Which of the Following Statements Best Describes the Role of Current

question 82

Multiple Choice

Which of the following statements best describes the role of current and accumulated earnings and profits in determining if a distribution is a dividend?

• A) A distribution will only be a dividend if total earnings and profits (current plus accumulated) is positive at the time of the distribution.
• B) A distribution can never be a dividend if current earnings and profits is negative.
• C) A distribution will be a dividend if current earnings and profits for the year is positive, even if accumulated earnings and profits is negative.
• D) A distribution will never be a dividend if current earnings and profits for the year is negative, even if accumulated earnings and profits is positive.

---

Definitions:

Adjusting Entry

Bookkeeping entries executed at the termination of an accounting cycle, intended to apportion income and outlays to their respective periods of occurrence.

Accrue Wages

The process of recognizing wages that have been earned by employees but have not yet been paid out by the company.

Net Income

Net income is the total profit of a company after all expenses and taxes have been deducted from revenue.

Total Assets

The sum of all current and non-current assets that a company owns, as shown on the balance sheet.