Learning Objective 13-3
1) The declaration and payment of cash dividends cause a decrease in both assets (Cash) and stockholders' equity (Retained Earnings) for the corporation.
2) The declaration of a cash dividend does not create an obligation (liability) for the corporation.
3) Declaring and paying dividends causes an increase in both assets and stockholders' equity for the corporation.
4) Legal capital refers to the portion of stockholders' equity that cannot be used for dividends.
5) If preferred stock is noncumulative, then the company needs to pay dividends that were passed in previous years.
6) A dividend's declaration date is the date the corporation records which stockholders get dividend checks.
7) No journal entry is made on the dividend declaration date.
8) When a company has issued both preferred and common stock, the common stockholders are allocated their dividends first.
9) Stock dividends have no impact on the total amount of stockholders' equity.
10) Stock dividends are distributed to stockholders in proportion to the number of shares each stockholder already owns.