WorksheetsCORPORATION
Total questions: 30
Worksheet time: 16mins
The residual interest in a corporation belongs to the
management
creditors
preferred shareholders
ordinary stockholders
The pre-emptive right enables a shareholder to
share proportionately in any new issues of stock of the same class
receive cash dividends before other classes of stock without the pre-emptive right.
sell capital stock back to the corporation at the option of the shareholder.
receive the same amount of dividends on a percentage basis as the preferred shareholders
Total shareholders' equity represents
a claim to specific assets contributed by the owners.
the maximum amount that can be borrowed by the enterprise.
a claim against a portion of the total assets of an enterprise.
only the amount of earnings that have been retained in the business.
Creditors have no right over the personal assets of the investor(s) of a/an
sole proprietorship
general partnership
limited partnership
corporation
Primary source(s) of shareholders' equity is
income retained by the corporation.
appropriated retained earnings.
contributions by stockholders.
PICK 2 ANS
Shareholders' equity is generally classified into two major categories:
contributed capital and appropriated capital.
appropriated capital and retained earnings.
retained earnings and unappropriated capital.
contributed capital and earned capital.
The investor receives a proportionate share in the profits earned by the business except for the
proprietor
capitalist partner
industrial partner
shareholder
When a corporation issues its capital stock in payment for services, the best appropriate basis for recording the transaction is the
market value of the services received.
par value of the shares issued.
market value of the shares issued if market value of services received is not known.
Any of these provides an appropriate basis for recording the transaction.
The amount of equity distributed to shareholders out of its profitable operations is called
share capital
subscribed capital
retained earnings
dividends
When treasury share is purchased for more than the par value of the stock and the cost method is used to account for treasury share, what account(s) should be debited?
Treasury share for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value.
Paid-in capital in excess of par for the purchase price.
Treasury share for the purchase price.
Treasury share for the par value and retained earnings for the excess of the purchase price over the par
Two financial requirements that the Board of Directors must consider when declaring cash dividends are
sufficient retained earnings and no treasury shares
sufficient cash and sufficient retained earnings
sufficient cash and sufficient additional paid in capital
sufficient retained earnings and sufficient premium on stock
Cash dividends are paid on the basis of the number of shares
authorized.
outstanding.
issued.
outstanding less the number of treasury shares.
Fame Corporation owns 4,000,000 shares of stock in BPI Corporation. On December 31, 2013, Fame distributed these shares of stock as a dividend to its stockholders. This is an example of a
property dividend
liquidating dividend
stock dividend
cash dividend
A dividend which is a return to stockholders of a portion of their original investments is a
scrip dividend.
liability dividend.
property dividend.
liquidating dividend.
If management wishes to "capitalize" part of the earnings, it may issue a
cash dividend.
property dividend.
stock dividend.
liquidating dividend.
Which dividends do not reduce shareholders' equity?
Cash dividends
Property dividends
Stock dividends
Liquidating dividends
The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding
increases ordinary shares outstanding and increases total shareholders' equity
decreases retained earnings but does not change total shareholders' equity
may increase or decrease paid-in capital in excess of par but does not change total shareholders' equity.
increases retained earnings as well as total shareholders' equity.
At the date of declaration of a small ordinary share dividend, the entry should not include
credit to Ordinary Share Dividend Payable.
credit to Paid-in Capital in Excess of Par.
a debit to Retained Earnings.
credit to retained earnings
The balance in Ordinary Share Dividend Payable should be reported as a(n)
reduction from ordinary shares issued.
addition to ordinary share capital.
current liability.
contra current asset.
The rate of return on common stock equity is calculated by dividing
net income less preferred dividends by average ordinary shareholders’ equity
net income by average ordinary shareholders’ equity, if there are no preference shares.
net income less preferred dividends by ending ordinary shareholders’ equity.
2
Dividends are not paid on
noncumulative preferred stock.
treasury shares.
nonparticipating preferred stock.
Dividends are paid on all of these.
Noncumulative preferred dividends in arrears
are not paid or disclosed.
must be paid before any other cash dividends can be distributed.
are disclosed as a liability until paid.
are paid to preferred stockholders if sufficient funds remain after payment of the current preferred dividend.
How should a "gain" from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions?
As ordinary earnings shown on the income statement.
As paid-in capital from treasury stock transactions.
As an increase in the amount shown for common stock.
As an extraordinary item shown on the income statement.
Which of the following best describes a possible effect of treasury stock transaction by a corporation?
May increase but not decrease retained earnings.
May increase net income if the cost method is used.
May decrease but not increase retained earnings.
May decrease but not increase net income.
The corporation may bids and pay for the delinquent subscription if there are no bidders. The entry will require a debit to
treasury shares at the delinquent amount.
subscribed share capital at the delinquent subscription price.
paid in capital at the premium price.
debited to share capital at the par value.
At the date of the financial statements, ordinary shares issued would exceed outstanding common stock shares because of the
subscription price being higher than the par value
declaration of a stock dividend.
purchase of treasury shares.
payment in full of subscribed stock.
If Victory Corporation issues 2,000 ordinary shares of P5 par value stock for P140,000,
Common Stock will be credited for P140,000.
Paid-In Capital in Excess of Par Value will be credited for P10,000
Paid-In Capital in Excess of Par Value will be credited for P130,000.
Cash will be debited for P130,000
Which of the following represents the largest number of ordinary shares?
Treasury shares
Issued shares
Outstanding shares
Authorized shares
When preferred stock is cumulative, preferred dividends not declared in a period are
considered a liability.
called dividends in arrears.
distributions of earnings.
never paid.
Which of the following is not a right or preference associated with preferred stock?
The right to vote
First claim to dividends
Preference to corporate assets in case of liquidation
To receive dividends in arrears before common stockholders receive dividends
