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Intermediate Accounting 2 > Shareholders' Equity > Flashcards

Shareholders' Equity Flashcards

1
Q

When shares with par value are sold, the excess of the proceeds over the par value is credited to

a. Share Capital
b. Share Premium
c. Retained Earnings
d. Gain on issuance of shares

A

b. Share Premium

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2
Q

When shares without par value are sold, the excess proceeds over stated value shall be credited to

a. Income
b. Retained Earnings
c. Share Premium
d. Share Capital

A

c. Share Premium

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3
Q

If shares are issued for a noncash consideration, the shares issued shall be measured by

a. FV of the shares
b. Par value of the shares
c. FV of the noncash consideration
d. CA of the noncash consideration

A

c. FV of the noncas consideration

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4
Q

When shares are issued in payment for services, what is the least appropriate basis for recording the transaction?

a. FV of the services
b. Par value of the shares
c. FV of the shares
d. Any of these provides an appropriate basis for recording the transaction

A

b. Par value of the shares

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5
Q

What is the meaning of net assets of a corporation?

a. Contributed capital
b. Retained earnings
c. Shareholders’ equity
d. Legal Capital

A

c. Shareholders’ equity

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6
Q

The two primary account classifications within shareholders’ equity are

a. Preference shares and retained earnings
b. Par value of ordinary shares and retained earnings
c. Contributed capital and retained earnings
d. Preference shares and ordinary shares

A

c. Contributed capital and retained earnings

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7
Q

Details of each class of share capital should be reported

a. On the face of the statement of financial position only
b. In disclosure notes only
c. On the face of the statement of financial position or in disclosure notes
d. On the face of the statement of comprehensive income and in disclosure notes

A

c. On the face of the statement of financial position or in disclosure notes

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8
Q

The corporate charter is known as

a. Articles of incorporation
b. Statement of organization
c. By-laws
d. Registration statement

A

a. Articles of incorporation

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8
Q

Characteristics of the corporate form that have led to the growth of this form of business ownership include all of the following, except

a. Ease of raising capital
b. Low government regulation
c. Limited liability
d. Ease of ownership transfer

A

b. Low government regulation

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9
Q

Outstanding ordinary shares are

a. Shares that are performing well on the Philippine Stock Exchange
b. Shares that have been authorized by the state for issue
c. Shares held in the corporate treasury
d. Shares in the hands of shareholders

A

d. Shares in the hands of shareholders

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10
Q

Issued shares refer to the number of shares

a. Outstanding plus treasury
b. Shares issued for cash
c. In the hands of shareholders
d. That may be issued under state law

A

a. Outstanding plus treasury shares

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11
Q

Authorized share capital refers to the number of shares

a. Outstanding
b. Issued
c. Issued and outstanding
d. That can be issued

A

d. That can be issued

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12
Q

The share capital account is measured as

a. The shares outstanding multiplied by par value
b. The shares outstanding multiplied by market value
c. The shares issued multiplied by par value
d. The shares issued multiplied by book value

A

c. The shares issued multiplied by par value

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13
Q

The par value of shares issued is normally recorded in

a. Additional paid in capital
b. Share Capital
c. Retained earnings
d. Appropriated retained earnings

A

b. Share capital

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14
Q

Total shareholders’ equity represents

a. A claim against specific assets
b. The maximum amount that can be borrowed
c. A claim against the total assets of an entity
d. Only the amount of retained earnings

A

c. A claim against the total assets of an entity

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15
Q

In accounting for shareholders’ equity, the accountant is primarily concerned with which of the following?

a. Determining the total amount of shareholders’ equity
b. Distinguishing between realized and unrealized revenue
c. Recording the source of each of the various elements of shareholders’ equity
d. Making sure that the directors do not declare dividends in excess of retained earnings

A

c. Recording the source of each of the various elements of shareholders’ equity

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16
Q

Shares that have a fixed per-share amount printed on the share certificate are called

a. Stated value shares
b. Fixed value shares
c. Uniform value shares
d. Par value shares

A

d. Par value shares

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17
Q

The par value of an ordinary share represents

a. The liquidation value of the share
b. The book value of the share
c. The legal nominal value assigned to the share
d. The amount received by the corporation when the share is originally issued

A

c. The legal nominal value assigned to the share

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18
Q

Contributed capital does not include

a. Share premium on ordinary and preference shares
b. Preference share capital
c. Share premium from reissuance of treasury shares
d. Retained earnings

A

d. Retained earnings

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19
Q

Discount on share capital

a. May be recorded as either an asset or an expense
b. Should be closed to income summary account
c. May be offset against share premium on the same class
d. None of the above may be done

A

d. None of the above may be done

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20
Q

Which is not one of the basic shareholders’ rights?

a. The right to participate in earnings
b. The right to maintain one’s proportional interest
c. The right to participate in the proceeds of the sale of corporate assets upon liquidation of the corporation
d. The right to inspect the accounting records

A

d. the right to inspect the accounting records

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21
Q

An ordinary shareholder does not possess which of the following?

a. The right to share in the earnings of the corporation
b. The right to maintain one’s proportional interest
c. The right to participate in the proceeds of the sale of corporate assets upon liquidation of the corporation
d. The right to inspect the accounting records

A

c. The right to participate in the proceeds of the sale of corporate assets upon liquidation of the corporation

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22
Q

The preemptive right of an ordinary shareholder is the right to

a. Share proportionately in corporate assets
b. Share proportionately in any new issue of shares of the same class
c. Receive cash dividends annually
d. Exclude preference shareholders from voting rights

A

b. Share proportionately in any new issue of shares of the same class

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23
Q

Share premium is reported

a. As a reduction of shareholders’ equity
b. As a noncurrent asset
c. As a noncurrent liability
d. As an increase in shareholders’ equity

A

d. As an increase in shareholders’ equity

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24
Q

Share issue costs are

a. Not recorded separately
b. Recorded as an asset
c. Recorded as a liability
d. Amortized over time

A

a. Not recorded separately

25
Q

When more than one security is sold for a single price and the total selling price is not equal to the sum of the market prices, the cash received is allocated between the securities based on

a. Relative book value
b. Par value
c. Relative market value
d. The earnings per share

A

c. Relative market value

26
Q

When shares traded on an active exchange are issued for an asset

a. No entry is recorded until restrictions are lifted
b. An asset is recorded at the FV of the shares
c. An asset is recorded at the appraised value
d. Share capital is increased by the appraised value of the asser

A

b. An asset is recorded at the FV of the shares

27
Q

When shares are issued in exchange for property, the best evidence of FV might be any of the following, except

a. The FV of the property received
b. The selling price of the shares in a recent transaction
c. The price of the shares quoted on the stock exchange
d. The average book value of outstanding shares

A

d. The average book value of outstanding shares

28
Q

The dominant form of business organization is

a. Partnership
b. Corporation
c. Limited Liability Company
d. Proprietorship

A

b. Corporation

29
Q

Ordinary shareholders usually have all, except

a. To share in the net income
b. To share in the assets upon liquidation
c. To elect the board of directors
d. To participate in the day-to-day operations

A

d. To participate in the day-to-day operations

30
Q

When preference shares are retired by the issuer at a price below the original issue price, the transaction

a. Increases net income for the year
b. Increases retained earnings
c. Increases revenue for the year
d. Increases contributed capital of ordinary shareholders

A

d. Increases contributed capital of ordinary shareholders

31
Q

When preference shares carry a redemption privilege, the shareholders may

a. Purchase new shares when available
b. Exchange their preference shares for ordinary shares
c. Surrender the preference shares for a specified amount of cash
d. Purchase treasury shares

A

c. Surrender the preference shares for a specified amount of cash

32
Q

An entity that issued shares of Class B should report the share capital

a. Among liabilities under all circumstances
b. As equity unless the shares are mandatorily redeemable
c. As equity unless the shares are redeemable at the option of the issuer
d. Among liabilities unless the shares are mandatorily redeemable

A

b. As equity unless the shares are mandatorily redeemable

33
Q

The issuance of preference shares

a. Increase preference shares outstanding
b. Has no effect on preference shares outstanding
c. Increases authorized preference share capital
d, Decrease authorized preference share capital

A

a. Increase preference shares oustanding

34
Q

When an entity calls in all of the preference shares for more than the original issue price, the excess over the original issue price should be

a. Accounted for as loss on exchange
b. Charged against share premium of ordinary shares
c. Charged to a discount on preference shares
d. Charged against retained earnings

A

d. Charged against retained earnings

35
Q

When preference shares are called in by the issuer for less than original issue price, proper accounting for the redemption

a. Increases the amount of dividends available to ordinary shareholders
b. Increases the contributed capital of the ordinary shareholders
c. Increases reported income for the period
d. Increases the treasury shares held by the entity

A

b. Increases the contributed capital of the ordinary shareholders

36
Q

Dividend paid on redeemable preference shares shall be accounted for as

a. Direct deduction from retained earnings
b. Interest expense as component of finance cost
c. Component of other comprehensive income
d. Deduction from reserves

A

b. Interest expense as component of finance cost

37
Q

The cost of treasury shares acquired for noncash consideration is usually measured by

a. CA of the noncash asset surrendered
b. FV of the noncash asset surrendered
c. FV of the treasury shares
d. Book value of the treasury shares

A

a. CA of the noncash asset surrendered

38
Q

The total cost of treasury shares shall be reported as

a. Deduction from shareholders’ equity
b. Financial asset
c. Deduction from retained earnings
d. Deduction from share premium

A

a. Deduction from shareholders’ equity

39
Q

If treasury shares are reissued for noncash consideration, the proceeds shall be measured by

a. FV of the treasury shares
b. FV of the noncash consideration
c. CA of the noncash consideration
d. CA of the treasury shares

A

b. FV of the noncash consideration

40
Q

“Loss” from sale of treasury shares shall be charged to

a. Loss on sale of treasury shares
b. Retained earnings and then share premium from treasury shares
c. Share premium from treasury shares and then retained earnings
d. Share premium from original issuance and then retained earnings

A

c. Share premium from treasury shares and then retained earnings

41
Q

Loss on retirement of treasury shares is debited to

a. Retained earnings
b. Share premium from treasury shares and then retained earnings
c. Share premium from treasury shares, share premium from original issuance and then retained earnings
d. Share premium from original issuance, share premium from treasury shares and then retained earnings

A

d. Share premium from original issuance, share premium from treasury shares and then retained earnings

42
Q

Gain on retirement of treasury shares shall credited to

a. Share premium
b. Retained earnings
c. Share capital
d. Income

A

a. Share premium

43
Q

Shares issued exceed shares outstanding as a result of

a. Declaration of share split
b. Declaration of share dividend
c. Purchase of treasury shares
d. Payments in full of subscribed shares

A

c. Purchase of treasury shares

44
Q

When treasury shares are sold at a price above cost

a. A gain is credited
b. A loss is reported
c. A revenue is credited
d. Contributed capital is increased

A

d. Contributed capital is increased

45
Q

Which is not a method to account for treasury shares?

a. Cost method
b. Par value method
c. Retained earnings method
d. Constructive retirement method

A

c. Retained earnings method

46
Q

Which is incorrect in relation to treasury shares?

a. Treasury shares shall be recorded at cost
b. The total cost of treasury shares shall be deducted from shareholders’ equity
c. Treasury shares may be recognized as financial assets
d. Gain on sale of treasury shares is not recognized as income

A

c. Treasury shares may be recognized as financial assets

47
Q

Only a memorandum is made when an entity

a. Gives warrants to executives as compensation
b. Include warrants to make a security more attractive
c. Entities issue rights to existing shareholders
d. All of the choices are correct

A

c. Entities issue rights to existing shareholders

48
Q

Which is issue to shareholders to acquire unissued shares within a specified time at a specified price?

a. Share option
b. Share warrant
c. Share subscription
d. Share appreciation right

A

b. Share warrant

49
Q

An entity issued rights to the existing shareholders to purchased unissued ordinary shares at more than par value. Share premium would be recorded when the rights

a. Expire
b. Are exercised
c. Become exercisable
d. Are issued

A

b. Are exercised

50
Q

Share warrants outstanding account shall be reported as

a. Liability
b Reduction of share premium
c. Share capital
d. Share premium

A

d. Share premium

51
Q

Share split is issued primarily to

a. Increase the number of outstanding shares
b. Increase the number of authorized shares
c. Increase legal capital
d. Induce a decline in market value per share

A

d. Induce a decline in market value per share

52
Q

When collectibility is reasonably assured, the excess of the subscription price over the stated value of no par ordinary share subscribed shall be recorded as

a. No par ordinary share capital
b. Share premium when the subscription is recorded
c. Share premium when the subscription is collected
d. Share premium when the ordinary share is issued

A

b. Share premium when the subscription is recorded

53
Q

The purchase of treasury ordinary shares

a. Decreases authorized ordinary share capital
b. Decreases issued ordinary shares
c. Decreases outstanding ordinary shares
d. Has no effect on ordinary shares outstanding

A

c. Decreases outstanding ordinary shares

54
Q

When treasury shares are purchases for more than par value, what account or accounts shall be debited?

a. Treasury shares for the par value and share premium for the excess or purchase rice over the par value
b. Share premium for the purchase price
c. Treasury shares for the purchase price
d. Treasury shares for the par value and retained earnings for excess of the purchase price over the par value

A

a. Treasury shares for the par value and share premium for the excess or purchase rice over the par value

55
Q

Which statement best describes the net effect on retained earnings of the purchase and subsequent sale of treasury shares?

a. Retained earnings may never be increased but sometimes decreased
b. Retained earnings sometimes may never be increased or decreased
c. Retained earnings sometimes may be increased but never decreased
d. Retained earnings account is always affected unless the sale price is exactly equal to cost

A

a. Retained earnings may never be increased but sometimes decreased

56
Q

Treasury shares were acquired for cash at a price in excess of par value. The treasury shares were subsequently sold for cash at a price in excess of acquisition cost. What is the effect of the purchase and sale of treasury, respectively on total shareholders’ equity?

a. Increase and Decrease
b. Decrease and No effect
c. Decrease and Increase
d. No effect and No effect

A

c. Decrease and Increase

57
Q

Treasury shares were acquired for cash at more than par value and then subsequently sold for cash at more than acquisition price. What is the effect of the purchase and sale of treasury, respectively on share premium?

a. Increase and Increase
b. Decrease and No effect
c. No effect and Increase
d. No effect and no effect

A

c. No effect and Increase

58
Q

How would a share split affect share premium and retained earnings, respectively?

a. Increase and No effect
b. No effect and No effect
c. No effect and Decrease
d. Increase and Decrease

A

b. No effect and No effect

59
Q

How would a share split affect asset shareholders’ equity, respectively?

a. Increase and Increase
b. No effect and No effect
c. No effect and Increase
d. Increase and No effect

A

b. No effect and No effect

Intermediate Accounting 2 (3 decks)

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