ACC/206 Strayer Accounting Principles II Week 6 Quiz

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StrayerACC/206 Accounting Principles II Week 6 QuizTRUE-FALSESTATEMENTS1. Dividends may be declared and paid in cash or stock.TrueFalse2. Cash dividends are not a liability of the corporation until they are declared by the board ofdirectors.TrueFalse3. The amount of a cash dividend liability is recorded on the date of record because it is on thatdate that the persons or entities who will receive the dividend are identified.TrueFalse4. A 10% stock dividend will increase the number of shares outstanding but the book value pershare will decrease.TrueFalse5. A 3 for 1 common stock split will increase total stockholders' equity but reduce the par orstated value per share of common stock.TrueFalse6. Retained earningsrepresents the amount of cash available for dividends.TrueFalse7. Net income of a corporation should be closed to retained earnings and net losses should beclosed to paid-in capital accounts.TrueFalse8. A debit balance in the Retained Earnings account is identified as a deficit.TrueFalse9. A correction in income of a prior period involves either a debit or credit to the RetainedEarningsaccount.TrueFalse10. Prior period adjustments to income are reported in the current year's incomestatement.TrueFalse11. Retained earnings that are restricted are unavailable for dividends.TrueFalse12. Restricted retained earnings are available for preferred stock dividends but unavailable forcommon stock dividends.TrueFalse

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13. A retained earnings statement shows the same information as a corporation incomestatement.TrueFalse14. A detailed stockholders' equity section in the balance sheet will list the names of individualswho are eligible to receive dividends on the date of record.TrueFalse15. Common Stock Dividends Distributable is shown within the Paid-in Capital subdivision ofthe stockholders' equity section of the balance sheet.TrueFalse16. Return on common stockholders’ equity is computed by dividing net income by endingstockholders’ equity.TrueFalse17. Many companies prepare a stockholders’ equity statement instead of presenting a detailedstockholders’ equity section in the balance sheet.TrueFalse18. A major difference among corporations,proprietorships, and partnerships is that acorporation's income statement reports income tax expense.TrueFalse19. A corporation incurs income tax expense only if it pays dividends to stockholders.TrueFalse20. Income tax expense usuallyappears as a separate section on a corporation income statement.TrueFalse21. Earnings per share is calculated by dividing net income by the weighted average number ofshares of preferred stock and common stock outstanding.TrueFalse22. Preferred dividends paid are added back to net income in calculating earnings per share forcommon stockholders.TrueFalse23. Earnings per share indicates the net income earned by each share of outstanding commonstock.TrueFalse24. Earnings per share is reported for both preferred and common stock.TrueFalse

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25. Most companies are required to report earnings per share on the face of the incomestatement.TrueFalseAdditional True-False Questions26. A dividend based on paid-in capital is termed aliquidating dividend.TrueFalse27. Common Stock Dividends Distributable is reported as additional paid-in capital in thestockholders' equity section.TrueFalse28. A prior period adjustment is reported as an adjustment of the beginning balance ofRetainedEarnings.TrueFalse29. Income tax expense and the related liability for income taxes payable are recorded whentaxes are paid.TrueFalse30. Earnings per share is reported only for common stock.TrueFalseMULTIPLECHOICEQUESTIONS31.Each of the following decreases retained earningsexceptaa. cash dividend.b. liquidating dividend.c. stock dividend.d. All of these decrease retained earnings.32. Each of the following decreases total stockholders' equityexceptaa. cash dividend.b. liquidating dividend.c. stock dividend.d. All of these decrease total stockholders' equity.33. Which one of the following isnotnecessary in order for a corporation to pay a cashdividend?a. Adequate cashb. Approval of stockholdersc. Declaration of dividends by the board of directorsd. Retained earnings34. If a corporation declares a dividend based upon paid-in capital, it is known as aa. scrip dividend.b. property dividend. c. paid dividend.d. liquidating dividend.35. The date on which a cash dividend becomes a binding legal obligation is on thea. declaration date.

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