A Company Declared a Cash Dividend on Its Common Stock

question 45

Multiple Choice

A company declared a cash dividend on its common stock in December 2010, payable in January 2011. Retained Earnings would

• A) increase on the date of declaration.
• B) not be affected on the date of declaration.
• C) not be affected on the date of payment.
• D) decrease on the date of payment.

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Definitions:

Common Stock Dividends Distributable

A liability account representing dividends declared by a company but not yet distributed to common stockholders.

Stock Split

A corporate action to increase the number of outstanding shares by dividing each share, which typically makes the stock more affordable.

Common Stock

A form of corporate equity ownership, representing a claim on a portion of the corporation's assets and earnings.

Stock Dividend

A dividend payment made in the form of additional shares of the company's stock rather than cash.