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WorksheetsQuiz 3 (IBT)
Total questions: 63
Worksheet time: 32mins
When shares with par value are sold, the excess of the proceeds over the par value is credited to
Share capital
Share premium
Retained earnings
Gain on issuance of shares
When shares without par value are sold, the excess proceeds
over stated value shall be credited to
Retained earnings
Share premium
Share capital
If shares are issued for a noncash consideration, the shares issued shall be measured by
Fair value of the shares
Par value of the shares
Fair value of the noncash consideration
Carrying amount of the noncash consideration
If shares are issued to extinguish a financial liability, what is the initial measurement of the shares issued?
Par value of the shares
Fair value of the shares
Fair value of liability extinguished
Book value of the shares
When shares are issued in payment for services, what is the least appropriate basis for recording the transaction?
Fair value of the services .
Par value of the shares
Fair value of the shares
Any of these provides an appropriate basis for recording the transaction
What is the meaning of net assets of a corporation?
Contributed capital
Shareholders' equity
Retained earnings
Legal capital
The two primary account classifications within shareholders' equity are
Preference shares and retained earnings
Par value of ordinary shares and retained earnings
Preference shares and ordinary shares
Contributed capital and retained earnings
Details of each class of share capital should be reported
On the face of the statement of financial position only.
In disclosure notes only.
On the face of the statement of financial position or in disclosure notes.
On the face of the statement of comprehensive income and in disclosure notes.
The corporate charter is known as
Articles of incorporation
Statement of organization
By-laws
Registration statement
Characteristics of the corporate form that have led to the growth of this form of business ownership include all of the following, except
Ease of raising capital
Low government regulation
Limited liability
Ease of ownership transfer
Outstanding ordinary shares are
Shares that are performing well on the Philippine Stock Exchange
Shares that have been authorized by the state for issue
Shares held in the corporate treasury
Shares in the hands of shareholders
Issued shares refer to the number of shares
Outstanding plus treasury shares
Shares issued for cash
In the hands of shareholders
That may be issued under state law
Authorized share capital refers to the total number of shares
Outstanding
Issued
Issued and outstanding
That can be issued
The share capital account is measured as
The shares outstanding multiplied by par value
The shares outstanding multiplied by market value
The shares issued multiplied by par value
The shares issued multiplied by book value
The par value of shares issued is normally recorded in
Additional paid in capital
Share capital
Retained earnings
Appropriated retained earnings
Total shareholders' equity represents
A claim against specific assets.
The maximum amount that can be borrowed.
A claim against the total assets of an entity.
Only the amount of retained earnings.
In accounting for shareholders' equity, the accountant is primarily concerned with which of the following?
Determining the total amount of shareholders' equity
Distinguishing between realized and unrealized revenue
Recording the source of each of the various elements of shareholders' equity
Making sure that the directors do not declare dividends in excess of retained earnings
The term residual owner means that ordinary shareholders
Are entitled to a dividend every year in which the entity earns an income.
Can negotiate individual contracts for the entity.
Bear the ultimate risks and uncertainties and receive the benefits of ownership.
Have the rights to specific assets of the entity.
Shares that have a fixed per-share amount printed on the share certificate are called
Stated value shares
Fixed value shares
Uniform value shares
Par value shares
The par value of an ordinary share represents
The liquidation value of the share.
The book value of the share.
The legal nominal value assigned to the share.
The amount received by the corporation when the share is originally issued.
Contributed capital does not include
Share premium on ordinary and preference shares
Preference share capital
Share premium from reissuance of treasury shares
Retained earnings
Discount on share capital
May be recorded as either an asset or an expense
May be offset against share premium on the same class
Should be closed to income summary account
None of the above may be done
Which is not one of the basic shareholders' rights?
The right to maintain one's proportional interest.
The right to participate in earnings.
The right to participate in the proceeds of the sale of corporate assets upon liquidation of the corporation.
The right to inspect the accounting records.
An ordinary shareholder does not possess which of the following?
The right to share in the earnings of the corporation.
The right to share proportionately in corporate assets in case of liquidation.
The right to direct ownership of the corporate assets.
The right to vote in the election of the board of directors.
The preemptive right of an ordinary shareholder is the right to
Share proportionately in corporate assets.
Share proportionately in any new issue of shares of the same class.
Exclude preference shareholders from voting rights.
Receive cash dividends annually.
Share premium is reported
As a reduction of shareholders' equity
As a noncurrent asset
As a noncurrent liability
As an increase in shareholders' equity
Share issue costs are
Not recorded separately
Recorded as an asset
Recorded as a liability
Amortized over time
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
Par value
Relative book value
Relative market value
The earnings per share
When shares traded on an active exchange are issued for an asset
No entry is recorded until restrictions are lifted.
An asset is recorded at the fair value of the shares.
An asset is recorded at the appraised value.
Share capital is increased by the appraised value of the asset.
When shares are issued in exchange for property, the best evidence of fair value might be any of the following, except
The fair value of the property received.
The selling price of the shares in a recent transaction.
The price of the shares quoted on the stock exchange.
The average book value of outstanding shares.
The dominant form of business organization is
Partnership
Corporation
Limited liability company
Proprietorship
Ordinary shareholders usually have all, except
To elect the board of directors
To share in the assets upon liquidation
To participate in the day-to-day operations
To share in the net income
When preference shares are retired by the issuer at a price below the original issue price, the transaction
Increases retained earnings
Increases net income for the year
Increases revenue for the year
Increases contributed capital of ordinary shareholders
When preference shares carry a redemption privilege, the shareholders may
Purchase new shares when available.
Exchange their preference shares for ordinary shares.
Surrender the preference shares for a specified amount of cash.
Purchase treasury shares.
An entity that issued shares of Class B should report the share capital
Among liabilities under all circumstances.
As equity unless the shares are mandatorily redeemable.
Among liabilities unless the shares are mandatorily redeemable.
As equity unless the shares are redeemable at the option of the issuer.
The issuance of preference shares a. b. c. d.
Increases preference shares outstanding
Has no effect on preference shares outstanding
Increases authorized preference share capital
Decreases authorized preference share capital
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
Accounted for as loss on exchange
Charged against share premium of ordinary shares
Charged to a discount on preference shares
Charged against retained earnings
When preference shares are called in by the issuer for less than original issue price, proper accounting for the redemption
Increases the treasury shares held by the entity
Increases the contributed capital of the ordinary shareholders
Increases reported income for the period
Increases the amount of dividends available to ordinary shareholders
Convertible preference shares
Are accounted for as financial liability
Include an option for the holder to convert preference shares into a fixed number ordinary shares.
Are compound financial instrument.
All of the choices are correct.
Dividend paid on redeemable preference share shall be accounted for as
Direct deduction from retained earnings
Interest expense as component of finance cost
Component of other comprehensive income
Deduction from reserves
The cost of treasury shares acquired for noncash consideration is usually measured by
Carrying amount of the noncash asset surrendered
Fair value of the treasury shares
Book value of the treasury shares
Fair value of the noncash asset surrendered
The total cost of treasury shares shall be reported as
Deduction from shareholders' equity
Financial asset
Deduction from retained earnings
Deduction from share premium
If treasury shares are reissued for noncash consideration, the proceeds shall be measured by
Fair value of the treasury shares
Fair value of the noncash consideration
Carrying amount of the treasury shares
Carrying amount of the noncash consideration
"Loss" from sale of treasury shares shall be charged to
Loss on sale of treasury shares
Retained earnings and then share premium from treasury shares
Share premium from treasury shares and then retained earnings
Share premium from original issuance and then retained earnings
Loss on retirement of treasury shares is debited to
Retained earnings
Share premium from treasury shares and then retained earnings
Share premium from treasury shares, share premium from original issuance and then retained earnings
Share premium from original issuance, share premium from treasury shares and then retained earnings
Gain on retirement of treasury shares shall credited to
Share premium
Retained earnings
Share capital
Income
Shares issued exceed shares outstanding as a result of
Declaration of share dividend
Declaration of share split
Purchase of treasury shares
Payment in full of subscribed shares
When treasury shares are sold at a price above cost
A gain is credited
A loss is reported
A revenue is credited
Contributed capital is increased
Which is not a method to account for treasury shares?
Cost method
Par value method
Retained earnings method
Constructive retirement method
Which is incorrect in relation to treasury shares?
Treasury shares shall be recorded at cost.
The total cost of treasury shares shall be deducted from shareholders' equity.
Treasury shares may be recognized as financial asset.
Gain on sale of treasury shares is not recognized as income.
Only a memorandum is made when an entity
Gives warrants to executives as compensation.
Includes warrants to make a security more attractive.
Entities issue rights to existing shareholders.
All of the choices are correct.
Which is issued to shareholders to acquire unissued shares within a specified time at a specified price?
Share option
Share warrant
Share subscription
Share appreciation right
An entity issued rights to the existing shareholders to purchase unissued ordinary shares at more than par value. Share premium would be recorded when the rights
Expire
Are exercised
Become exercisable
Are issued
Share warrants outstanding account shall be reported as
Liability
Reduction of share premium
Share capital
Share premium
Share split is issued primarily to
Increase the number of outstanding shares
Increase legal capital
Increase the number of authorized shares
Induce a decline in market value per share
When collectability is reasonably assured, the excess of the subscription price over the stated value of no par ordinary share subscribed shall be recorded as
No par ordinary share capital
Share premium when the subscription is recorded.
Share premium when the subscription is collected.
Share premium when the ordinary share is issued.
The purchase of treasury ordinary shares
Decreases authorized ordinary share capital
Has no effect on ordinary shares outstanding
Decreases outstanding ordinary shares
Decreases issued ordinary shares
When treasury shares are purchased for more than par value, what account or accounts shall be debited?
Treasury shares for the par value and share premium for the excess of purchase price over the par value.
Share premium for the purchase price.
Treasury shares for the purchase price.
Treasury shares for the par value and retained earnings for excess of the purchase price over the par value.
Which statement best describes the net effect on retained earnings of the purchase and subsequent sale of treasury shares?
Retained earnings may never be increased but sometimes decreased
Retained earnings sometimes may never be increased or decreased
Retained earnings account is always affected unless the sale price is exactly equal to cost
Retained earnings sometimes may be increased but never decreased
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?
Increase and Decrease
Decrease and No effect
Decrease and Increase
No effect and No effect
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?
Increase and Increase
No effect
No effect and and No effect
Decrease and No effect Increase
How would a share split affect share premium and retained earnings, respectively?
Increase and No effect
No effect and No effect Decrease
No effect and and Decrease
Increase
How would a share split affect asset and shareholders' equity, respectively? a. b. c.
Increase and Increase
No effect and No effect
No effect and Increase
Increase and No effect
