Question 1

A premium on ordinary shares:

Accepted Answer

A)  Is the amount paid in excess of par by purchasers of newly issued shares. 
B)  Is the difference between par value and issue price when the amount paid is below par. 
C)  Represents profit from issuing shares. 
D)  Represents capital gain on sale of shares. 
E)  Is prohibited in most states. 
A)  Is the amount paid in excess of par by purchasers of newly issued shares. 
B)  Is the difference between par value and issue price when the amount paid is below par. 
C)  Represents profit from issuing shares. 
D)  Represents capital gain on sale of shares. 
E)  Is prohibited in most states. A

Question 2

The board of directors of a corporation:

Accepted Answer

A)  Are elected by the corporate registrar. 
B)  Are responsible for day-to-day operations of the business. 
C)  Do not have the power to bind the corporation to contracts, due to lack of mutual agency. 
D)  May not also be executive officers of the corporation, due to the separate entity principle. 
E)  Are responsible for and have final authority for managing corporate activities. 
A)  Are elected by the corporate registrar. 
B)  Are responsible for day-to-day operations of the business. 
C)  Do not have the power to bind the corporation to contracts, due to lack of mutual agency. 
D)  May not also be executive officers of the corporation, due to the separate entity principle. 
E)  Are responsible for and have final authority for managing corporate activities. E

Question 3

A bonus issue or share dividend decreases the market price of the company's share.

Accepted Answer

A) True 
 B)False  True

Question 4

A proxy is:

Accepted Answer

A)  A document that gives a designated agent of a shareholder the right to vote on the shareholder's behalf. 
B)  A contractual commitment by an investor to purchase unissued shares. 
C)  An amount of assets defined by law that shareholders must invest and leave invested in a corporation. 
D)  The right of ordinary shareholders to protect their proportionate interests in a corporation by having the first opportunity to purchase additional ordinary shares issued by the corporation. 
E)  An arbitrary amount assigned to no-par shares by the corporation's board of directors. 
A)  A document that gives a designated agent of a shareholder the right to vote on the shareholder's behalf. 
B)  A contractual commitment by an investor to purchase unissued shares. 
C)  An amount of assets defined by law that shareholders must invest and leave invested in a corporation. 
D)  The right of ordinary shareholders to protect their proportionate interests in a corporation by having the first opportunity to purchase additional ordinary shares issued by the corporation. 
E)  An arbitrary amount assigned to no-par shares by the corporation's board of directors.

Question 5

Earnings per share is the amount of income earned per share of a company's outstanding (weighted-average) ordinary shares.

Accepted Answer

A) True 
 B)False

Question 6

Organization expenses of a corporation often include legal fees and promoter fees.

Accepted Answer

A) True 
 B)False

Question 7

A company has 500,000 ordinary shares authorized, 400,000 ordinary shares issued, and 15,000 ordinary shares in treasury at the current year-end. It paid $0.24 per share in cash dividends during the year. The year-end market price of the share is $15. Calculate (1) the total dividends paid and (2) the dividend yield.

Accepted Answer

(1) $0.24 x (400,000

Question 8

The retirement of shares:

Accepted Answer

A)  Reduces the number of issued shares. 
B)  Does not reduce the number of authorized shares. 
C)  Removes all paid-in capital amounts related to the retired shares. 
D)  Is not the same thing as treasury shares. 
E)  All of these. 
A)  Reduces the number of issued shares. 
B)  Does not reduce the number of authorized shares. 
C)  Removes all paid-in capital amounts related to the retired shares. 
D)  Is not the same thing as treasury shares. 
E)  All of these.

Question 9

The declaration of cash dividends reduces retained earnings.

Accepted Answer

A) True 
 B)False

Question 10

Retained earnings:

Accepted Answer

A)  Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception. 
B)  Can only be appropriated by setting aside a cash fund. 
C)  Represent an amount of cash available to pay shareholders. 
D)  Are never adjusted for anything other than net income or dividends. 
E)  All of these. 
A)  Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception. 
B)  Can only be appropriated by setting aside a cash fund. 
C)  Represent an amount of cash available to pay shareholders. 
D)  Are never adjusted for anything other than net income or dividends. 
E)  All of these.

Question 11

Xtreme Sports has $100,000 of 8% noncumulative, nonparticipating, preference shares outstanding. Xtreme Sports also has $500,000 of ordinary shares outstanding. In the company's first year of operation, no dividends were paid. During the second year, Xtreme Sports paid cash dividends of $30,000. This dividend should be distributed as follows:

Accepted Answer

A)  $8,000 preference; $22,000 ordinary. 
B)  $16,000 preference; $14,000 ordinary. 
C)  $7,500 preference; $22,500 ordinary. 
D)  $15,000 preference; $15,000 ordinary. 
E)  $0 preference; $30,000 ordinary. 
A)  $8,000 preference; $22,000 ordinary. 
B)  $16,000 preference; $14,000 ordinary. 
C)  $7,500 preference; $22,500 ordinary. 
D)  $15,000 preference; $15,000 ordinary. 
E)  $0 preference; $30,000 ordinary.

Question 12

Stated value share is par share that is assigned a value per share by the corporation's board of directors.

Accepted Answer

A) True 
 B)False

Question 13

A corporation issued 6,000 $10 par value ordinary shares in exchange for land that has a market value of $84,000. The entry to record this transaction would include:

Accepted Answer

A)  A debit to Share Capital-Ordinary for $60,000. 
B)  A debit to Land for $60,000. 
C)  A credit to Land for $60,000. 
D)  A credit to Share Premium-Ordinary for $24,000. 
E)  A credit to Share Capital-Ordinary for $84,000. 
A)  A debit to Share Capital-Ordinary for $60,000. 
B)  A debit to Land for $60,000. 
C)  A credit to Land for $60,000. 
D)  A credit to Share Premium-Ordinary for $24,000. 
E)  A credit to Share Capital-Ordinary for $84,000.

Question 14

A share split increases total shareholders' equity.

Accepted Answer

A) True 
 B)False

Question 15

There is a credit balance in Share Premium-Treasury Shares of $1,500:
$2,500 - $1,000 = $1,500

Accepted Answer

The answer of There is a credit balance in Share...

Question 16

A company's board of directors votes to declare a cash dividend of $.75 per share. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is:

Accepted Answer

A)  $10,250. 
B)  $14,625. 
C)  $7,125. 
D)  $7,500. 
E)  $11,250. 
A)  $10,250. 
B)  $14,625. 
C)  $7,125. 
D)  $7,500. 
E)  $11,250.

Question 17

A company reports the following shareholders' equity:
   Compute the (1) number of ordinary shares outstanding and (2) book value per ordinary share.

Accepted Answer

(1) Number of ordinary shares

Question 18

A share split is the distribution of additional shares to shareholders according to their percent of ownership.

Accepted Answer

A) True 
 B)False

Question 19

The price-earnings ratio is calculated by dividing:

Accepted Answer

A)  Market value per share by earnings per share. 
B)  Earnings per share by market value per share. 
C)  Dividends per share by earnings per share. 
D)  Dividends per share by market value per share. 
E)  Market value per share by dividends per share. 
A)  Market value per share by earnings per share. 
B)  Earnings per share by market value per share. 
C)  Dividends per share by earnings per share. 
D)  Dividends per share by market value per share. 
E)  Market value per share by dividends per share.

Question 20

A bonus issue or share dividend transfers:

Accepted Answer

A)  Contributed capital to retained earnings. 
B)  Retained earnings to contributed capital. 
C)  Retained earnings to assets. 
D)  Contributed capital to assets. 
E)  Assets to contributed capital. 
A)  Contributed capital to retained earnings. 
B)  Retained earnings to contributed capital. 
C)  Retained earnings to assets. 
D)  Contributed capital to assets. 
E)  Assets to contributed capital.

Exam 13: Accounting for Corporations

A premium on ordinary shares:

The board of directors of a corporation:

A bonus issue or share dividend decreases the market price of the company's share.

A proxy is:

Earnings per share is the amount of income earned per share of a company's outstanding (weighted-average) ordinary shares.

Organization expenses of a corporation often include legal fees and promoter fees.

The retirement of shares:

The declaration of cash dividends reduces retained earnings.

Retained earnings:

Stated value share is par share that is assigned a value per share by the corporation's board of directors.

A corporation issued 6,000 $10 par value ordinary shares in exchange for land that has a market value of $84,000. The entry to record this transaction would include:

A share split increases total shareholders' equity.

There is a credit balance in Share Premium-Treasury Shares of $1,500: $2,500 - $1,000 = $1,500

A company's board of directors votes to declare a cash dividend of $.75 per share. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is:

A company reports the following shareholders' equity: Compute the (1) number of ordinary shares outstanding and (2) book value per ordinary share.

A share split is the distribution of additional shares to shareholders according to their percent of ownership.

The price-earnings ratio is calculated by dividing:

A bonus issue or share dividend transfers:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Long-Term Liabilities

Investments and International Operations

Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Filters