1. The legal capital and retained earnings can be used for the distribution of dividends. 2. Shareholders' liability is generally limited; therefore, creditor recourse is limited to that of the corporate assets. 3. Retained earnings are the cumulative profit less losses and amounts distributed to shareholders since incorporation. 4. Income tax expense is calculated based on Profit from Operations from the income statement. 5. Dividends paid on common shares are shown as Dividends Expense in the Other Expenses section of the Income Statement. 6. When convertible preferred shares are converted into common shares, the company uses the current fair value to record the journal entry. 7. The redemption or call features apply to preferred shares. 8. Dividend payments become legally binding upon the date of declaration. 9. Return on equity is calculated by dividing average shareholders' equity by profit. 10. When shares are issued for noncash assets, the cost of the assets acquired is always equal to the fair value o