Retained earnings

The cumulative feature of preferred stock...

A. Limits the amount of cumulative dividends to the par value of the preferred stock.

B. Means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which

time it can be converted into common stock.

C. Enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock

in place of the cash dividends.

D. Requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common

shareholders.

D. Requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common

shareholders.

How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position?

A. Increase in shareholders’ equity.

B. Note disclosure

C. Increase in current liabilities

D. Increase in current liabilities for the amount expected to be declared within the year or operating cycle, and increase in

long-term liabilities for the balance.

B. Note disclosure

An entry is not made on the date of...

A. Declaration B. Record C. Payment D. None of the foregoing

B. Record

Cash dividends are paid on the basis of the number of shares...

A. Authorized B. Issued

C. Outstanding D. Outstanding less number of shares in the treasury

C. Outstanding

Which of the following statements about property dividends is incorrect?

A. A property dividend is usually in the form of securities of other companies.

B. A property dividend is usually in the form of securities of the entity.

C. A property dividend is also called a dividend in kind.

D. The accounting for a property dividend should be based on the fair value of the non-monetary assets transferred.

B. A property dividend is usually in the form of securities of the entity.

6. A dividend which is a return to stockholders of a portion of their original investments is a...

A. Cash dividend B. Scrip dividend C. Liquidating dividend D. Melting dividend

C. Liquidating dividend

If the board wishes to capitalize part of the earnings, it may issue a...

A. Cash dividend B. Property dividend C. Stock dividend D. Liquidating dividend

C. Stock dividend

8The following statements have been presented to you:

I. C Corporation issued a 100% stock dividend of its common stock which had a par value of P100. At what amount should

retained earnings be capitalized for the additional shares issued?

II. C Corporation issued a 10% stock dividend of its common stock which had a par value of P100. At what amount should

retained earnings be capitalized for the additional shares issued?

Statement I Statement II

A. Fair value at date of declaration Par value

B. Par value Fair value at date of declaration

C. Fair value at date of payment Par value

D. Par value Fair value at date of payment

B. Par value Fair value at date of declaration

The balance in “Stock Dividend Distributable” account should be reported as a(n)...

A. Current liability B. Addition to contributed capital

C. Contra-retained earnings account D. Contra-asset account

B. Addition to contributed capital

Dividends are not paid on...

A. Cumulative preference share B. Non-cumulative preference share

C. Redeemable preference share D. Treasury preference share

D. Treasury preference share

Which of the following is not correct concerning retained earnings?

A. Appropriated retained earnings shall be clearly distinguished from unappropriated retained earnings.

B. A deficit is a debit balance in retained earnings.

C. Whenever the retained earnings resulted to a debit balance, retained earnings shall not be reported.

D. When the deficit exceeds the total of the other capital account balances, the excess is a capital deficiency.

C. Whenever the retained earnings resulted to a debit balance, retained earnings shall not be reported.