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ParCor > CHAPTER 8 Review > Flashcards

CHAPTER 8 Review Flashcards

1
Q

Property dividends should be recorded at the fair value of the assets to be distributed.

(TRUE OR FALSE)

A

True

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2
Q

A share capital dividend decreases retained earnings but it increases contributed capital.

(TRUE OR FALSE)

A

True

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3
Q

A share capital dividend does not change total shareholders’ equity.

(TRUE OR FALSE)

A

True

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4
Q

A debit balance in the Retained Earnings account is called a deficit.

(TRUE OR FALSE)

A

True

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5
Q

A share capital dividend that has been declared but not yet distributed should be reported as a current liability.

(TRUE OR FALSE)

A

False

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6
Q

An appropriation of retained earnings reduces the total amount of retained earnings.

(TRUE OR FALSE)

A

False

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7
Q

The liquidation value of a preference share is always equal to its par-value.

(TRUE OR FALSE)

A

False

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8
Q

The accounting cycle of a corporation is very much different from the accounting cycle of a partnership or a sole proprietorship.

(TRUE OR FALSE)

A

False

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9
Q

Book value per share is the amount earned for every capital share owned by a shareholder.

(TRUE OR FALSE)

A

False

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10
Q

Dividends may be declared even if a corporation has a deficit.

(TRUE OR FALSE)

A

False

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11
Q

A cumulative preference share capital is entitled to payment of dividends in arrears.

(TRUE OR FALSE)

A

True

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12
Q

Unappropriated retained earings represents amount of cash available for dividend distribution.

(TRUE OR FALSE)

A

False

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13
Q

Appropriation of retained earnings is necessary when the corporation reacquires its own share capital.

(TRUE OR FALSE)

A

True

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14
Q

The balance of the Income Summary account is transferred to the Retained Earnings account.

(TRUE OR FALSE)

A

True

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15
Q

The normal balance of Retained Earnings account is credit. Therefore, it can never have a debit balance.

(TRUE OR FALSE)

A

False

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16
Q

A deficit (or debit balance) in Retained Earnings means that Retained Earnings appears in the asset section of the statement of financial position.

(TRUE OR FALSE)

A

False

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17
Q

On a corporation’s statement of financial position, Ordinary Share Capital Subscribed will appear in the shareholders’ equity section rather than in the asset section.

(TRUE OR FALSE)

A

True

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18
Q

Earnings per share is computed for both preference and ordinary shares.

(TRUE OR FALSE)

A

False

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19
Q

“Dividends in arrears” is a term that applies to cumulative preference shares.

(TRUE OR FALSE)

A

True

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20
Q

Book value of share capital is a measurement of the amount of income earned for each share of stock.

(TRUE OR FALSE)

A

False

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21
Q

Capital arising from investment by shareholders.

A

Contributed Capital

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22
Q

Also known as legal capital.

A

Share Capital

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23
Q

Contributions by shareholders in excess of the par or stated value of the share capital.

A

Share Premium

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24
Q

Dividends representing return of shareholders’ investment.

A

Liquidating Dividend

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25
Q

A deferred cash dividend.

A

Scrip Dividends

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26
Q

Corporate earnings distributed to shareholders in the form of cash, non- cash assets, or the corporation’s own shares.

A

Dividends

27
Q

Retained Earnings set aside for a specific purpose.

A

Appropriated Retained Earnings

28
Q

Dividends distributable in the form of non-cash assets.

A

Property Dividend

29
Q

A share capital dividend representing less than 20% of the outstanding stock of the corporation.

A

Small Share Capital Dividend

30
Q

Unpaid dividends of prior years.

A

Dividends in Arrears

31
Q

A debit balance in the Retained Earnings account.

A

Deficit

32
Q

The peso equity in corporate capital of each share capital.

A

Book Value per share

33
Q

Retained earnings available for distribution as dividends to shareholders.

A

Unappropriated Retained Earnings

34
Q

Capital arising from profitable operations of the corporation.

A

Retained Earnings

35
Q

Preference share capital that participates in the excess dividends after paying both preference and ordinary shares their regular dividends.

A

Participating Preference Shares Capital

36
Q

The excess of fair value over par value of share capital in a small stock dividend.

A
37
Q

The amount recorded as reduction in Retained Earnings on a property dividend declaration.

A

Carrying Value

38
Q

The account used for the declared bit mot yer distributed stock dividend.

A

Stock Dividend Distributable

39
Q

The type of dividend that does not affect total assets and total shareholders’ equity.

A

Stock Dividend

40
Q

Amount earned by shareholders during a given period for each ordinary share held.

A

Earning per share

41
Q

The Retained Earnings account:

a. has a credit balance if earnings have been greater than losses and dividends, and is reported as part of shareholders’ equity on the statement of financial position.

b. has a debit balance if losses have exceeded earnings, and is reported as part of assets on the statement of financial position.

c. represents the amount of cash available for payment of dividends if there has been profitable operations.

d. is a special fund for paying shareholders’ dividends on the basis of income.

A

a. has a credit balance if earnings have been greater than losses and dividends, and is reported as part of shareholders’ equity on the statement of financial position.

42
Q

All of the following statements pertain to dividends. Which of them is (are) true?

a. Shareholders vote each year to declare and set the amount of the dividends to be paid.

b. Dividends Payable is a current liability in the statement of financial position of the corporation.

c. A 10% dividend on preference share capital means that each shareholder receives a cash dividend equal to 10% of the market value of the stock.

d. All of these statements are true.

A

b. Dividends Payable is a current liability in the statement of financial position of the corporation.

43
Q

All of the following statements regarding dividends in arrears is false?

a. Dividends in arrears are not a liability to a corporation until they are declared.

b. Total dividends in arrears is one year dividend requirement on in arrears.
cumulative preference share capital multiplied by the number of years

c. Dividends in arrears must be reported in the footnotes to the financial statements.

d. Dividends in arrears may arise on both preference and ordinary share capital in any year the dividends are not paid.

A

d. Dividends in arrears may arise on both preference and ordinary share capital in any year the dividends are not paid.

44
Q

Dividends in arrears on preference shares are reported in the financial statements as (an)

a. liability
b. expense
c. reduction from Retained Earnings
d. footnote to financial statements

A

d. footnote to financial statements

45
Q

Donated Capital is reported as part of

a. share capital
b. Additional Paid-in Capital
c. Appropriated retained earnings
d. Unappropriated retained earnings

A

b. Additional Paid-in Capital

46
Q

When a small share capital dividend is declared, Retained Earings is debited for the

a. par value of the share capital

b. fair market value of the share capital on the date of record

c. fair market value of the share capital on the date of declaration

d. fair market value of the share capital on the date of distribution

A

c. fair market value of the share capital on the date of declaration

47
Q

Cash dividends declared but not paid as of the statement of financial position date are reported as

a. current liability

b. deduction from Cash

c. addition to Share Capital

d. addition to Additional Paid-in Capital

A

a. current liability

48
Q

The total shareholders’ equity after the declaration of stock dividend

a. is the same as the total shareholders’ equity before the declaration.

b. is greater than the total shareholders’ equity before the declaration.

c. is less than the total shareholders’ equity before the declaration.

d. may be more than or less than the total shareholders’ equity before the declaration depending on whether the stock dividend declared is small or large

A

a. is the same as the total shareholders’ equity before the declaration.

49
Q

An appropriation of Retained Earnings

a. leaves total Retained Earnings unchanged

b. means that cash has been set aside for a specific purpose

c. reduces the amount of Retained Earnings available for dividends

d. both a and c

A

d. both a and c

50
Q

The peso equity in corporate capital for each share capital owned by a shareholder is known as

a. earnings per share
b. book value per share
c. none of these
d. dividends per share

A

b. book value per share

51
Q

A corporation declared dividends on December 1 payable on January 15 to shareholders of record of December 30. The balance of Retained Earnings

a. decreases on December 30
b. decreases on January 15
c. is not affected on December 30
d. is not affected on December 1

A

c. is not affected on December 30

52
Q

A corporation has experienced losses greater than profits in the past three years since incorporation. Which of the following statements is true?

a. Retained Earnings has a credit balance at the end of the third year.

b. Retained Earnings has a debit balance and is reported as an asset on the statement of financial position.

c. Retained Earnings has a debit balance and it appears as a reduction in the shareholders’ equity on the statement of financial position.

d. Retained Earnings has a credit balance at the end of the third year and the corporation may choose how to report a deficit.

A

c. Retained Earnings has a debit balance and it appears as a reduction in the shareholders’ equity on the statement of financial position.

53
Q

Dividends representing a return of invested capital is known as

a. stock dividend

b. scrip dividend

c. property dividend

d. liquidating dividend

A

d. liquidating dividend

54
Q

A debit balance in the Retained Earnings accounts is reported as a (an)

a. asset

b. contra liability

c. liability

d. contra equity

A

d. contra equity

55
Q

When a corporation pays dividends, the three relevant dates for dividends occur in this order:
a. date of record, date of declaration, date of payment

b. date of payment, date of declaration, date of record

c. date of declaration, date of payment, date of record

d. date of declaration, date of record, date of payment

A

d. date of declaration, date of record, date of payment

56
Q

Which of the following will reduce Retained Earnings?

a. Declaration of a stock dividend
b. Payment of a cash dividend
c. Profit for the period
d. None of these

A

a. Declaration of a stock dividend

57
Q

When a corporation declares a cash dividend, the entry include a
a. debit to net income
b. credit to APIC
c. debit to Retained Earnings
d. credit to Cash

A

c. debit to Retained Earnings

58
Q

The date when the board of directors announces the intention to pay dividends is known as

a. dividend date
b. declaration date
c. record date
d. payment date

A

b. declaration date

59
Q

Which of the following is not reported in the statement of changes in shareholders’ equity?

a. Profit for the year

b. Undistributed dividends declared during the year

c. Interest expense

d. Ordinary shares issued at more than par value

A

c. Interest expense

60
Q

The type of dividend that does not affect total assets and total shareholders’ equity is

a. share capital dividend
b. property dividend
c. cash dividend
d. scrip dividend

A

a. share capital dividend

61
Q

Which of the following is (are) attributed to market value of share capital?

a. Share capital dividend
b. 3/30
c. Date of declaration value
d. All of the above

A

d. All of the above

62
Q

When the outstanding preference share capital is multiplied by the participation rate, the result is

a. full participation preference

b. maximum allowed participation

c. non-participating preference shares

d. cumulative preference

A

b. maximum allowed participation

63
Q

Earnings per share is computed on

a. ordinary shares only

b. preference shares only

c. both ordinary and preferencé shares

d. neither ordinary nor preference shares

A

a. ordinary shares only

64
Q

Which of the following is not correct relative to an appropriation of Retainea Earnings?

a. Retained earnings set aside for a special or specific purpose.

b. Undistributed funds for dividends declared during the year.

c. Reduction in the amount available to shareholders as dividends

d. Total retained earnings remains unchanged.

A

b. Undistributed funds for dividends declared during the year.

ParCor (3 decks)

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