TRUE/FALSE

A. Cash dividends reduce both the retained earnings and the stockholders' equity in the corporation.

B. Stock Dividends Distributable is reported as an addition to common stock in the stockholders' equity section of the balance sheet.

C. At year-end, an adjusting entry is necessary to recognize the correct amount of income taxes the corporation must pay for the year.

D. An entry is required both on the date of declaration and the date of payment.

E. Income taxes for a corporation are normally reported as a separate expense item on the income statement.

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Q/A

The effect of a retained earnings appropriation is to

A.divide the retained earnings into two categories.

B. increase cash and other assets.

C. allow the corporation to use its assets for dividends.

D. increase the number of shares of stock available.