A Bonus Issue or Share Dividend

question 171

Multiple Choice

A bonus issue or share dividend:

• A) Is not a liability on the balance sheet.
• B) Does not reduce a corporation's assets and shareholders' equity.
• C) Transfers a portion of equity from retained earnings to contributed capital.
• D) Does not affect total equity, but does affect the components of equity.
• E) All of these.

---

Definitions:

Variable Costs

Costs that vary in direct proportion to changes in production or sales volume, such as raw materials and sales commissions.

Long-Run Usage

Analysis or operations that consider a longer time horizon, focusing on trends and strategies sustainable in the future.

Reciprocal Method

An accounting method used for allocating costs between interdependent departments, accurately reflecting the shared services costs.

Mutual Provision

Mutual provision relates to the sharing or exchange of services, resources, or benefits between parties, often within a cooperative or collaborative framework.