Which of the Following Statements Is NOT True About When

Multiple Choice

Which of the following statements is NOT true about when Cash dividends can be paid?

A) The retained earnings account must have an accumulated balance sufficient to cover the amount of the dividends to be paid.
B) The cash account must have a balance sufficient to pay the dividends.
C) The board of directors must have declared the dividend before it can be paid.
D) Loan covenants do not restrict the payment of dividends.