Question : 81. The _____ has the legal authority to declare dividends. When : 1245760

81. The _____ has the legal authority to declare dividends. When considering whether to declare dividends, they must conclude that declaring a dividend is both legal (under law and contract) and financially desirable.  
A. chief financial officer
B. chief operating officer
C. chief executive officer
D. board of directors
E. financial analysts

82. Which of the following is/are true? 
A. Preferred shares usually entitle their holders to dividends at a certain rate, which the firm must pay before it can pay dividends to common shareholders.
B. Firms may sometimes postpone or omit preferred dividends.
C. Most preferred shares have cumulative dividend rights.
D. all of the above
E. none of the above

83. Jurisdiction-specific corporate laws limit directors’ freedom to declare dividends. Which of the following is/are true? 
A. The board may not declare dividends “out of capital,” that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners.
B. The board must declare them “out of earnings” by debiting them against the Retained Earnings account, which results from earnings transactions.
C. “Capital” may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders.
D. Some jurisdictions allow corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period.
E. all of the above

84. Jurisdiction-specific corporate laws limit directors’ freedom to declare dividends. Which of the following is/are not true? 
A. The board may declare dividends “out of capital,” that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners.
B. The board may declare dividends “out of earnings” by debiting them against the Retained Earnings account, which results from earnings transactions.
C. “Capital” may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders.
D. Some jurisdictions allow corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period
E. none of the above

85. Jurisdiction-specific corporate laws limit directors’ freedom to declare dividends. Which of the following is/are true? 
A. The board may declare dividends “out of capital,” that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners.
B. The board may not declare dividends “out of earnings” by debiting them against the Retained Earnings account, which results from earnings transactions.
C. “Capital” may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders.
D. No jurisdictions allows corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period
E. none of the above

86. Jurisdiction-specific corporate laws limit directors’ freedom to declare dividends. Without these limits, directors might dissipate the firm’s assets for the benefit of  
A. common shareholders, harming other nonshareholding stakeholders.
B. creditors, harming other stakeholders.
C. employees, harming other stakeholders.
D. management, harming other stakeholders.
E. customers, harming other stakeholders.

87. Contracts with bondholders, other lenders, and preferred shareholders often limit dividend payments and thereby compel the retention of earnings. Which of the following is/are true? 
A. A bond contract may require that total liabilities not exceed the total amount of shareholders’ equity.
B. A bond contract may require that firms retire debt “out of earnings.”
C. A bond contract’s provisions may involves curtailing dividends so that the necessary debt service payments, plus any dividends, do not exceed the amount of earnings for the period.
D. Financial statement notes must disclose significant limitations on dividend declarations.
E. all of the above

88. Directors usually declare dividends less than the legal maximum and thereby allow retained earnings to increase as a matter of corporate financial policy for what reason(s)? 
A. Available cash did not increase by as much as the amount of earnings, so paying the maximum legally permitted dividends would require raising more cash.
B. Restricting dividends in prosperous years may permit continued level or steadily growing dividend payments in poor years.
C. The firm may need funds for expansion of working capital or for plant and equipment.
D. The firm can distribute the funds to shareholders with lower tax burdens for them by using the cash to repurchase shares.
E. all of the above

89. Directors usually declare dividends less than the legal maximum and thereby allow retained earnings to increase as a matter of corporate financial policy.  Which of the following is not a valid reason for this practice? 
A. Available cash did not increase by as much as the amount of earnings, so paying the maximum legally permitted dividends would require raising more cash.
B. Restricting dividends in prosperous years may permit continued level or steadily growing dividend payments in poor years.
C. The firm may need funds for expansion of working capital or for plant and equipment.
D. The firm can distribute the funds to shareholders with lower tax burdens for them by using the cash to repurchase shares.
E. The firm can distribute steadily growing dividend payments to shareholders thereby increasing the market value of the firm’s common stock and increasing the earnings multiple that investors apply.

90. Corporations sometimes distribute assets other than cash when paying a dividend.  Which of the following is/are true? 
A. Such a dividend is known as a dividend in kind or a property dividend.
B. The accounting for property dividends resembles that for cash dividends, except that when the firm pays the dividend, it credits the asset given up, rather than Cash.
C. The amount debited to Retained Earnings equals the fair value of the assets distributed.
D. When this fair value differs from the carrying value of the assets distributed, the firm recognizes a gain or loss in net income.
E. all of the above