CH13.2 Do In Class Handout Circle the correct answer True/False (If False, Expla
ID: 2400924 • Letter: C
Question
CH13.2 Do In Class Handout Circle the correct answer True/False (If False, Explain Why) 1. The cumulative effect of the declaration and payment of a cash dividend is to decrease both stockholders' equity and total assets. True False A stock split does not have any effect on total paid-in capital, retained earnings, or total stockholders' equity 2. True False 3. A stock dividend results in a decrease in retained eamings and a decrease in total stockholders' equity. True False Earnings per share is reported for both common and preferred stock True 4. False 5. Income tax expense is reported in a separate section of the corporation income statement before net income. True The return on common stockholders' equity shows how many dollars of net income False 6. were earned for each dollar invested by stockholders. True False A prior period adjustment always includes a credit to Retained Earnings. True False 7. 8. A restriction on retained earnings is described as a cash fund established for a specific future purpose True False 9. The accounting effects of a restriction on retained earnings is limited entirely to the retained earnings section of stockholders' equity True False Three important dates when cash dividends are involved are: date of declaration, date of record, and date of payment. True False 10.Explanation / Answer
1) The cumulative effect of the declaration and payment of a cash dividend is to decrease total assets and stockholders' equity TRUE The transaction would reduce cash (and asset) and dividend would also be subtracted from retained earnings (Stockholders' Equity.) 2) A stock split does not have any effect on total paid-in capital, retained earnings, and total stockholders' equity. TRUE A stock split increases the total shares outstanding and decreases the par value per share as it increases in the same proportion that the par value per share decreases, the total par value of common stock does not change. 3) A stock dividend results in decrease in retained Earnings and decrease in total shareholder equity FALSE A stock dividend results in decrease in retained Earnings and no effect in total shareholder equity as a stock dividend affects the total par value of common stock 4) Earning Per share is reported for both common and preferred stock. FALSE EPS is only reported for shares of common stock. Preferred Dividend is subtracted from net income to arrive at income available for common stockholders and it will be reported on financial statements