Question 1

Liquidating dividends

Accepted Answer

A) Are prohibited under IFRS. 
B) Require a credit to Share Capital-Ordinary. 
C) Reduce amounts paid-in by shareholders. 
D) All of these answer choices are correct. 
A) Are prohibited under IFRS. 
B) Require a credit to Share Capital-Ordinary. 
C) Reduce amounts paid-in by shareholders. 
D) All of these answer choices are correct. C

Question 2

The features most frequently associated with preference shares include all of the following except

Accepted Answer

A) Callable at the option of the shareholder. 
B) Convertible into ordinary shares. 
C) Non-voting. 
D) Preference as to assets in the event of liquidation. 
A) Callable at the option of the shareholder. 
B) Convertible into ordinary shares. 
C) Non-voting. 
D) Preference as to assets in the event of liquidation. A

Question 3

According to IFRS, redeemable preference shares should be

Accepted Answer

A) included with ordinary shares. 
B) included as a liability. 
C) excluded from the statement of financial position. 
D) included as a contra item in shareholders' equity. 
A) included with ordinary shares. 
B) included as a liability. 
C) excluded from the statement of financial position. 
D) included as a contra item in shareholders' equity. B

Question 4

True no-par shares should be carried in the accounts at issue price without any share premium reported.

Accepted Answer

A) True 
 B)False

Question 5

Dunn Trading Co.issued 2,500 ordinary shares, The shares have a ₤2 par value and sold for ₤12 per share.Dunn incurred ₤3,000 to sell the shares related to underwriting costs and legal fees.Dunn Trading Co.will record the ₤3,000 as

Accepted Answer

A) A debit to Share Premium-Ordinary. 
B) A debit to Financing Expense. 
C) A credit to Share Premium-Ordinary. 
D) A credit to Share Capital-Ordinary. 
A) A debit to Share Premium-Ordinary. 
B) A debit to Financing Expense. 
C) A credit to Share Premium-Ordinary. 
D) A credit to Share Capital-Ordinary.

Question 6

The declaration and issuance of a share dividend

Accepted Answer

A) increases ordinary shares outstanding and increases total equity. 
B) decreases retained earnings but does not change total equity. 
C) may increase share premium but does not change total equity. 
D) increases retained earnings and increases total equity. 
A) increases ordinary shares outstanding and increases total equity. 
B) decreases retained earnings but does not change total equity. 
C) may increase share premium but does not change total equity. 
D) increases retained earnings and increases total equity.

Question 7

Companies allocate the proceeds received from a lump-sum sale of securities based on the securities' par values.

Accepted Answer

A) True 
 B)False

Question 8

An entry is not made on the

Accepted Answer

A) date of declaration. 
B) date of record. 
C) date of payment. 
D) An entry is made on all of these dates. 
A) date of declaration. 
B) date of record. 
C) date of payment. 
D) An entry is made on all of these dates.

Question 9

Categories of equity include all of the following except

Accepted Answer

A) Non-controlling interest. 
B) Accumulated other comprehensive income. 
C) Liquidating dividends. 
D) Treasury shares. 
A) Non-controlling interest. 
B) Accumulated other comprehensive income. 
C) Liquidating dividends. 
D) Treasury shares.

Question 10

Earned capital consists of contributed capital and retained earnings.

Accepted Answer

A) True 
 B)False

Question 11

A dividend which is a return to shareholders of a portion of their original investments is a

Accepted Answer

A) liquidating dividend. 
B) property dividend. 
C) liability dividend. 
D) participating dividend. 
A) liquidating dividend. 
B) property dividend. 
C) liability dividend. 
D) participating dividend.

Question 12

Porter Corp.purchased its own par value shares on January 1, 2015 for $20,000 and debited the treasury shares account for the purchase price.The shares were subsequently sold for $12,000.The $8,000 difference between the cost and sales price should be recorded as a deduction from

Accepted Answer

A) share premium-treasury to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings. 
B) share premium-treasury without regard as to whether or not there have been previous net "gains" from sales of the same class of shares included therein. 
C) retained earnings. 
D) net income. 
A) share premium-treasury to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings. 
B) share premium-treasury without regard as to whether or not there have been previous net "gains" from sales of the same class of shares included therein. 
C) retained earnings. 
D) net income.

Question 13

When a share dividend is declared on the ordinary shares outstanding, a company is required to transfer the par value of the shares issued from retained earnings.

Accepted Answer

A) True 
 B)False

Question 14

Total shareholders' equity represents

Accepted Answer

A) a claim to specific assets contributed by the owners. 
B) the maximum amount that can be borrowed by the enterprise. 
C) a claim against a portion of the total assets of an enterprise. 
D) only the amount of earnings that have been retained in the business. 
A) a claim to specific assets contributed by the owners. 
B) the maximum amount that can be borrowed by the enterprise. 
C) a claim against a portion of the total assets of an enterprise. 
D) only the amount of earnings that have been retained in the business.

Question 15

Special characteristics of the corporate form that affect accounting include the

Accepted Answer

A) influence of corporate law. 
B) use of the share system. 
C) development of a variety of ownership interests. 
D) All of these answer choices are correct. 
A) influence of corporate law. 
B) use of the share system. 
C) development of a variety of ownership interests. 
D) All of these answer choices are correct.

Question 16

Equity is generally classified into two major categories:

Accepted Answer

A) contributed capital and appropriated capital. 
B) appropriated capital and retained earnings. 
C) retained earnings and unearned capital. 
D) earned capital and contributed capital. 
A) contributed capital and appropriated capital. 
B) appropriated capital and retained earnings. 
C) retained earnings and unearned capital. 
D) earned capital and contributed capital.

Question 17

The pre-emptive right enables a shareholder to

Accepted Answer

A) share proportionately in any new issues of shares of the same class. 
B) receive cash dividends before other classes of stock without the pre-emptive right. 
C) sell ordinary shares back to the corporation at the option of the shareholder. 
D) receive the same amount of dividends on a percentage basis as the preference shareholders. 
A) share proportionately in any new issues of shares of the same class. 
B) receive cash dividends before other classes of stock without the pre-emptive right. 
C) sell ordinary shares back to the corporation at the option of the shareholder. 
D) receive the same amount of dividends on a percentage basis as the preference shareholders.

Question 18

Which of the following best describes a possible result of treasury share transactions by a corporation?

Accepted Answer

A) May increase but not decrease retained earnings. 
B) May increase net income if the cost method is used. 
C) May decrease but not increase retained earnings. 
D) May decrease but not increase net income. 
A) May increase but not decrease retained earnings. 
B) May increase net income if the cost method is used. 
C) May decrease but not increase retained earnings. 
D) May decrease but not increase net income.

Question 19

Ordinary shares is the residual corporate interest that bears the ultimate risks of loss.

Accepted Answer

A) True 
 B)False

Question 20

The residual interest in a corporation belongs to the

Accepted Answer

A) management. 
B) creditors. 
C) ordinary shareholders. 
D) preference shareholders. 
A) management. 
B) creditors. 
C) ordinary shareholders. 
D) preference shareholders.

Exam 15: Equity

Liquidating dividends

The features most frequently associated with preference shares include all of the following except

According to IFRS, redeemable preference shares should be

True no-par shares should be carried in the accounts at issue price without any share premium reported.

Dunn Trading Co.issued 2,500 ordinary shares, The shares have a ₤2 par value and sold for ₤12 per share.Dunn incurred ₤3,000 to sell the shares related to underwriting costs and legal fees.Dunn Trading Co.will record the ₤3,000 as

The declaration and issuance of a share dividend

Companies allocate the proceeds received from a lump-sum sale of securities based on the securities' par values.

An entry is not made on the

Categories of equity include all of the following except

Earned capital consists of contributed capital and retained earnings.

A dividend which is a return to shareholders of a portion of their original investments is a

Porter Corp.purchased its own par value shares on January 1, 2015 for $20,000 and debited the treasury shares account for the purchase price.The shares were subsequently sold for $12,000.The $8,000 difference between the cost and sales price should be recorded as a deduction from

When a share dividend is declared on the ordinary shares outstanding, a company is required to transfer the par value of the shares issued from retained earnings.

Total shareholders' equity represents

Special characteristics of the corporate form that affect accounting include the

Equity is generally classified into two major categories:

The pre-emptive right enables a shareholder to

Which of the following best describes a possible result of treasury share transactions by a corporation?

Ordinary shares is the residual corporate interest that bears the ultimate risks of loss.

The residual interest in a corporation belongs to the

Financial Reporting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities, Provisions, and Contingencies

Non-Current Liabilities

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Presentation and Disclosure in Financialreporting

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