Question 1

The share capital category on the statement of financial position includes both preference and ordinary shares.

Accepted Answer

The share capital category includes both types of shares.

Question 2

A detailed equity section in the statement of financial position will list the names of individuals who are eligible to receive dividends on the date of record.

Accepted Answer

A detailed equity section will list the various components of equity, such as share capital, reserves, and retained earnings. It will not list the names of individuals who are eligible to receive dividends, as this information is not typically included in the statement of financial position. Instead, the company will announce a date of record for dividend eligibility and pay dividends to shareholders accordingly.

Question 3

Ordinary Share Dividends Distributable is reported as share premium in the equity section.

Accepted Answer

Ordinary Share Dividends Distributable is not reported as share premium in the equity section. It is reported as a liability under current liabilities until the dividends are actually paid out to the shareholders.

Question 4

Under the corporate form of business organization

Accepted Answer

The corporation's life is stipulated in its charter. This means that the duration of the corporation is predetermined and outlined in the corporation's founding documents. This is one of the main features of the corporate form of business organization. A is incorrect because shareholders are not personally liable for the debts of the corporation. B is incorrect because shareholders' acts cannot bind the corporation unless they have been authorized by the corporation or appointed as agents of the corporation. D is incorrect because shareholders generally have the right to sell their shares without obtaining the approval of other shareholders.

Question 5

Return on ordinary shareholders' equity is computed by dividing net income by ending ordinary shareholders' equity.

Accepted Answer

The answer of Return on ordinary shareholders' equity is computed...

Question 6

Organization costs are capitalized by debiting an intangible asset entitled Organization Costs.

Accepted Answer

The answer of Organization costs are capitalized by debiting an...

Question 7

A prior period adjustment is reported as an adjustment of the beginning balance of Retained Earnings.

Accepted Answer

A prior period adjustment is a correction of an error in the financial statements of a prior period. The adjustment is made by restating the beginning balance of Retained Earnings for the period in question, which is then reflected in the current period's financial statements.

Question 8

The chief accounting officer in a company is known as the

Accepted Answer

The chief accounting officer in a company is known as the controller.

Question 9

Which one of the following is a privately held corporation?

Accepted Answer

Cargill Inc. is a privately held corporation, meaning it is not publicly traded on a stock exchange and is owned by a small group of investors rather than a wide range of shareholders. Intel, General Electric, and Caterpillar Inc. are all publicly traded companies.

Question 10

A statement of changes in equity shows the changes in each equity account and in total that have occurred during the year.

Accepted Answer

A statement of changes in equity is a financial statement that shows the changes in each equity account and in total that have occurred during the year. It is also known as a statement of retained earnings or statement of shareholders' equity.

Question 11

A book value per ordinary share is the same amount as the market value per share.

Accepted Answer

The book value per ordinary share is a value that represents the net assets of a company divided by the number of ordinary shares in issue. Market value per share, on the other hand, is the current price at which a share is trading in the stock market. These two values can be different, with market value per share being influenced by factors such as supply and demand, company performance, and overall market conditions.

Question 12

A dividend declared out of share capital or share premium is termed a liquidating dividend.

Accepted Answer

A liquidating dividend is a distribution of the company's assets to shareholders after all liabilities have been paid off. It is often financed through the use of share capital or share premium rather than the company's earnings.

Question 13

The term "reserves" is used for forms of equity other than that contributed by shareholders.

Accepted Answer

Reserves refer to forms of equity such as retained earnings, surplus funds, and other sources of profit that are not contributed by shareholders.

Question 14

Ordinary Share Dividends Distributable is shown in the equity section of the statement of financial position.

Accepted Answer

Ordinary Share Dividends Distributable is a part of equity, specifically the current liabilities within equity, and is therefore shown in the equity section of the statement of financial position.

Question 15

Restricted retained earnings are available for preference share dividends but unavailable for ordinary share dividends.

Accepted Answer

The answer of Restricted retained earnings are available for preference...

Question 16

Shareholders of a corporation directly elect

Accepted Answer

Shareholders of a corporation directly elect the board of directors, who are responsible for setting the company's direction, making major decisions, and appointing top executives such as the president and treasurer. Shareholders do not directly elect the president or treasurer. They may indirectly influence their selection by electing board members who support specific candidates for these positions. Shareholders do not elect all employees of the corporation.

Question 17

The cost of a noncash asset acquired in exchange for ordinary shares should be either the fair value of the consideration given up, or the fair value of the consideration received, whichever is more clearly determinable.

Accepted Answer

This is in accordance with International Accounting Standard (IAS) 38: Intangible Assets.

Question 18

The cash proceeds from issuing par value shares may be equal to or greater than, but not less than par value.

Accepted Answer

The answer of The cash proceeds from issuing par value...

Question 19

Under the cost method, Treasury Shares is debited at the price paid to reacquire the shares, and the same amount is credited to Treasury Shares when the shares are sold.

Accepted Answer

This statement is true. Under the cost method, the Treasury Shares account is debited at the price paid to repurchase the shares, and then the same amount is credited to Treasury Shares when the shares are sold.

Question 20

The dominant form of business organization in the United States in terms of dollar sales volume, earnings, and employees is

Accepted Answer

According to most recent data, corporations have the highest dollar sales volume, earnings, and employees compared to other forms of business organization. Therefore, the dominant form of business organization in the United States is the corporation.

Quiz 11: Corporations: Organization, Share Transactions, Dividends,and Retained Earnings