1. In the real world, we find that dividends:
a) usually exhibit greater stability than earnings.
b) fluctuate more widely than earnings.
c) tend to be a lower percentage of earnings for mature firms than for newer firms.
d) are usually set as a fixed percentage of earnings every year.
2. The company with the common equity accounts shown here has declared a 10 percent stock dividend when the market value of its stock is $20 per share. What is the capital surplus account after the 10 percent stock dividend?
Common stock ($1 par value) $ 406,000
Capital Surplus 1,340,000
Retained earnings 3,427,000
Total owners’ equity $ 5,173,000
a) $568,600
b) $1,218,000
c) $1,380,600
d) $2,111,400
e) $3,467,600