Exam 24: Appendix

Peterson Company is issuing 4 000 ordinary shares, payable by instalments. Investors must pay $10 per share on application, $5 per share on allotment, and there will be a final call of $2 payable at a later date to be determined by directors. The journal entry to record the allotment will include:

Which of the following factors may cause a difference between book profit and taxable income?

The two basic types of equity on the balance sheet are:

A company declares a dividend of $0.75 per share on 12 500 shares of ordinary shares. Which of the following would be included in the entry to record the declaration?

Hot Tamale Company had $120 000 of revenues and $125 000 of expenses. No dividends were paid. The first of the year- end closing entries should include which of the following line items?

Paying dividends causes a decrease in total share capital.

Peterson Company is issuing 4 000 ordinary shares, payable by instalments. Investors must pay $10 per share on application, $5 per share on allotment, and there will be a final call of $2 payable at a later date to be determined by directors. The journal entry to record the application will be:

Share capital is equity that is generated internally by company business transactions.

The rate of return on total assets and the rate of return on ordinary shareholders' equity are used to evaluate the:

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

All forms and classes of shares carry voting rights.

Lerner Company had the following transactions in 2013, its first year of operations. • Issued 20 000 ordinary shares. Shares were issued at $14.00 per share. • Issued 1 000 preference shares at $100 each. • Earned net profit of $35 000. At the end of 2013, what is the total amount of Shareholders' equity?

Retained earnings as shown on the balance sheet can, under certain circumstances, show a negative balance.

Lerner Company had the following transactions in 2013, its first year of operations. • Issued 20 000 ordinary shares. Shares were issued at $14.00 per share. • Issued 1 000 preference shares at $100 each. • Earned net profit of $35 000. At the end of 2013, what is the total amount of Share capital?

A loss for the year increases the balance in Retained earnings.

Different classes and types of shares carry different degrees of risk for the shareholder.

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

When a company records the year- end closing entries, the Income summary balance, before it is closed to Retained earnings, should be equal to the Profit or Loss for the year.

Which of the following is the correct description of dividends in arrears, as it applies to cumulative preference shares?

Many of the rules in the Corporations Act can be replaced by the company's own constitiution.