Scott SpA Has a General Dividend Policy Whereby It Pays

question 102

Multiple Choice

Scott SpA has a general dividend policy whereby it pays a constant annual dividend of €1 per share. The firm has 1,000 shares outstanding.The company:

• A)must always show a current liability of €1,000 for dividends payable.
• B)is obligated to continue paying €1 per share per year.
• C)will be declared in default and can face bankruptcy if it does not pay €1 per year to each
• Shareholder on a timely basis.
• D)has a liability which must be paid at a later date should the company miss paying an
• Annual dividend payment.
• E)must still declare each dividend before it becomes an actual company liability.

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Definitions:

Overhead Rate

The ratio of indirect costs to a base activity, used to allocate overhead costs to products or job orders.

Work In Process

Partially finished goods that are in the midst of the production process, not yet ready for sale but representing a portion of inventory.

Direct Labor

The wages and related costs for personnel who are directly involved in the production process of a company's products or services.

Factory Overhead Applied

This term refers to the amount of indirect manufacturing costs allocated to products based on an estimated overhead rate.