1. Which of the following is true?

1. Cash dividends are paid on the declaration date.
2. Dividends in arrears are a current liability on the balance sheet.
3. Cumulative preferred stock may share in additional dividends after the common shareholders receive their dividend.
4. Mandatorily redeemable preferred stock is classified as a liability.

2. Which of the following is true?

1. Buying treasury stock with borrowed money makes the debt/equity ratio higher.
2. Treasury stock may be purchased to lower earnings per share.
3. When cash dividends on a companys common stock are declared, the expense is recorded in the journal entry.
4. The account Retained Earnings represents the cash the company has available on hand for paying cash dividends.

3. Which of the following has no effect on total stockholders equity?

1. Stock splits
2. Stock dividends
3. Conversion of preferred stock to common stock
4. All of the above