The questions are indicated on the picture.

PROBLEM 2: FOR CLASSROOM DISCUSSION 1. Which of the following is least likely to affect the retained earnings balance? a. Conversion of preferred stock into common stock. b. Stock splits. C. Treasury stock transactions. d. Stock dividends. (Adapted) 2. Which of the following is most likely true regarding payment of dividends? a. Dividends may be paid from legal capital. b. Retained earnings are available for dividends unless restricted by contract or by statute. c. Unrealized capital is available for any type of dividend. d. Capital from donated assets is available for dividends. (Adapted) 3. The use of equity reserves under PFRSs a. is strictly voluntary on the part of the management of a company. b. is based on whether a reserve is part of distributable or nondistributable equity. c. is primarily for the benefit of shareholders rather than creditors. d. results in the elimination of the retained earnings category from the total equity of a company. Adapted) Select the statement that is incorrect concerning the appropriations of retained earnings. a. Appropriations of retained earnings do not change the total amount of stockholders' equity. b. Appropriations of retained earnings reflect funds set aside for a designated purpose, such as plant expansion. c. Appropriations of retained earnings can be made as a result of contractual requirements. d. Appropriations of retained earnings can be made at the discretion of the board of directors. apted)