Corporation Formation Flashcards
Preference share dividends are usually paid prior to payment of ordinary
share dividends.
True
Paid in capital is capital from contributions by shareholders.
True
Paid in capital includes share premium and retained earnings.
False
Treasury share is one that gives the holder a preference over the holders
of ordinary shares with respect to the payment of dividends.
True
Resale of treasury share at more than cost is one source of additional
paid in capital.
True
Reissue of treasury shares does not affect the total shareholders’ equity.
False
Declaration and issuance of share dividend will not affect total
shareholders’ equity.
True
Retirement of shares previously held in the treasury does not affect total
shareholders’ equity.
True
The purchase of treasury shares decreases the total shareholder’s
equity
True
The generally accepted method of accounting for treasury shares is
the cost method
True
A gain or loss is recognized in profit or loss when the retirement
price of share capital differs from the original issue price of the share.
False
Non cumulative preference shares are entitled to dividends that
have not been declared in the prior years.
False
The purchase of treasury shares reduces both the number of
shares issued and the number of shares outstanding.
False
When a corporation reacquires its own ordinary shares as treasury
shares, the balance in the Ordinary Share Capital is decreased
False
Appropriation of retained earnings requires the setting up of a
separate cash fund.
False
The ledger balance of the Treasury Shares account is reported in
the shareholders’ equity section as a direct deduction from retained
earnings.
False
Acquisition of treasury shares by donation from shareholders does
not change the total shareholders’ equity.
True
No entry is made by the corporation on the date of record.
True
As a general guideline, a share dividend of less than 20% of the
number of shares previously outstanding is considered as a small share
dividend.
True
A share dividend requires a transfer of capital from retained
earnings to contributed capital.
True
With a large share dividend, a corporation transfers from retained
earnings to contributed capital an amount equal to the par or stated
value of the share issues.
True
Retained earnings may not be increased as a result of share capital
transactions.
True
A deficit in retained earnings arises whenever a net loss is reported
for an accounting period.
False
No adjustment is made by the corporation for any change in the
fair value of the assets held for distribution to shareholders from the
date of declaration to the date of settlement.
False
Deficit is the term that is used to indicate a debit balance in the
retained earnings account.
True
A property dividend is recorded at the adjusted carrying value, on
the date of declaration, of the non-cash asset to be distributed as
dividends.
False
Assets held for distribution as dividends to shareholders are
measured on the statement of financial position at the lower of the fair
value and their carrying value.
False
An appropriation of retained earnings is necessary for the cost of
treasury shares held by the corporation.
True
A scrip dividend is a distribution to shareholders representing a
return of a portion of contributed capital.
False
A share dividend increases contributed capital and retained
earnings
False
Dividends, other than a share dividend, reduce total shareholders’
equity.
True
Book value per share is a measurement of the amount of income
earned by a shareholder during the period.
False
Payment of dividends, which have been previously declared and
recorded, does not affect Total shareholders’ equity.
True
No liability is recognized by a corporation upon declaration of a
share dividend.
True
Preference share that is given a right to share with the ordinary
share in dividends in excess of a stated dividend rate is said to be
a. cumulative
b. participating
c. non cumulative
d. non participating
B.
For an entity that has only ordinary shares outstanding, total
shareholders’ equity divided by the number of shares outstanding
represents
a. return on equity
b. earnings per share
c. Liquidation value per share
d. Book Value Per Share
d.
How would the share dividends distributable account balance be
presented on the statement of financial position?
as part of current liabilities
as addition to share capital
as addition to retained earnings
as addition to additional paid in capital
as addition to share capital
Sale of treasury shares at less than cost shall be charged to
Loss on sale of treasury shares to be reported as other expense
Retained earnings and then additional paid in capital from treasury share
transactions
Additional paid in capital from treasury share transactions and
then retained earnings
Share premium from original issuance, additional paid in capital from
treasury share transactions and then retained earnings
Additional paid in capital from treasury share transactions and
then retained earnings
When a corporation calls in all of its preference shares for more
than the original issuance price, the excess paid above the original
issuance price shall be
a. accounted for as loss on exchange in the income statement
b. charged against share premium on ordinary shares
c. charged to a discount on preference shares
d. charged against retained earnings
D.
Contributed capital does not include
a. share premiums on ordinary and preference shares
b. preference share capital dividend distributable
c. share capital resulting from reissuance of treasury shares at price above
acquisition price
d. accumulated earnings of the corporation
d.
The corporation should charge retained earnings for the fair
value of the shares issued in a
a.1 for 5 share capital dividend
b. 1 for 8 share capital dividend
c. 4 for 1 share split
d. 2 for 1 share split
d.
Appropriations of retained earnings, if reflected in separate account
shall be reported as
a. component of equity as part of share premium
b. component of equity as part as total retained earnings
c. component of total liabilities as current liability
d. component of total liabilities as noncurrent liability
b.
Which dividends do not reduce total shareholders’ equity?
a. liquidating dividends
b. property dividends
c. share capital dividends
d. scrip dividends
c.
