10.4 Account for cash dividends
1) Paying dividends causes a decrease in total assets, but an increase in total shareholders' equity.
2) Corporations declare cash dividends from retained earnings.
3) The portion of shareholders' equity that can be used for dividends is referred to as legal capital.
4) If a corporation has both common and preferred shares, the preferred shareholders will receive their dividends first, if the money is available.
5) Cumulative common shares will pay dividends in arrears.
6) Which of the following is NOT a date associated with dividends?
A) Date of issuance
B) Date of declaration
C) Date of payment
D) Date of record
E) Date of purchase
7) Which of the following dates do NOT require a journal entry?
A) Date of payment
B) Date of record
C) Date of declaration
D) Date of dividend
E) All dividend dates require a journal entry.
8) The date of declaration creates ________ for the corporation.
A) an asset
B) a liability
C) an expense
D) a revenue
E) no obligation
9) The date of record is the date that:
A) the board of directors announces a dividend will be paid.
B) the dividends will be transferred to the shareholders.
C) the shareholders purchased the shares.
D) will determine which shareholders receive the dividends.
E) the company records its obligation.
10) On the date of record:
A) debit Dividends and credit Retained Earnings.
B) debit Dividends Payable and credit Cash.
C) no entry is required.
D) debit Retained Earnings and credit Dividends Payable.
E) debit Cash and credit Dividends Payable.