Question 1

Which of the following factors does not affect the initial market price of shares?

Accepted Answer

A) The company's anticipated future earnings 
B) The par value of the shares 
C) The current state of the economy 
D) The expected dividend rate per share 
A) The company's anticipated future earnings 
B) The par value of the shares 
C) The current state of the economy 
D) The expected dividend rate per share B

Question 2

Ludwick Inc.has retained earnings of $800,000 and total equity of $2,000,000.It has 200,000 ordinary shares with a $5 par value outstanding, which is currently selling for $30 per share.If Ludwick declares a 10% share dividend on its ordinary shares:

Accepted Answer

A) net income will decrease by $100,000. 
B) retained earnings will decrease by $100,000 and total equity will increase by $100,000. 
C) retained earnings will decrease by $600,000 and total equity will increase by $600,000. 
D) retained earnings will decrease by $600,000 and share capital and share premium will increase by $600,000. 
A) net income will decrease by $100,000. 
B) retained earnings will decrease by $100,000 and total equity will increase by $100,000. 
C) retained earnings will decrease by $600,000 and total equity will increase by $600,000. 
D) retained earnings will decrease by $600,000 and share capital and share premium will increase by $600,000. D

Question 3

Which of the following statements is not considered a disadvantage of the corporate form of organization?

Accepted Answer

A) Additional taxes 
B) Government regulations 
C) Limited liability of shareholders 
D) Separation of ownership and management 
A) Additional taxes 
B) Government regulations 
C) Limited liability of shareholders 
D) Separation of ownership and management C

Question 4

Which of the following statements reflects the transferability of ownership rights in a corporation?

Accepted Answer

A) If a shareholder decides to transfer ownership, he must transfer all of his shares. 
B) A shareholder may dispose of part or all of his shares. 
C) A shareholder must obtain permission from the board of directors before selling shares. 
D) A shareholder must obtain permission from at least three other shareholders before selling shares. 
A) If a shareholder decides to transfer ownership, he must transfer all of his shares. 
B) A shareholder may dispose of part or all of his shares. 
C) A shareholder must obtain permission from the board of directors before selling shares. 
D) A shareholder must obtain permission from at least three other shareholders before selling shares.

Question 5

Which one of the following is not an ownership right of a shareholder in a corporation?

Accepted Answer

A) To vote in the election of directors 
B) To declare dividends on the ordinary shares 
C) To share in assets upon liquidation 
D) To share in corporate earnings 
A) To vote in the election of directors 
B) To declare dividends on the ordinary shares 
C) To share in assets upon liquidation 
D) To share in corporate earnings

Question 6

Shannon Manufacturing declared a 10% share dividend when it had 250,000 ordinary shares with a $3 par value outstanding.The market price per share was $12 per share when the dividend was declared.The entry to record this dividend declaration includes a credit to

Accepted Answer

A) Retained Earnings for $75,000. 
B) Share Premium-Ordinary for $225,000. 
C) Share Capital-Ordinary for $75,000. 
D) Ordinary Share Dividends Distributable for $300,000. 
A) Retained Earnings for $75,000. 
B) Share Premium-Ordinary for $225,000. 
C) Share Capital-Ordinary for $75,000. 
D) Ordinary Share Dividends Distributable for $300,000.

Question 7

A correction in income of a prior period involves either a debit or credit to the Retained Earnings account.

Accepted Answer

A) True 
 B)False

Question 8

The par value of shares

Accepted Answer

A) is legally significant. 
B) reflects the most recent market price. 
C) is selected by the IASB. 
D) is indicative of the worth of the shares. 
A) is legally significant. 
B) reflects the most recent market price. 
C) is selected by the IASB. 
D) is indicative of the worth of the shares.

Question 9

Regular dividends are declared out of

Accepted Answer

A) Share Premium-Ordinary. 
B) Treasury Shares. 
C) Share Capital-Ordinary. 
D) Retained Earnings. 
A) Share Premium-Ordinary. 
B) Treasury Shares. 
C) Share Capital-Ordinary. 
D) Retained Earnings.

Question 10

A corporation is not committed to a legal obligation when it declares

Accepted Answer

A) a cash dividend. 
B) either a cash dividend or a share dividend. 
C) a share dividend. 
D) a distribution date. 
A) a cash dividend. 
B) either a cash dividend or a share dividend. 
C) a share dividend. 
D) a distribution date.

Question 11

Dailey Company is a publicly held corporation whose $1 par value ordinary shares are actively traded at $22 per share.The company issued 2,000 shares to acquire land recently advertised at $55,000.When recording this transaction, Dailey Company will

Accepted Answer

A) debit Land for $55,000. 
B) credit Share Capital-Ordinary for $44,000. 
C) debit Land for $44,000. 
D) credit Share Premium-Ordinary for $53,000. 
A) debit Land for $55,000. 
B) credit Share Capital-Ordinary for $44,000. 
C) debit Land for $44,000. 
D) credit Share Premium-Ordinary for $53,000.

Question 12

Corporations generally issue share dividends in order to

Accepted Answer

A) increase the market price per share. 
B) exceed shareholders' dividend expectations. 
C) increase the marketability of the shares. 
D) decrease the amount of capital in the corporation. 
A) increase the market price per share. 
B) exceed shareholders' dividend expectations. 
C) increase the marketability of the shares. 
D) decrease the amount of capital in the corporation.

Question 13

A corporation is not an entity which is separate and distinct from its owners.

Accepted Answer

A) True 
 B)False

Question 14

On January 1, Castagno Corporation had 800,000 ordinary shares with a $10 par value outstanding.On March 31, the company declared a 15% share dividend.Market value was $15/share.As a result of this event,

Accepted Answer

A) Castagno's Share Premium-Ordinary account increased $600,000. 
B) Castagno's total equity was unaffected. 
C) Castagno's Cash Dividends account increased $1,800,000. 
D) All of the above. 
A) Castagno's Share Premium-Ordinary account increased $600,000. 
B) Castagno's total equity was unaffected. 
C) Castagno's Cash Dividends account increased $1,800,000. 
D) All of the above.

Question 15

If Kiner Company issues 3,000 ordinary shares with a $5 par value for $70,000, the account

Accepted Answer

A) Share Capital-Ordinary will be credited for $15,000. 
B) Share Premium-Ordinary will be credited for $15,000. 
C) Share Premium-Ordinary will be credited for $70,000. 
D) Cash will be debited for $55,000. 
A) Share Capital-Ordinary will be credited for $15,000. 
B) Share Premium-Ordinary will be credited for $15,000. 
C) Share Premium-Ordinary will be credited for $70,000. 
D) Cash will be debited for $55,000.

Question 16

The authorized shares of a corporation

Accepted Answer

A) only reflects the initial capital needs of the company. 
B) is indicated in its by-laws. 
C) is indicated in its charter. 
D) must be recorded in a formal accounting entry. 
A) only reflects the initial capital needs of the company. 
B) is indicated in its by-laws. 
C) is indicated in its charter. 
D) must be recorded in a formal accounting entry.

Question 17

Dividends are predominantly paid in

Accepted Answer

A) earnings. 
B) property. 
C) cash. 
D) shares. 
A) earnings. 
B) property. 
C) cash. 
D) shares.

Question 18

Which one of the following is a privately held corporation?

Accepted Answer

A) Intel 
B) General Electric 
C) Caterpillar Inc. 
D) Cargill Inc. 
A) Intel 
B) General Electric 
C) Caterpillar Inc. 
D) Cargill Inc.

Question 19

On January 1, Swanson Corporation had 60,000 ordinary shares with a €10 par value outstanding.On March 17, the company declared a 15% share dividend to shareholders of record on March 20.Market value of the shares was €13 on March 17.The entry to record the transaction of March 17 would include a

Accepted Answer

A) credit to Cash Dividends for €27,000. 
B) credit to Cash for €117,000. 
C) credit to Ordinary Share Dividends Distributable for €90,000. 
D) debit to Ordinary Share Dividends Distributable for €90,000. 
A) credit to Cash Dividends for €27,000. 
B) credit to Cash for €117,000. 
C) credit to Ordinary Share Dividends Distributable for €90,000. 
D) debit to Ordinary Share Dividends Distributable for €90,000.

Question 20

On January 1, Sanford Corporation had 80,000 ordinary shares with a $10 par value outstanding.On June 17, the company declared a 15% share dividend to shareholders of record on June 20.Market value of the shares was $15 on June 17.The shares were distributed on June 30.The entry to record the transaction of June 30 would include a

Accepted Answer

A) credit to Share Capital-Ordinary Share for $120,000. 
B) debit to Ordinary Share Dividends Distributable for $180,000. 
C) credit to Share Premium-Ordinary for $60,000. 
D) debit to Cash Dividends for $60,000. 
A) credit to Share Capital-Ordinary Share for $120,000. 
B) debit to Ordinary Share Dividends Distributable for $180,000. 
C) credit to Share Premium-Ordinary for $60,000. 
D) debit to Cash Dividends for $60,000.

Which of the following factors does not affect the initial market price of shares?

Ludwick Inc.has retained earnings of $800,000 and total equity of $2,000,000.It has 200,000 ordinary shares with a $5 par value outstanding, which is currently selling for $30 per share.If Ludwick declares a 10% share dividend on its ordinary shares:

Which of the following statements is not considered a disadvantage of the corporate form of organization?

Which of the following statements reflects the transferability of ownership rights in a corporation?

Which one of the following is not an ownership right of a shareholder in a corporation?

Shannon Manufacturing declared a 10% share dividend when it had 250,000 ordinary shares with a $3 par value outstanding.The market price per share was $12 per share when the dividend was declared.The entry to record this dividend declaration includes a credit to

A correction in income of a prior period involves either a debit or credit to the Retained Earnings account.

The par value of shares

Regular dividends are declared out of

A corporation is not committed to a legal obligation when it declares

Dailey Company is a publicly held corporation whose $1 par value ordinary shares are actively traded at $22 per share.The company issued 2,000 shares to acquire land recently advertised at $55,000.When recording this transaction, Dailey Company will

Corporations generally issue share dividends in order to

A corporation is not an entity which is separate and distinct from its owners.

On January 1, Castagno Corporation had 800,000 ordinary shares with a $10 par value outstanding.On March 31, the company declared a 15% share dividend.Market value was $15/share.As a result of this event,

If Kiner Company issues 3,000 ordinary shares with a $5 par value for $70,000, the account

The authorized shares of a corporation

Dividends are predominantly paid in

Which one of the following is a privately held corporation?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Payroll Accounting

Other Significant Liabilities

Filters

Exam 11: Corporations: Organization, Share Transactions, Dividends,and Retained Earnings

Which of the following factors does not affect the initial market price of shares?

Ludwick Inc.has retained earnings of $800,000 and total equity of $2,000,000.It has 200,000 ordinary shares with a $5 par value outstanding, which is currently selling for $30 per share.If Ludwick declares a 10% share dividend on its ordinary shares:

Which of the following statements is not considered a disadvantage of the corporate form of organization?

Which of the following statements reflects the transferability of ownership rights in a corporation?

Which one of the following is not an ownership right of a shareholder in a corporation?

Shannon Manufacturing declared a 10% share dividend when it had 250,000 ordinary shares with a $3 par value outstanding.The market price per share was $12 per share when the dividend was declared.The entry to record this dividend declaration includes a credit to

A correction in income of a prior period involves either a debit or credit to the Retained Earnings account.

The par value of shares

Regular dividends are declared out of

A corporation is not committed to a legal obligation when it declares

Dailey Company is a publicly held corporation whose $1 par value ordinary shares are actively traded at $22 per share.The company issued 2,000 shares to acquire land recently advertised at $55,000.When recording this transaction, Dailey Company will

Corporations generally issue share dividends in order to

A corporation is not an entity which is separate and distinct from its owners.

On January 1, Castagno Corporation had 800,000 ordinary shares with a $10 par value outstanding.On March 31, the company declared a 15% share dividend.Market value was $15/share.As a result of this event,

If Kiner Company issues 3,000 ordinary shares with a $5 par value for $70,000, the account

The authorized shares of a corporation

Dividends are predominantly paid in

Which one of the following is a privately held corporation?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Payroll Accounting

Other Significant Liabilities

Filters