Exercise Set 4 (True or False) Part II

Question 1

Treasury shares are considered as issued shares. True or False?

Answer 1

True

Question 2

The highest bidder in a public auction for a delinquent subscription is the person willing to pay the offer price for the most number of shares. True or False?

Answer 2

False. [*Why not?]

Question 3

In all cases, the defaulting subscriber still receives a certain number of shares, even though his subscription was declared delinquent. True or False?

Answer 3

False. The defaulting subscriber cannot receive shares if his subscription is declared delinquent

Question 4

When there are no bidders in the public auction, the shares are issued in favor of the corporation and are considered as treasury shares. True or False?

Answer 4

True

Question 5

A treasury share may never be reissued below the share’s par value. True or False?

Answer 5

False. It can be

Question 6

Treasury share transactions may decrease but never increase a corporation’s accumulated profits. True or False?

Answer 6

True

Question 7

When treasury shares are reissued at above cost, there is an income recognized from the reissuance. True or False?

Answer 7

False. [*What is recognized when treasury shares are reissued at above cost?]

Question 8

A treasury share is not an outstanding share. True or False?

Answer 8

True

Question 9

Under the cost method, treasury shares are either debited or credited based on the share’s par value. True or False?

Answer 9

False. [*Where is treasury share debited/credited?]

Question 10

Costs incurred in conducting a public auction for a delinquent subscription is recorded as an expense of the corporation. True or False?

Answer 10

False. [*What is it recorded as?]

Question 11

The liability to pay cash dividends is recognized on the date of record. True or False?

Answer 11

False. [*Where is it recognized?]

Question 12

The declaration and distribution of share dividend does not affect a corporation’s total shareholders’ equity. True or False?

Answer 12

False. It decreases the total shareholders’ equity.

Question 13

All issued shares are entitled to receive dividends. True or False?

Answer 13

False. [*What shares are entitled to receive dividends?]

Question 14

Cumulative preference share is entitled to receive current year dividends only. True or False?

Answer 14

False. Not just current year dividend

Question 15

A deficit occurs when a corporation’s Accumulated Profits account has a debit balance. True or False?

Answer 15

True

Question 16

An appropriation out of a corporation’s unrestricted accumulated profits decreases amount available for dividend distribution. True or False?

Answer 16

True

Question 17

A share dividend distributable is considered as a current liability of the corporation. True or False?

Answer 17

False. [*Is it part of owner’s equity?]

Question 18

The declaration of a small share dividend requires that Accumulated Profits is charged for the par value of share dividends declared. True or False?

Answer 18

False. [*Which account?]

Question 19

Before and after distribution of share dividends, a shareholder’s percentage interest in the corporation does not change. True or False?

Answer 19

True

Question 20

The participation feature of preference shares allows holders of these shares to receive more dividends than ordinary shareholders in all cases. True or False?

Answer 20

False. They are preferred shares over ordinary shares.