If a company with 1,000 shares outstanding has a general dividend policy whereby it pays a constant annual dividend of $2 per share of common stock, the company:

Multiple Choice

• Must always show a current liability of $2,000 for dividends payable.
• Has a liability which must be paid at a later date should the company miss paying an annual dividend payment.
• Will be declared in default and can face bankruptcy if it does not pay $2 per year to each shareholder on a timely basis.
• Must still declare each dividend before it becomes an actual company liability.
• Is obligated to continue paying $2 per share per year.

Please show all your work and show your steps. Clearly explain your answer and the steps you take. If writing, please write neatly, no cursive, and write in a linear fashion.