True or False (Review Materials) Part 5

Question 1

Treasury shares are entitled to receive dividends. True or False?

Answer 1

False. Treasury shares are not outstanding shares.

Question 2

Accumulated Profits-Free represents the portion that is free so it can be declared as dividends to
shareholders. True or False?

Answer 2

True

Question 3

When the dividends are paid, the entry is debit Dividends Payable and credit Accumulated Profits-Free. True or False?

Answer 3

False. Credit to Cash

Question 4

Property dividends are the distribution of earnings of the entity to the shareholders in the form of non-
cash assets. True or False?

Answer 4

True

Question 5

If the share dividend is less than 20%, the amount charged to Accumulated Profits is equal to the par
value of the shares. True or False?

Answer 5

False. Fair value.

Question 6

If 10% share dividends are declared, it simply means a shareholder shall receive 1 share for every 10
shares held. True or False?

Answer 6

True

Question 7

In the case of share capital dividend, whether considered small or large, there is no change in the three
basic accounting elements. True or False?

Answer 7

True

Question 8

A cumulative preference share is one that is entitled to any dividends accumulated per year until paid. True or False?

Answer 8

True

Question 9

If the preference share is non-cumulative and participating, before computing the balance for
participation, the ordinary shareholders will receive the basic rate first. True or False?

Answer 9

True

Question 10

The corporation is allowed to declare dividends to the shareholders out of its Appropriated Accumulated
Profits. True or False?

Answer 10

False. Appropriated Accumulated Profits are set aside for specific purposes.