12 when a company is determining its dividend policy the company must adhere to lega 4313649

12 when a company is determining its dividend policy the company must adhere to lega 4313649

12.When a company is determining its dividend policy, the company must adhere to legal requirements. The legal requirements are determined by

a.

theFinancial Accounting Standards Board (FASB).

b.

thestate in which the company was incorporated.

c.

theSecurities and Exchange Commission (SEC).

d.

theFederal Trade Commission (FTC).

13.How will a company's retained earnings and total stockholders' equity be affected by the declaration of a stock dividend to be distributed at a later date?

Retained Earnings

Total Stockholders' Equity

I.

decrease

decrease

II.

decrease

no effect

III.

no effect

no effect

IV.

no effect

decrease

?

a.

I

b.

II

c.

III

d.

IV

14.All of the following types of dividends will result in an increase in liabilities as a result of the declaration of the dividend except a

a.

cash dividend.

b.

property dividend.

c.

scrip dividend.

d.

stock dividend.

15.The Frank Company has issued 10%, fully participating, cumulative preferred stock with a total par value of $300,000 and common stock with a total par value of $900,000. Dividends for one previous year are in arrears. How much cash will be paid to the preferred stockholders and the common stockholders, respectively, if cash dividends of $222,000 are distributed at the end of the current year?

a.

$85,500to preferred and $136,500to common

b.

$78,000to preferred and $144,000to common

c.

$60,000to preferred and $162,000to common

d.

$55,500to preferred and $166,500to common

16.The Chester Company has issued 10%, nonparticipating, cumulative preferred stock with a total par value of $400,000 and common stock with a total par value of $800,000. No dividends are in arrears. How much cash will be paid to the preferred stockholders and the common stockholders, respectively, if cash dividends of $180,000 are distributed?

a.

$80,000 to preferred and $100,000 to common

b.

$60,000 to preferred and $120,000 to common

c.

$55,000 to preferred and $125,000 to common

d.

$40,000 to preferred and $140,000 to common

17.The Stansbury Company has issued 10%, partially participating, cumulative preferred stock with a total par value of $200,000 and common stock with a total par value of $800,000. The preferred stock participates up to 15% of its par value. No dividends are in arrears. How much cash will be paid to the preferred stockholders and the common stockholders, respectively, if cash dividends of $160,000 are distributed?

a.

$50,000 to preferred and $110,000 to common

b.

$20,000 to preferred and $140,000 to common

c.

$30,000 to preferred and $130,000 to common

d.

$32,000 to preferred and $128,000 to common

18.Which statement best represents the relationship between date of declaration, date of record and ex-dividend date, and date of payment, for a cash dividend.

a.

The date of payment results in the biggest decrease in the current ratio.

b.

The date of record establishes the amount to be received.

c.

The ex-dividend date establishes the decrease to cash.

d.

The date of declaration establishes the increase to liabilities.

19.On November 1, 2016, the Cranberry Construction Company declared a property dividend payable in the form of bonds held for long-term investment purposes. The bonds will be distributed to the common stockholders on December 15, 2016. The bonds to be distributed to the common stockholders originally cost Cranberry $210,000. Fair values of the bonds on various dates are as follows:

?

December 31, 2015

$220,000

November 1, 2016

235,000

December 15, 2016

225,000

Which one of the following amounts should be used to record the appropriate credit to Property Dividends Payable?

a.

$210,000

b.

$220,000

c.

$235,000

d.

$230,000

20.On October 1, 2016, White Company declared a property dividend payable in the form of marketable equity securities classified as “available for sale” for financial accounting purposes. The marketable equity securities will be distributed to the common stockholders on December 1, 2016. The investment in equity securities originally cost White $510,000 on August 1, 2016. The investment's fair value on various dates is as follows:

October 1, 2016

$530,000

December 1, 2016

535,000

December 31, 2016

540,000

?

The amount credited to Gain on Disposal of Investments resulting from this dividend transaction should be

a.

$0.

b.

$20,000.

c.

$25,000.

d.

$30,000.

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