Question 1

How should cumulative preference dividends in arrears be shown in a corporation's statement of financial position?

Accepted Answer

A) Note disclosure 
B) Increase in shareholders' equity 
C) Increase in current liabilities 
D) Increase in current liabilities for the amount expected to be declared within the year or operating cycle, and increase in non-current liabilities for the balance 
A) Note disclosure 
B) Increase in shareholders' equity 
C) Increase in current liabilities 
D) Increase in current liabilities for the amount expected to be declared within the year or operating cycle, and increase in non-current liabilities for the balance

Question 2

Ordinary no-par shares

Accepted Answer

A) Are considered illegal. 
B) May be subject to high taxes. 
C) May be sold at a premium. 
D) All of these answer choices are correct. 
A) Are considered illegal. 
B) May be subject to high taxes. 
C) May be sold at a premium. 
D) All of these answer choices are correct.

Question 3

Trading on the equity is:

Accepted Answer

A) The ratio of the company's cash dividends to net income. 
B) A return on assets that is higher than the cost of financing these assets. 
C) The amount each share would receive if the company were liquidated. 
D) The "Revaluation Surplus" related to increases or decreases in items such as property, plant, and equipment. 
A) The ratio of the company's cash dividends to net income. 
B) A return on assets that is higher than the cost of financing these assets. 
C) The amount each share would receive if the company were liquidated. 
D) The "Revaluation Surplus" related to increases or decreases in items such as property, plant, and equipment.

Question 4

Callable preference shares permit the corporation at its option to redeem the outstanding preference shares at stipulated prices.

Accepted Answer

A) True 
 B)False

Question 5

Which dividends do not reduce equity?

Accepted Answer

A) Cash dividends 
B) Share dividends 
C) Property dividends 
D) Liquidating dividends 
A) Cash dividends 
B) Share dividends 
C) Property dividends 
D) Liquidating dividends

Question 6

The pre-emptive right of an ordinary shareholder is the right to

Accepted Answer

A) share proportionately in corporate assets upon liquidation. 
B) share proportionately in any new issues of stock of the same class. 
C) receive cash dividends before they are distributed to preference shareholders. 
D) exclude preference shareholders from voting rights. 
A) share proportionately in corporate assets upon liquidation. 
B) share proportionately in any new issues of stock of the same class. 
C) receive cash dividends before they are distributed to preference shareholders. 
D) exclude preference shareholders from voting rights.

Question 7

Younger Company has outstanding both ordinary shares and nonparticipating, non-cumulative preference shares.The liquidation value of the preference shares is equal to its par value.The book value per share of the ordinary shares is unaffected by

Accepted Answer

A) the declaration of a share dividend on preference payable in preference shares when the market price of the preference is equal to its par value. 
B) the declaration of a share dividend on ordinary shares payable in ordinary shares when the market price of the ordinary shares is equal to its par value. 
C) the payment of a previously declared cash dividend on the ordinary shares. 
D) a 2-for-1 split of the ordinary shares. 
A) the declaration of a share dividend on preference payable in preference shares when the market price of the preference is equal to its par value. 
B) the declaration of a share dividend on ordinary shares payable in ordinary shares when the market price of the ordinary shares is equal to its par value. 
C) the payment of a previously declared cash dividend on the ordinary shares. 
D) a 2-for-1 split of the ordinary shares.

Question 8

Ordinary shareholders' equity divided by the number of ordinary shares outstanding is called

Accepted Answer

A) book value per share. 
B) par value per share. 
C) stated value per share. 
D) market value per share. 
A) book value per share. 
B) par value per share. 
C) stated value per share. 
D) market value per share.

Question 9

A mining company declared a liquidating dividend.The journal entry to record the declaration must include a debit to

Accepted Answer

A) Retained Earnings. 
B) Share Premium. 
C) Accumulated Depletion. 
D) Accumulated Depreciation. 
A) Retained Earnings. 
B) Share Premium. 
C) Accumulated Depletion. 
D) Accumulated Depreciation.

Question 10

The payout ratio can be calculated by dividing

Accepted Answer

A) dividends per share by earnings per share. 
B) cash dividends by net income less preference dividends. 
C) cash dividends by market price per share. 
D) dividends per share by earnings per share and dividing cash dividends by net income less preference dividends. 
A) dividends per share by earnings per share. 
B) cash dividends by net income less preference dividends. 
C) cash dividends by market price per share. 
D) dividends per share by earnings per share and dividing cash dividends by net income less preference dividends.

Question 11

Quirk Corporation issued a 100% share dividend of its ordinary shares which had a par value of $10 before and after the dividend.At what amount should retained earnings be capitalized for the additional shares issued?

Accepted Answer

A) There should be no capitalization of retained earnings. 
B) Par value 
C) Fair value on the declaration date 
D) Fair value on the payment date 
A) There should be no capitalization of retained earnings. 
B) Par value 
C) Fair value on the declaration date 
D) Fair value on the payment date

Question 12

Treasury shares are a company's own shares that have been reacquired and retired.

Accepted Answer

A) True 
 B)False

Question 13

Participating preference shares require that if a company fails to pay a dividend in any year, it must make it up in a later year before paying any ordinary dividends.

Accepted Answer

A) True 
 B)False

Question 14

Cash dividends are paid on the basis of the number of shares

Accepted Answer

A) authorized. 
B) issued. 
C) outstanding. 
D) outstanding less the number of treasury shares. 
A) authorized. 
B) issued. 
C) outstanding. 
D) outstanding less the number of treasury shares.

Question 15

The return on ordinary share equity is calculated by dividing

Accepted Answer

A) net income less preference dividends by average ordinary shareholders' equity. 
B) net income by average ordinary shareholders' equity. 
C) net income less preference dividends by ending ordinary shareholders' equity. 
D) net income by ending ordinary shareholders' equity. 
A) net income less preference dividends by average ordinary shareholders' equity. 
B) net income by average ordinary shareholders' equity. 
C) net income less preference dividends by ending ordinary shareholders' equity. 
D) net income by ending ordinary shareholders' equity.

Question 16

Companies should record shares issued for services or noncash property at either the fair value of the shares issued or the fair value of the consideration received.

Accepted Answer

A) True 
 B)False

Question 17

Treasury shares are

Accepted Answer

A) shares held as an investment by the treasurer of the corporation. 
B) shares held as an investment of the corporation. 
C) issued and outstanding shares. 
D) issued but not outstanding shares. 
A) shares held as an investment by the treasurer of the corporation. 
B) shares held as an investment of the corporation. 
C) issued and outstanding shares. 
D) issued but not outstanding shares.

Question 18

The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities.An acceptable method of allocation is the

Accepted Answer

A) pro forma method. 
B) proportional method. 
C) incremental method. 
D) either the proportional method or the incremental method. 
A) pro forma method. 
B) proportional method. 
C) incremental method. 
D) either the proportional method or the incremental method.

Question 19

When a corporation sells treasury shares below its cost, it usually debits the difference between cost and selling price to Share Premium-Treasury.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements about property dividends is not true?

Accepted Answer

A) A property dividend is usually in the form of securities of other companies. 
B) A property dividend is also called a dividend in kind. 
C) The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred. 
D) All of these statements are true. 
A) A property dividend is usually in the form of securities of other companies. 
B) A property dividend is also called a dividend in kind. 
C) The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred. 
D) All of these statements are true.

Exam 15: Equity

How should cumulative preference dividends in arrears be shown in a corporation's statement of financial position?

Ordinary no-par shares

Trading on the equity is:

Callable preference shares permit the corporation at its option to redeem the outstanding preference shares at stipulated prices.

Which dividends do not reduce equity?

The pre-emptive right of an ordinary shareholder is the right to

Younger Company has outstanding both ordinary shares and nonparticipating, non-cumulative preference shares.The liquidation value of the preference shares is equal to its par value.The book value per share of the ordinary shares is unaffected by

Ordinary shareholders' equity divided by the number of ordinary shares outstanding is called

A mining company declared a liquidating dividend.The journal entry to record the declaration must include a debit to

The payout ratio can be calculated by dividing

Quirk Corporation issued a 100% share dividend of its ordinary shares which had a par value of $10 before and after the dividend.At what amount should retained earnings be capitalized for the additional shares issued?

Treasury shares are a company's own shares that have been reacquired and retired.

Participating preference shares require that if a company fails to pay a dividend in any year, it must make it up in a later year before paying any ordinary dividends.

Cash dividends are paid on the basis of the number of shares

The return on ordinary share equity is calculated by dividing

Companies should record shares issued for services or noncash property at either the fair value of the shares issued or the fair value of the consideration received.

Treasury shares are

The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities.An acceptable method of allocation is the

When a corporation sells treasury shares below its cost, it usually debits the difference between cost and selling price to Share Premium-Treasury.

Which of the following statements about property dividends is not true?

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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