Finals_Par Cor

1^ST STATEMENT: The authorized shares represent the maximum number of shares that a corporation may issue.

2^ND STATEMENT: It is legal to issue share capital at par or more than par but not less than par value.

3^RD STATEMENT: A corporation, like a partnership, may be formed by the mere agreement of five or more persons.

• True; True; True

• True, False; False

• False; False; True

• False; True; False

1^ST STATEMENT: Appropriation of Retained Earnings reduces the total amount of Retained Earnings.

2^ND STATEMENT: Unappropriated retained earnings represents amount of cash available for dividend distribution.

3^RD STATEMENT: A cumulative preference share capital is entitled to payment of dividends in arrears.

• True; True; True

• True, False; False

• False; False; True

• False; True; False

1^ST STATEMENT: Treasury shares may be acquired through donations by shareholders.

2^ND STATEMENT: Convertible preference shares can be converted into ordinary shares at the option of the holder.

3^RD STATEMENT: When the market price of the shares is high and the corporation feels that a lower price will result in a wider distribution of ownership, it may authorize the replacement of outstanding shares by a larger number of shares.

• True; True; True

• True, False; False

• False; False; True

• False; True; False

1^ST STATEMENT: Financial statements are structured representation of the financial position and financial performance of an entity.

2^ND STATEMENT: Financial statements are the end product of the accounting process.

3^RD STATEMENT: Financial statements show the results of the management’s stewardship of the resources entrusted to it.

• True; True; True

• True, False; False

• False; False; True

• False; True; False

1^ST STATEMENT: Total manufacturing cost and cost of goods manufactured are one and the same thing.

2^ND STATEMENT: Finished goods inventory is an asset, but inventories of materials and work in process are not considered assets until production is completed.

3^RD STATEMENT: The cost of indirect materials used in production is added to the manufacturing overhead account rather than added directly to work in process.

• True; True; True

• True, False; False

• False; False; True

• False; True; False

Direct material costs are:

Conversion Cost Prime Cost

• No No

• No Yes

• Yes Yes

• Yes No

How would a share split affect the amount of each of the following?

Share Capital/Shareholders Equity/Retained Earnings

• No Effect No Effect No Effect

• No Effect No Effect Increase

• Increase Increase No Effect

• Decrease Decrease Decrease

The type of dividend that does not affect total assets and total shareholder’s equity is:

• Share Capital Dividend

• Property Dividend

• Cash Dividend

• Scrip Dividend

The date when the board of directors announce the intention to pay dividends is know as:

• Dividend date

• Declaration date

• Record date

• Payment date

A non-cash asset received in exchange for share capital is recorded at:

• Its book value

• Its fair market value

• The lower of its book value or fair market value

• The higher of its book value or fair market value