14. Dividends in arrears on cumulative preferred shares (a) never have to be paid, even if common dividends are paid. (b) must be paid before common shareholders can receive a dividend. (c) should be recorded as a current liability until they are paid. (d) enable the preferred shareholders to share equally in corporate profits with the common shareholders

14. Dividends in arrears on cumulative preferred shares (a) never have to be paid, even if common dividends are paid. (b) must be paid before common shareholders can receive a dividend. (c) should be recorded as a current liability until they are paid. (d) enable the preferred shareholders to share equally in corporate profits with the common shareholders

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter14: Corporation Accounting

Section: Chapter Questions

Problem 14MC: Which of the following is true of a stock dividend? A. It is a liability. B. The decision to issue a...

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Which of the following statements is true? The outstanding number of shares is the maximum number of shares that can be issued by a corporation. The shares that are in the hands of the stockholders are said to be outstanding. It is very unlikely that corporations will have more than one class of stock outstanding. Preferred stock is stock that has been retired.
Which of the following is true of a stock dividend? A. It is a liability. B. The decision to issue a stock dividend resides with shareholders. C. It does not affect total equity but transfers amounts between equity components. D. It creates a cash reserve for shareholders.
7. With regard to preferred shares, a.their issuance provides no flexibility to the issuing company because their terms always require mandatory dividend payments. b.their shareholders may have the right to participate, along with common shareholders, if a dividend is declared. c.no dividends are expected by the shareholders. d.there is a legal requirement for a corporation to declare a dividend on preferred shares.
10. When shareholders may elect receive cash in lieu of share dividend, the amount to be charged to retained earnings is equal to the * a. Optional cash dividend b. Fair value of the shares c. Par value of the shares d. Book value of the shares
Identify all of the following statements that are correct with regards to dividends and stock splits: a. The record date is the date that will determine who is eligible to receive a dividend. b. When a stock split occurs, a share’s market value will decline and, initially, each shareholder’s wealth will decline. c. Companies are not required to declare and issue dividends to common shareholders, but companies are required to declare and issue a dividend to preferred shareholders. d. If a person holds 25% of the common shares in a company, they will receive 25% of the total dividends paid on common shares. e. Both cash dividends and stock dividends decrease shareholders’ equity. f. The advantage of a stock split is that it may increase the marketability of the shares by lowering the share price. g. The Canada Business Corporations Act requires that stock dividends be recorded at book value. h. When a stock dividend is declared, additional shares will be issued to each shareholder based…
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TRUE OR FALSE? 1. "Dividend in arrears" is a term that applies to cumulative preference shares. 2. A share capital dividend decreases retained earnings but it increases contributed capital. 3. A share capital dividend does not change total shareholders' equity. 4. Book value per share is the amount earned for every capital share owned by a shareholder. 5. Appropriation of retained earnings is necessary when the corporation reacquires its own share capital. 6. The liquidation value of a preference share is always equal to its par value. 7. Property dividends should be recorded at the fair value of the assets to be distributed. 8. Earnings per share is computed for both preference and ordinary shares. 9. On a corporation's statement of financial position, Ordinary Share Capital Subscribed will appear in the shareholders' equity section rather than in the asset section. 11. A deficit (or debit balance) in Retained Earnings means that Retained Earnings appears in the asset section of the…
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