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Louisiana State University, Shreveport ACCT 701 TRUE-FALSE STATEMENTS 1)Cash dividends are not a liability of the corporation until they are declared by the board of directors
Louisiana State University, Shreveport
ACCT 701
TRUE-FALSE STATEMENTS
1)Cash dividends are not a liability of the corporation until they are declared by the board of directors.
- 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.
3. A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.
- A stock dividend does not affect the total amount of stockholders’ equity.
- A stock split results in a transfer at market value from retained earnings to paid-in capital.
- A 3-for-1 common stock split will increase total stockholders’ equity but reduce the par or stated value per share of common stock.
- Retained earnings represents the amount of cash available for dividends.
- Dividends in arrears are liabilities of the corporation.
- Net income of a corporation should be closed to retained earnings and net losses should be closed to paid-in capital accounts.
- A debit balance in the Retained Earnings account is identified as a deficit.
- Retained earnings that are restricted are unavailable for dividends.
- Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.
- 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.
- The Common Stock Distributable account is classified as a current liability.
- Return on common stockholders’ equity is computed by dividing net income by ending stockholders’ equity.
- The payout ratio is computed by dividing total cash dividends paid on common stock by retained earnings.
17. A liability arises when the board of directors declares a stock dividend.
18. A stock dividend is a pro rata distribution of cash to a corporation’s stockholders.
19. A stock dividend will cause an increase in total contributed capital at the date the dividend is declared.
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