Circle the correct answer. True/False 1. Cash dividends reduce total shareholder' equity. 2. Stock dividends reduce retained earnings. 3. Stock splits are not recorded in a journal entry. 4. Earnings per share is reported for both common and preferred shares. True False True False True False True False 5. A comprehensive income statement makes it easier to evaluate the profitability of a company on an all-inclusive basis. True False 6. The payout ratio is calculated by dividing total cash dividends by net income. True False 7. Prior year financial statements that are published with the current statements are not adjusted for changes in accounting policies. True False 8. A restriction on retained earnings is described as a cash fund established for a specific future purpose. True False 9. The declaration of a stock dividend does not create a liability. True False 10. The price-earnings ratio is calculated by dividing the market price per share by the earnings per share. True False