Which of the Following Is Not True Regarding Restrictions on Dividend

question 58

Multiple Choice

Which of the following is not true regarding restrictions on dividend payments?

• A)These restrictions typically arise when loan agreements prohibit the registrant from paying cash dividends without the consent of the lender.
• B)In certain cases,restrictions at a subsidiary-company level exist such that the registrant's subsidiary companies may not transfer amounts to the registrant without the consent of a third party.
• C)Amounts subject to restrictions must be disclosed.
• D)The auditor will typically confirm with shareholders whether there are any side agreements regarding dividend restrictions.

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Definitions:

Specific Identification Method

An inventory costing method that tracks the actual cost of each specific item in inventory until it is sold.

Equity Method

An accounting technique used for recording investments in associate companies where the investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets.

Journal Entries

The method by which all business transactions are recorded in a company's accounting system, using debits and credits.

Other Comprehensive Income

Portions of total comprehensive income of a company not realized in net income, including items like foreign currency translation adjustments or unrealized gains on securities.