Exam 21: Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement

An exchange of one share of an old issue of stock for a multiple number of shares of a new issue of stock with a reduced par or stated value is known as a stock split.

A resolution by the board of directors to set aside a part of the credit balance of the retained earnings account for a specific use is called

Generally, a stock dividend is declared to improve the marketability of the shares by reducing the market price per share, increasing the number of shares outstanding, and making it possible to have a wider ownership of the stock.

A dividend is declared by the

Corporate earnings that are not distributed to the stockholders are retained by the corporation to help finance the growth of the business.

After making four quarterly estimated payments of $3,500, a corporation's actual income tax liability for the year is $17,200. The year-end adjusting entry would require

A board of directors may declare a dividend higher than the balance of the retained earnings account, as long as the cash balance is adequate to pay the dividends.

If a corporation issues additional shares of its own stock to the stockholders on a proportional ownership basis, these are known as a

When a stock dividend is distributed, the account to be credited would be

When a stock dividend of less than 20−25% is declared and the market value exceeds the par or stated value of the shares, an amount equal to the market value of the shares to be distributed should be charged (debited) to which of the following accounts?

If a 10% stock dividend is declared, an amount equal to the par value of the shares to be distributed should be charged to the retained earnings account.

A stock dividend will reduce the amount in the retained earnings section of stockholders' equity, while increasing the amount in the paid-in capital section.