of retained earnings

Only ___ common shares are eligible to receive dividends.

outstanding

The statement of shareholders' equity reports

the changes in each equity account balance over time.

Shareholders' equity is another common term for ___ equity. (Do not use shareholders)

stockholders

The declaration of a dividend results in ______.

an increase in Dividends an increase in liabilities

Which of the following occurs on the date of record?

A list of shareholders that are entitled to receive a dividend is made.

Shareholders' equity consists of which of the following items?

Amounts invested by shareholders Amounts earned by the corporation

When does a corporation record an increase in dividends payable?

On the declaration date

Select those statements below that are true about cash dividends.

On the payment date, current assets are decreased. On the declaration date, liabilities are increased.

Which of the following shares are eligible to receive dividends?

Outstanding shares

When does a dividend become a liability to a corporation?

When it is declared by the board of directors

The journal entry to record the declaration of a dividend includes ______.

a credit to Dividends payable a debit to Dividends

On March 1, Fresh Corp. declared a dividend of $3,000. The record date is March 20, and the payment date is April 1. The journal entry required on March 1, will include which of the following entries?

Debit dividends $3,000. Credit dividends payable $3,000.

Gosling Corp. has 100,000 shares of common stock authorized, 80,000 shares issued, and 20,000 shares of treasury stock. Gosling declares a dividend of $0.10 share. Which of the following entries is required at the date of declaration?

Debit dividends $6,000.

On April 1, 2021, Rawlings declares a dividend of $0.30 per share. Rawlings has 100,000 shares authorized, and 40,000 issued and outstanding. The date of record is April 28, and the payment date is May 15. Which of the following entries is included in the journal entry on May 15?

Debit dividends payable $12,000.

On March 1, 2021, Fresh Corp. declared a dividend of $3,000. The record date is March 20, 2021, and the payment date is April 1, 2021. The journal entry required on April 1, 2021, will include which of the following entries?

Debit dividends payable $3,000. Credit cash $3,000.

Which of the following are sources of shareholders' equity?

Retained earnings Paid-in capital

Which financial statement summarizes the changes in the balance of each equity over time?

Statement of stockholders' equity only

True or false: The total net income earned by a corporation on behalf of its shareholders and not paid out as dividends is called retained earnings.

True

Dividends ______ paid on treasury shares.

are not

The dividend payment date is when:

cash is decreased dividends payable is decreased

The dividend payment date is when ______.

cash is paid to satisfy the dividend liability

The date on which a cash dividend becomes a liability to a corporation is the

declaration date.

A distribution of a company's accumulated prior earnings is a(n) ______.

dividend

When a corporation distributes assets of the company to its investors, it is referred to as a(n)

dividend.

The effect on the accounting equation of declaring a dividend that will be paid at a later date includes a(n):

increase in liabilities. decrease in stockholders' equity.

The date on which a company determines the registered owners of the stock who will receive a dividend is referred to as the

record date.

The purpose of the statement of shareholders' equity is to

report the changes and the sources of the changes in shareholder equity accounts.

A company's past profits that are not paid out in dividends are ______.

retained earnings

True or false: Typically the balance in the additional paid-in capital account will be larger than the common stock account of a company that issues par value stock.

True

Amounts earned by the corporation and not paid out in dividends are referred to as

retained earnings.

Another common term for stockholders' equity is:

shareholders' equity