Question 1

Dividends are not paid on

Accepted Answer

A) noncumulative preference shares. 
B) nonparticipating preference shares. 
C) treasury shares. 
D) Dividends are paid on all of these. 
A) noncumulative preference shares. 
B) nonparticipating preference shares. 
C) treasury shares. 
D) Dividends are paid on all of these.

Question 2

All dividends, except for liquidating dividends, reduce the total shareholders' equity of a corporation.

Accepted Answer

A) True 
 B)False

Question 3

What effect does the issuance of a 2-for-1 share split have on each of the following?

Accepted Answer

The answer of What effect does the issuance of a...

Question 4

At the date of the financial statements, ordinary shares issued would exceed ordinary shares outstanding as a result of the

Accepted Answer

A) declaration of a share split. 
B) declaration of a share dividend. 
C) purchase of treasury shares. 
D) payment in full of subscribed shares. 
A) declaration of a share split. 
B) declaration of a share dividend. 
C) purchase of treasury shares. 
D) payment in full of subscribed shares.

Question 5

When a corporation issues its ordinary shares in payment for services, the least appropriate basis for recording the transaction is the

Accepted Answer

A) fair value of the services received. 
B) par value of the shares issued. 
C) fair value of the shares issued. 
D) Any of these provides an appropriate basis for recording the transaction. 
A) fair value of the services received. 
B) par value of the shares issued. 
C) fair value of the shares issued. 
D) Any of these provides an appropriate basis for recording the transaction.

Question 6

Share splits and share dividends have the same effect on a company's retained earnings and total shareholders' equity.

Accepted Answer

A) True 
 B)False

Question 7

Dividends payable in assets of the corporation other than cash are called property dividends or dividends in kind.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a legal restriction related to profit distributions by a corporation?

Accepted Answer

A) The amount distributed to owners must be in compliance with the laws governing corporations. 
B) The amount distributed in any one year can never exceed the net income reported for that year. 
C) Profit distributions must be formally approved by the board of directors. 
D) Dividends must be in full agreement with the capital contracts as to preferences and participation. 
A) The amount distributed to owners must be in compliance with the laws governing corporations. 
B) The amount distributed in any one year can never exceed the net income reported for that year. 
C) Profit distributions must be formally approved by the board of directors. 
D) Dividends must be in full agreement with the capital contracts as to preferences and participation.

Question 9

Houser Corporation owns 4,000,000 shares of Baha Corporation.On December 31, 2015, Houser distributed these shares as a dividend to its shareholders.This is an example of a

Accepted Answer

A) property dividend. 
B) share dividend. 
C) liquidating dividend. 
D) cash dividend. 
A) property dividend. 
B) share dividend. 
C) liquidating dividend. 
D) cash dividend.

Question 10

A "secret reserve" will be created if

Accepted Answer

A) inadequate depreciation is charged to income. 
B) a capital expenditure is charged to expense. 
C) liabilities are understated. 
D) shareholders' equity is overstated. 
A) inadequate depreciation is charged to income. 
B) a capital expenditure is charged to expense. 
C) liabilities are understated. 
D) shareholders' equity is overstated.

Question 11

The payout ratio is determined by dividing cash dividends paid to ordinary shareholders by net income available to ordinary shareholders.

Accepted Answer

A) True 
 B)False

Question 12

The balance in Ordinary Share Dividend Distributable should be reported as a(n)

Accepted Answer

A) deduction from share capital-ordinary. 
B) addition to share capital-ordinary. 
C) current liability. 
D) contra current asset. 
A) deduction from share capital-ordinary. 
B) addition to share capital-ordinary. 
C) current liability. 
D) contra current asset.

Question 13

The laws of some jurisdictions require that corporations restrict their contributed capital from distribution to shareholders.

Accepted Answer

A) True 
 B)False

Question 14

Noncumulative preferred dividends in arrears

Accepted Answer

A) are not paid or disclosed. 
B) must be paid before any other cash dividends can be distributed. 
C) are disclosed as a liability until paid. 
D) are paid to preference shareholders if sufficient funds remain after payment of the current preference dividend. 
A) are not paid or disclosed. 
B) must be paid before any other cash dividends can be distributed. 
C) are disclosed as a liability until paid. 
D) are paid to preference shareholders if sufficient funds remain after payment of the current preference dividend.

Question 15

"Gains" on sales of treasury shares (using the cost method) should be credited to

Accepted Answer

A) share premium-treasury. 
B) share capital. 
C) retained earnings. 
D) other income. 
A) share premium-treasury. 
B) share capital. 
C) retained earnings. 
D) other income.

Question 16

Hiro Corp.issues shares which bear the ultimate risks of loss and receive the benefit of success.These shares are not guaranteed dividends nor assets upon dissolution.These shares are considered

Accepted Answer

The answer of Hiro Corp.issues shares which bear the ultimate...

Question 17

The return on ordinary share equity is computed by dividing net income by the average ordinary equity.

Accepted Answer

A) True 
 B)False

Question 18

The cumulative feature of preference shares

Accepted Answer

A) limits the amount of cumulative dividends to the par value of the preference shares. 
B) requires that preference dividends not paid in any year must be made up in a later year before dividends are distributed to ordinary shareholders. 
C) means that the shareholder can accumulate preference shares until it is equal to the par value of ordinary shares at which time it can be converted into ordinary shares. 
D) enables a preference shareholder to accumulate dividends until they equal the par value of the shares and receive the shares in place of the cash dividends. 
A) limits the amount of cumulative dividends to the par value of the preference shares. 
B) requires that preference dividends not paid in any year must be made up in a later year before dividends are distributed to ordinary shareholders. 
C) means that the shareholder can accumulate preference shares until it is equal to the par value of ordinary shares at which time it can be converted into ordinary shares. 
D) enables a preference shareholder to accumulate dividends until they equal the par value of the shares and receive the shares in place of the cash dividends.

Question 19

The preemptive right allows shareholders the right to vote for directors of the company.

Accepted Answer

A) True 
 B)False

Question 20

The issuer of an ordinary share dividend to ordinary shareholders should transfer from retained earnings to contributed capital an amount equal to the

Accepted Answer

A) fair value of the shares issued. 
B) book value of the shares issued. 
C) minimum legal requirements. 
D) par or stated value of the shares issued. 
A) fair value of the shares issued. 
B) book value of the shares issued. 
C) minimum legal requirements. 
D) par or stated value of the shares issued.

Exam 15: Equity

Dividends are not paid on

All dividends, except for liquidating dividends, reduce the total shareholders' equity of a corporation.

What effect does the issuance of a 2-for-1 share split have on each of the following?

At the date of the financial statements, ordinary shares issued would exceed ordinary shares outstanding as a result of the

When a corporation issues its ordinary shares in payment for services, the least appropriate basis for recording the transaction is the

Share splits and share dividends have the same effect on a company's retained earnings and total shareholders' equity.

Dividends payable in assets of the corporation other than cash are called property dividends or dividends in kind.

Which of the following is not a legal restriction related to profit distributions by a corporation?

Houser Corporation owns 4,000,000 shares of Baha Corporation.On December 31, 2015, Houser distributed these shares as a dividend to its shareholders.This is an example of a

A "secret reserve" will be created if

The payout ratio is determined by dividing cash dividends paid to ordinary shareholders by net income available to ordinary shareholders.

The balance in Ordinary Share Dividend Distributable should be reported as a(n)

The laws of some jurisdictions require that corporations restrict their contributed capital from distribution to shareholders.

Noncumulative preferred dividends in arrears

"Gains" on sales of treasury shares (using the cost method) should be credited to

Hiro Corp.issues shares which bear the ultimate risks of loss and receive the benefit of success.These shares are not guaranteed dividends nor assets upon dissolution.These shares are considered

The return on ordinary share equity is computed by dividing net income by the average ordinary equity.

The cumulative feature of preference shares

The preemptive right allows shareholders the right to vote for directors of the company.

The issuer of an ordinary share dividend to ordinary shareholders should transfer from retained earnings to contributed capital an amount equal 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

Filters