Question 1

When a company has issued both preference and ordinary shares, the preference shareholders are allocated their dividends first.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following represents one of the basic rights of shareholders?

Accepted Answer

A) Shareholders may authorise a business contract on behalf of the company. 
B) Shareholders may sell their shares back to the company if they wish. 
C) Shareholders may participate in management by voting on company matters. 
D) Shareholders may determine at what price the company issues shares. 
A) Shareholders may authorise a business contract on behalf of the company. 
B) Shareholders may sell their shares back to the company if they wish. 
C) Shareholders may participate in management by voting on company matters. 
D) Shareholders may determine at what price the company issues shares. C

Question 3

Which of the following characteristics is an advantage of the company form of business?

Accepted Answer

A) The potential to raise large amounts of capital 
B) Company taxation 
C) Separation of ownership and management 
D) Higher degree of government regulation 
A) The potential to raise large amounts of capital 
B) Company taxation 
C) Separation of ownership and management 
D) Higher degree of government regulation A

Question 4

Retained earnings is equity that is generated internally by company business transactions.

Accepted Answer

A) True 
 B)False

Question 5

Every company issues preference shares.

Accepted Answer

A) True 
 B)False

Question 6

A company had $80 000 of Sales revenue and $75 000 of Expenses. Which of the following would be the first of three year- end closing entries?

Accepted Answer

A) Debit Expenses $75 000 and credit Income summary $75 000. 
B) Debit Income summary $5 000 and credit Retained earnings $5 000. 
C) Debit Revenues $80 000 and credit Income summary $80 000. 
D) Debit Retained earnings $5 000 and credit Income summary $5 000. 
A) Debit Expenses $75 000 and credit Income summary $75 000. 
B) Debit Income summary $5 000 and credit Retained earnings $5 000. 
C) Debit Revenues $80 000 and credit Income summary $80 000. 
D) Debit Retained earnings $5 000 and credit Income summary $5 000.

Question 7

A company has issued 10 000 non- cumulative preference shares for $50 each, paying 10% annual dividends. It has also issued 20 000 ordinary shares. At the end of the current year, the company declares a dividend of $120 000. What is the dividend per share for preference shares and for ordinary shares?

Accepted Answer

A) The dividend per share is $50.00 to preference shares and $1.00 to ordinary shares. 
B) The dividend per share is $1.00 to preference shares and $6.75 to ordinary shares. 
C) The dividend per share is $5.00 to preference shares and $3.50 to ordinary shares. 
D) The dividend per share is $6.67 to preference shares and $1.50 to ordinary shares. 
A) The dividend per share is $50.00 to preference shares and $1.00 to ordinary shares. 
B) The dividend per share is $1.00 to preference shares and $6.75 to ordinary shares. 
C) The dividend per share is $5.00 to preference shares and $3.50 to ordinary shares. 
D) The dividend per share is $6.67 to preference shares and $1.50 to ordinary shares.

Question 8

Which of the following describes preference shares?

Accepted Answer

A) Shares which give shareholders certain preferences and advantages over ordinary shares 
B) Shares that are purchased by the company for investment purposes 
C) Shares that sell for a very high price 
D) Shares that are sold to employees of the company as a performance incentive 
A) Shares which give shareholders certain preferences and advantages over ordinary shares 
B) Shares that are purchased by the company for investment purposes 
C) Shares that sell for a very high price 
D) Shares that are sold to employees of the company as a performance incentive

Question 9

If a company has a strong rate of return on ordinary shareholders' equity, that is an indication of good cash flow.

Accepted Answer

A) True 
 B)False

Question 10

A company has 10 000 non- cumulative preference shares outstanding and 20 000 ordinary shares outstanding. The preference shares pay an annual dividend of $5 per share. At the end of the current year, the company declares a dividend of $120 000. How is the dividend allocated between preference and ordinary shareholders?

Accepted Answer

A) The dividend is allocated $12 000 to preference shareholders and $108 000 to ordinary shareholders. 
B) The dividend is allocated $60 000 to preference shareholders and $60 000 to ordinary shareholders. 
C) The dividend is allocated $50 000 to preference shareholders and $70 000 to ordinary shareholders. 
D) The dividend is allocated $5 000 to preference shareholders and $115 000 to ordinary shareholders. 
A) The dividend is allocated $12 000 to preference shareholders and $108 000 to ordinary shareholders. 
B) The dividend is allocated $60 000 to preference shareholders and $60 000 to ordinary shareholders. 
C) The dividend is allocated $50 000 to preference shareholders and $70 000 to ordinary shareholders. 
D) The dividend is allocated $5 000 to preference shareholders and $115 000 to ordinary shareholders.

Question 11

Which of the following statements describes the company characteristic termed no mutual agency?

Accepted Answer

A) Shares can be readily bought and sold by investors on the open market. 
B) Companies pay income tax on company earnings, and shareholders pay personal income tax on company dividends and gains from sale of shares. 
C) The liabilities of the company cannot be extended to the personal assets of the shareholder. 
D) Shareholders are not authorised to sign contracts or make business commitments on behalf of the company. 
A) Shares can be readily bought and sold by investors on the open market. 
B) Companies pay income tax on company earnings, and shareholders pay personal income tax on company dividends and gains from sale of shares. 
C) The liabilities of the company cannot be extended to the personal assets of the shareholder. 
D) Shareholders are not authorised to sign contracts or make business commitments on behalf of the company.

Question 12

Which of the following occurs when a dividend is declared?

Accepted Answer

A) Liabilities decrease 
B) Liabilities increase 
C) Equity increases 
D) Assets increase 
A) Liabilities decrease 
B) Liabilities increase 
C) Equity increases 
D) Assets increase

Question 13

Which of the following is the amount guaranteed to preference shareholders in the event the company goes out of business?

Accepted Answer

A) Book value 
B) Amortised value 
C) Market value 
D) Liquidation value 
A) Book value 
B) Amortised value 
C) Market value 
D) Liquidation value

Question 14

Which of the following measures a company's success in using assets to earn income?

Accepted Answer

A) Inventory turnover 
B) The rate of return on shareholders' equity 
C) The rate of return on total assets 
D) Days' sales in receivables 
A) Inventory turnover 
B) The rate of return on shareholders' equity 
C) The rate of return on total assets 
D) Days' sales in receivables

Question 15

Occidental Produce Company has 40 000 shares of ordinary shares outstanding and 2 000 shares of preference shares outstanding. The preference shares pay annual dividends of $4 each. On 15 October 2014, the company declares a total dividend payment of $40 000. How much dividend will be paid to the preference shareholders?

Accepted Answer

A) $2 000 
B) $4 500 
C) $8 000 
D) $40 000 
A) $2 000 
B) $4 500 
C) $8 000 
D) $40 000

Question 16

Declaring and paying dividends causes a decrease in both assets and equity.

Accepted Answer

A) True 
 B)False

Question 17

On 1 November 2014, Oster Company declared a dividend of $3.00 per share. Oster Company has 20 000 ordinary shares outstanding and no preference shares. The date of record is 15 November, and the payment date is 30 November 2014. Which of the following statements is TRUE about the date of record?

Accepted Answer

A) The liability must be recorded on the date of record. 
B) The company transfers cash to a stockbroking firm on the date of record. 
C) No journal entry is made on the date of record. 
D) Cash is disbursed to shareholders on the date of record. 
A) The liability must be recorded on the date of record. 
B) The company transfers cash to a stockbroking firm on the date of record. 
C) No journal entry is made on the date of record. 
D) Cash is disbursed to shareholders on the date of record.

Question 18

Which of the following is TRUE about the date of record?

Accepted Answer

A) On the date of record, the company issues new shares. 
B) On the date of record, the company determines who owns the shares as of that date. 
C) On the date of record, the company records the dividend payable amount. 
D) On the date of record, the company disburses dividend payments to shareholders. 
A) On the date of record, the company issues new shares. 
B) On the date of record, the company determines who owns the shares as of that date. 
C) On the date of record, the company records the dividend payable amount. 
D) On the date of record, the company disburses dividend payments to shareholders.

Question 19

If a company has a strong rate of return on ordinary shareholders' equity, that is an indication of strong profitability.

Accepted Answer

A) True 
 B)False

Question 20

A company had $80 000 of Sales revenue and $75 000 of Expenses. Which of the following would be the third of three year- end closing entries? (Assume no dividends were paid.)

Accepted Answer

A) Debit Income summary $5 000 and credit Retained earnings $5 000. 
B) Debit Revenues $80 000 and credit Income summary $80 000. 
C) Debit Expenses $75 000 and credit Income summary $75 000. 
D) Debit Income summary $75 000 and credit Expenses $75 000. 
A) Debit Income summary $5 000 and credit Retained earnings $5 000. 
B) Debit Revenues $80 000 and credit Income summary $80 000. 
C) Debit Expenses $75 000 and credit Income summary $75 000. 
D) Debit Income summary $75 000 and credit Expenses $75 000.

When a company has issued both preference and ordinary shares, the preference shareholders are allocated their dividends first.

Which of the following represents one of the basic rights of shareholders?

Which of the following characteristics is an advantage of the company form of business?

Retained earnings is equity that is generated internally by company business transactions.

Every company issues preference shares.

A company had $80 000 of Sales revenue and $75 000 of Expenses. Which of the following would be the first of three year- end closing entries?

Which of the following describes preference shares?

If a company has a strong rate of return on ordinary shareholders' equity, that is an indication of good cash flow.

Which of the following statements describes the company characteristic termed no mutual agency?

Which of the following occurs when a dividend is declared?

Which of the following is the amount guaranteed to preference shareholders in the event the company goes out of business?

Which of the following measures a company's success in using assets to earn income?

Declaring and paying dividends causes a decrease in both assets and equity.

On 1 November 2014, Oster Company declared a dividend of $3.00 per share. Oster Company has 20 000 ordinary shares outstanding and no preference shares. The date of record is 15 November, and the payment date is 30 November 2014. Which of the following statements is TRUE about the date of record?

Which of the following is TRUE about the date of record?

If a company has a strong rate of return on ordinary shareholders' equity, that is an indication of strong profitability.

A company had $80 000 of Sales revenue and $75 000 of Expenses. Which of the following would be the third of three year- end closing entries? (Assume no dividends were paid.)

The Role of Accounting in Business

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retailing Operations

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Share Capital and the Balance Sheet

Companies: Effects on Retained Earnings, Share Splits and Buy-Backs, and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Filters

Exam 24: Appendix

When a company has issued both preference and ordinary shares, the preference shareholders are allocated their dividends first.

Which of the following represents one of the basic rights of shareholders?

Which of the following characteristics is an advantage of the company form of business?

Retained earnings is equity that is generated internally by company business transactions.

Every company issues preference shares.

A company had $80 000 of Sales revenue and $75 000 of Expenses. Which of the following would be the first of three year- end closing entries?

Which of the following describes preference shares?

If a company has a strong rate of return on ordinary shareholders' equity, that is an indication of good cash flow.

Which of the following statements describes the company characteristic termed no mutual agency?

Which of the following occurs when a dividend is declared?

Which of the following is the amount guaranteed to preference shareholders in the event the company goes out of business?

Which of the following measures a company's success in using assets to earn income?

Declaring and paying dividends causes a decrease in both assets and equity.

On 1 November 2014, Oster Company declared a dividend of $3.00 per share. Oster Company has 20 000 ordinary shares outstanding and no preference shares. The date of record is 15 November, and the payment date is 30 November 2014. Which of the following statements is TRUE about the date of record?

Which of the following is TRUE about the date of record?

If a company has a strong rate of return on ordinary shareholders' equity, that is an indication of strong profitability.

A company had $80 000 of Sales revenue and $75 000 of Expenses. Which of the following would be the third of three year- end closing entries? (Assume no dividends were paid.)

The Role of Accounting in Business

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retailing Operations

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Share Capital and the Balance Sheet

Companies: Effects on Retained Earnings, Share Splits and Buy-Backs, and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Filters