Jurisdiction-specific corporate laws limit directors' freedom to declare dividends. Which of the following is/are true?
a. The board may declare dividends "out of capital," that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners.
b. The board may not declare dividends "out of earnings" by debiting them against the Retained Earnings account, which results from earnings transactions.
c. "Capital" may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders.
d. No jurisdictions allows corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period
e. none of the above
C
You might also like to view...
In economic terms, all resources are ________, that is, they can be replaced by substitutes, and in this sense resources are infinite.
Fill in the blank(s) with the appropriate word(s).
Research has shown that numerous companies manage their earnings. A variety of earnings management techniques are available ranging from income smoothing to outright fraud. Define income smoothing and explain how it is implemented
Which of the following budgets are prepared at the beginning of the period for one set level of activity?
a. Revenue variance budgets b. Flexible budgets c. Static budgets d. Activity variance budgets
Which is not a reason why a product is withdrawn from the marketplace according to the text?
a. A design flaw in the product b. Unfair competition c. Accidental contamination of the product d. Misuse of the product by consumers