Question 1

Authorized share capital is the amount of the shares that are issued to the shareholders.

Accepted Answer

A) True 
 B)False

Question 2

Acts of the shareholders who are not official agents of a corporation can legally bind a corporation.

Accepted Answer

A) True 
 B)False

Question 3

Southern Limited issued 2,000 common shares in payment of its lawyer's bill of $8,000. Southern Limited assured the lawyer that the shares would be worth $10,000 within one year. The bill was for services performed in helping the company incorporate. Southern should record this transaction by debiting

Accepted Answer

A)  Legal Fees Expense for $10,000. 
B)  Legal Fees Expense for $8,000. 
C)  Common Shares for $10,000. 
D)  Common Shares for $8,000.

Question 4

Which of the following Canadian companies must report under International Financial Reporting Standards?

Accepted Answer

A)  private companies 
B)  not-for-profit corporations 
C)  public companies 
D)  partnerships

Question 5

Retained earnings

Accepted Answer

A)  is unique to the corporate form of business. 
B)  is an optional account in the partnership form of business. 
C)  reflects cash paid in by shareholders to date. 
D)  is closed at the end of the year.

Question 6

Return on equity will assist a company to measure its cash flow.

Accepted Answer

A) True 
 B)False

Question 7

Torrie Corporation is authorized to issue an unlimited number of common shares and 1,000,000 shares of preferred shares. During 2013, its first year of operation, the company had profit of $200,000. The following share transactions occurred:
Jan 1 Paid the province $2,000 for incorporation fees.
Jan 15 Issued 500,000 of $1 cumulative preferred shares at $7 per share.
Jan 30 Lawyers for the company accepted 500 common shares as payment for legal services provided in helping the company incorporate. The legal services are estimated to have a value of $5,000. The shares were actively trading at $10.50 per share.
Jul 2 Issued 100,000 common shares for land. The land had an asking price of $900,000. The shares are currently selling on a provincial exchange at $8 per share.
Instructions
a. Journalize the transactions for Torrie Corporation.
b. Prepare the shareholders' equity section of the balance sheet.

Accepted Answer

The answer of Torrie Corporation is authorized to issue an...

Question 8

Which of the following factors does NOT affect the initial market price of a share?

Accepted Answer

A)  the company's anticipated future earnings 
B)  the legal capital of the share 
C)  the current state of the economy 
D)  the expected dividend rate per share

Question 9

One of the disadvantages of a corporation is that professional managers will run the company.

Accepted Answer

A) True 
 B)False

Question 10

The following information is taken from the trial balance of GlaxonSmith Supplies Ltd. at December 31, 2014, the company's year end. GlaxonSmith has a 15% tax rate.  Instructions
Prepare the income statement and statement of retained earnings for GlaxonSmith for the year ended December 31, 2014.

Accepted Answer

The answer of The following information is taken from the...

Question 11

Tantramar Corporation has the following shareholders equity on July 31, 2013: 
-Assume that during the following year the company had profit of $65,000 and declared and paid dividends of $15,000. The beginning balance of retained earnings on the statement of retained earnings for the year ended July 31, 2014 is

Accepted Answer

A)  $500,000. 
B)  $565,000. 
C)  $550,000. 
D)  Cannot be determined from the information provided.

Question 12

Corporate income tax is based on the amount of Retained Earnings that a company has.

Accepted Answer

A) True 
 B)False

Question 13

Preferred shares issued with the right of the shareholder to redeem the shares are referred to as

Accepted Answer

A)  redeemable preferred shares. 
B)  retractable preferred shares. 
C)  cumulative preferred shares. 
D)  convertible preferred shares.

Question 14

Orville Industries has the following account balances: 
-On the corporate income statement what will be the amount reported as "profit"?

Accepted Answer

A)  $40,400 
B)  $36,900 
C)  $50,500 
D)  $60,000

Question 15

The amount of dividends paid is reported on the statement of retained earnings.

Accepted Answer

A) True 
 B)False

Question 16

Private companies following ASPE are required to disclose for each class of shares, the

Accepted Answer

A)  the market value per share. 
B)  the present value per share. 
C)  number of shares authorized. 
D)  number of shares issued.

Question 17

Convertible preferred shares give common shareholders the option of exchanging their bonds for preferred shares.

Accepted Answer

A) True 
 B)False

Question 18

A transfer of shares by a shareholder does not require the approval of either the corporation or other shareholders.

Accepted Answer

A) True 
 B)False

Question 19

Jacobs Corporation has the following shareholders' equity on December 31, 2014: 
-What is the dividend amount payable to preferred shareholders in 2014 assuming no shares are converted?

Accepted Answer

A)  $50,000 
B)  $900,000 
C)  $100,000 
D)  $500,000

Question 20

The primary consideration for the decision to declare dividends is whether the company made a profit in the current year.

Accepted Answer

A) True 
 B)False

Exam 13: Introduction to Corporations

Authorized share capital is the amount of the shares that are issued to the shareholders.

Acts of the shareholders who are not official agents of a corporation can legally bind a corporation.

Which of the following Canadian companies must report under International Financial Reporting Standards?

Retained earnings

Return on equity will assist a company to measure its cash flow.

Which of the following factors does NOT affect the initial market price of a share?

One of the disadvantages of a corporation is that professional managers will run the company.

The following information is taken from the trial balance of GlaxonSmith Supplies Ltd. at December 31, 2014, the company's year end. GlaxonSmith has a 15% tax rate. Instructions Prepare the income statement and statement of retained earnings for GlaxonSmith for the year ended December 31, 2014.

Corporate income tax is based on the amount of Retained Earnings that a company has.

Preferred shares issued with the right of the shareholder to redeem the shares are referred to as

Orville Industries has the following account balances: -On the corporate income statement what will be the amount reported as "profit"?

The amount of dividends paid is reported on the statement of retained earnings.

Private companies following ASPE are required to disclose for each class of shares, the

Convertible preferred shares give common shareholders the option of exchanging their bonds for preferred shares.

A transfer of shares by a shareholder does not require the approval of either the corporation or other shareholders.

Jacobs Corporation has the following shareholders' equity on December 31, 2014: -What is the dividend amount payable to preferred shareholders in 2014 assuming no shares are converted?

The primary consideration for the decision to declare dividends is whether the company made a profit in the current year.