Match the Following Terms to Their Correct Definition

question 226

Multiple Choice

Match the following terms to their correct definition.
-Dividends that are paid out of contributed capital because retained earnings have been reduced to zero.

• A)Articles of incorporation
• B)Common stock
• C)Contributed capital
• D)Corporate charter
• E)Current dividend preference
• F)Date of record
• G)Declaration date
• H)Dividends in arrears
• I)Equity
• J)Exercise (strike) price
• K)Liquidating dividend
• L)No-par stock
• M)Payment date
• N)Preferred stock
• O)Prior period adjustment
• P)Return on common equity

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Definitions:

Modified Cash Basis

A method of accounting that combines elements of both cash and accrual accounting, recording most transactions on a cash basis, but also incorporating the accrual basis for significant items.

Warranty Expense

Costs associated with the obligation to repair or replace defective products sold to customers, recognized as a liability.

Estimated Liability

A probable future outflow of resources, arising from past transactions or events, the amount of which is not certain.

Cash Discounts

A reduction in invoice amount offered by sellers to buyers as an incentive for early payment.