1) All of the following statements about retained earnings are true except a.retained earnings are increased…
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Question “1) All of the following statements about retained earnings are true except a.retained earnings are increased…”
1)
All of the following statements about retained earnings are true
except
a.retained earnings are increased when a company has net
income.
b.retained earnings are sometimes referred to as “earnings
retained for use in the business.”
c.retained earnings represent surplus cash.
d.retained earnings are decreased when a company declares a
dividend.
2)
Which of the following statements is true
concerning stock splits?
a.The total number of shares outstanding does not change after
the stock split.
b.Stock splits require journal entries to be recorded.
c.Each shareholder will own the same total par amount of stock
before and after the split.
d.None of these choices are correct.
3)
In the calculation of earnings per share, preferred stock
dividends are
a.added to net income.
b.subtracted from net income.
c.not used in the calculation.
d.None of these choices are correct.
Answer
Dear student, you can only ask one question at a given time. Answer the first question
1)
a)
Retained earnings
= Net Income – Dividends
Therefore, net income increases the amount of retained earnings. Statement a is true
b)
These earnings are not distributed to shareholders as dividends. These are earnings that can be used in the business. Statement b is correct as well.
c)
Cash may or not be retained earnings as they could have been invested in fixed assets, or in investments in other ventures. Statement c is incorrect.
d)
Retained earnings
= Net Income – Dividends
Therefore, retained earnings decrease when dividends are declared. Statement d is correct as well.
As you can see, option c is correct.
Conclusion
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