Asked Sep 14, 2007, 05:37 AM
Cash dividends are not a liability of the corporation until they are declared by the board of directors.
A 3 for 1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock
A correction in income of a prior period involves either a debit or credit to the Retained Earnings account.
Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.
A major difference among corporations, proprietorships, and partnerships is that a corporation's income statement reports income tax expense.
Earnings per share is calculated by dividing net income by the weighted average number of shares of preferred stock and common stock outstanding.
Preferred dividends paid are added back to net income in calculating earnings per share for common stockholders.
Earnings per share is reported for both preferred and common stock.
A prior period adjustment is reported as an adjustment of the beginning balance of Retained Earnings.
Earnings per share is reported only for common stock.
Dividends Payable is classified as a
If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to
decrease total retained earnings and increase total liabilities.
A prior period adjustment for understatement of net income will
show as a gain on the current year's Income Statement.
Abbott Cort splits its common stock 4 for 1, when the market value is $80 per share. Prior to the split, Abbott had 50,000 shares of $20 par value common stock issued and outstanding, After the split, the par value of the stock
reduced to $20 per share
Lennox Corporation had 300,000 shares of common stock outstanding during the year. Lennox declared and paid cash dividends of $200,00 on the common stock and $160,000 on the perferred stock. Net income for the year was $880,000.
Lennox's earnings per share is $2.27
Last edited by chyland; Sep 14, 2007 at 07:26 AM.