Quiz on Accounting Principles

Dividends may be declared and paid in cash or stock.

• TRUE

• FALSE

Cash dividends are not a liability of the corporation until they are declared by the board of directors.

• TRUE

• FALSE

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.

• TRUE

• FALSE

A 10% stock dividend will increase the number of shares outstanding but the par value per share will stay the same.

• TRUE

• FALSE

A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

• TRUE

• FALSE

A dividend based on paid-in capital is termed a liquidating dividend.

• TRUE

• FALSE

Common Stock Dividends Distributable is reported as a debit in the stockholders' equity section.

• TRUE

• FALSE

A prior period adjustment is reported as an adjustment of the beginning balance of Retained Earnings.

• TRUE

• FALSE

Retained earnings represents the amount of cash available for dividends.

• TRUE

• FALSE

Net income of a corporation should be closed to retained earnings and net losses should be closed to paid-in capital accounts.

• TRUE

• FALSE