If Acme Corporation has 2,500 shares of 10%, $80 par value preferred stock outstanding on December 31, 2019. On December 31, 2019, the company declared a $75,000 cash dividend. The dividend paid to the common stockholders is $35000 if the preferred stock is non-cumulative, and the company did not pay a dividend in the previous year. *

True

False

Authorized share capital is the number of stock units (shares) that a company can issue as stated in its memorandum of association or its articles of incorporation. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. Another reason to keep shares in the company treasury is to retain a controlling interest in the business.

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F

On April 1, the directors of Acme Corporation declare a $1.00 per share cash dividend on 200,000 shares of $12 par value common stock. The dividend is payable on May 20 to shareholders of record on May 6. The Acme Corporation will record the declaration of the cash dividend on May 6 in their book of accounts. *

True

False

One of the benefits of raising funds (capital) for a corporation through the issuance of more equity over debt financing (bonds or bank loans) is that it results in an increase in the return on common stockholders' equity. *

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F

The board members of a corporation have declared a dividend for the year 2020 in the form of a 3-for-1 stock split. This should result in an increase in the number of outstanding shares by 3 times without changing the overall paid-in capital amount. *

True

False