Question

1)

All of the following statements about retained earnings are true except

a.retained earnings are increased when a company has net income.

b.retained earnings are sometimes referred to as "earnings retained for use in the business."

c.retained earnings represent surplus cash.

d.retained earnings are decreased when a company declares a dividend.

2)

Which of the following statements is true concerning stock splits?

a.The total number of shares outstanding does not change after the stock split.

b.Stock splits require journal entries to be recorded.

c.Each shareholder will own the same total par amount of stock before and after the split.

d.None of these choices are correct.

3)

In the calculation of earnings per share, preferred stock dividends are

a.added to net income.

b.subtracted from net income.

c.not used in the calculation.

d.None of these choices are correct.

Answer 1

Dear student, only one question is allowed at a time. I am answering the first question

1)

a)

Retained earnings

= Net Income – Dividends

So, retained earnings increases when there is net income. So, statement a is True

b)

Retained earnings are earnings not distributed as dividends to shareholders. So, these are earnings kept for use in the business. So, statement b is also correct

c)

Retained earnings may or may not be in the form of cash as they may have been invested in fixed assets or as an investment in other ventures. So, statement c is not correct

d)

Retained earnings

= Net Income – Dividends

So, when dividends are declared, retained earnings are decreased. So, statement d is also correct

So, as per above discussion, option c is the correct option