Determine if the following statements are True or False and please provide a brief explanation.
1. The purchase of treasury stock does not affect shareholders' equity.
2. A dividend that represents a return to the shareholders of a part of their share capital rather than a distribution out of retained earnings is called a liquidating dividend.
3. A debit balance in the Retained Earnings account is referred to as a deficit.
4. A share dividend will cause an increase in the total number of shares issued and outstanding.
5. Correction of errors and prior period adjustments both result in either a debit or a credit to Retained Earnings.
6. Dividends in arrears are liabilities of the corporation.
7. A share dividend does not affect the total amount of shareholders' equity.
8. No entry is required on the date of record for a cash dividend.
9. Property dividends are charged to retained earnings at cost or book value of the non-cash assets distributed.
10. A share dividend is a pro rata distribution of cash to a corporation's shareholders.
11. A 2-for-1 share split will have the same effect on the number of shares outstanding as a 200% share dividend.
12. Dividends usually cannot be paid on ordinary shares unless the regular dividend has been paid to preference shareholders.
13. A share split normally increases total shareholders' equity.
14. Cumulative preference shares entitle the holders to participate with the holders of ordinary shares pro-rata in the remainder after the ordinary shareholders have received their initial share.
15. The declaration of a cash dividend causes an increase in a corporation's liabilities at the date of record.
16. A share dividend reduces the retained earnings balance and permanently capitalizes the reduced portion of the retained earnings.
17. A share split results in a transfer of the market value of the share from retained earnings to share capital.
18. A retained earnings appropriation reduces the total shareholder's equity shown on the statement of financial position.
19 Share splits and share dividends are accounted for differently.
20. Prior period adjustments are corrections of errors made in financial statements of the prior periods. These should be shown in the current year's statement of recognized income and expense.
21. Dividends are declared by the shareholders.
22. Cash Dividends Payable is closed to Retained Earnings at the end of the period.
23. The retained earnings balance of a corporation is part of its share capital.
24. A share dividend exceeding 25% is properly treated as a share split.
25. Retained earnings is a component of contributed capital.