The Scott Co. has a general dividend policy whereby it pays a constant annual dividend of $1 per share of common stock. The firm has 1,000 shares of stock outstanding. The company:

Multiple Choice

a. must always show a current liability of $1,000 for dividends payable.

b. is obligated to continue paying $1 per share per year.

c. will be declared in default and can face bankruptcy if it does not pay $1 per year to each shareholder on a timely basis.

d. has a liability which must be paid at a later date should the company miss paying an annual dividend payment.

e. must still declare each dividend before it becomes an actual company liability.