Question 1

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 made in a prior period, therefore it affects the beginning balance of Retained Earnings. This adjustment reflects the change in the financial statements due to the correction of an error that was not discovered until a subsequent period.

Question 2

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

Accepted Answer

Ordinary Share Dividends Distributable is reported as a liability in the equity section, not as share premium. Share premium represents the amount paid by investors in excess of the nominal value of the shares.

Question 3

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 4

The chief accounting officer in a company is known as the

Accepted Answer

The chief accounting officer in a company is responsible for managing the accounting department and ensuring accurate financial reporting. This role is typically known as the controller. The treasurer is responsible for managing the company's finances, while the vice-president and president are higher-level executives responsible for overall management and strategy of the company.

Question 5

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

Accepted Answer

The share capital category includes both preference and ordinary shares.

Question 6

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

Accepted Answer

A liquidating dividend is a dividend declared out of the company's share capital or share premium, typically paid when a company is in the process of winding up or distributing assets to shareholders.

Question 7

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

Accepted Answer

Reserves refer to profits that a company retains and sets aside, rather than distributing to shareholders as dividends. These can include various types of equity such as retained earnings, capital reserves, and revenue reserves.

Question 8

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 9

Under the corporate form of business organization

Accepted Answer

The corporation's life is stipulated in its charter, meaning that the corporation has a separate legal existence from its shareholders and can continue on even if shareholders come and go. A is incorrect because one of the benefits of the corporate form is limited liability for shareholders, meaning they are not personally liable for the debts of the corporation. B is incorrect because shareholders generally do not have the authority to bind the corporation unless specifically authorized to do so. D is incorrect because shareholders are generally free to sell their shares without the approval of other shareholders, unless there are specific restrictions in the corporate bylaws or articles of incorporation.

Question 10

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 11

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

Accepted Answer

According to data from the U.S. Census Bureau, the dominant form of business organization in the United States in terms of dollar sales volume, earnings, and employees is the corporation. Corporations typically have greater resources and access to capital than sole proprietorships or partnerships, which allows them to generate higher levels of revenue and employ more people.

Question 12

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

Accepted Answer

Ordinary Share Dividends Distributable is a subcategory of the equity section of the statement of financial position, representing the amount of dividends owed to shareholders that have been declared but not yet paid out.

Question 13

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

The cost method involves treating treasury shares as a contra-equity account that is debited when the shares are bought and credited when they are sold, at the price paid to reacquire the shares.

Question 14

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

The equity section in the statement of financial position will list the various equity accounts, such as common stock, retained earnings, and additional paid-in capital. It will not typically list the names of individuals eligible to receive dividends on the date of record.

Question 15

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

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, according to the International Financial Reporting Standards (IFRS).

Question 16

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 17

Shareholders of a corporation directly elect

Accepted Answer

Shareholders of a corporation elect the board of directors, who are responsible for making major decisions on behalf of the company, including selecting the president and other top executives. Shareholders do not directly elect the president or employees of the corporation.

Question 18

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

Accepted Answer

Book value per ordinary share is calculated by taking the total shareholder equity and dividing it by the number of outstanding shares. Market value per share is the price at which the stock is currently trading in the market. These two values can be different due to factors such as market sentiment, company earnings, and future growth potential.

Question 19

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, also known as a statement of retained earnings, is a financial statement that shows how the equity section of a company's balance sheet has changed over a period of time, usually a year. It shows the beginning balance of each equity account, any additions or deductions during the year, and the ending balance of each account. It also shows the total change in equity for the year.

Question 20

Which one of the following is a privately held corporation?

Accepted Answer

Cargill Inc. is a privately held corporation, meaning its shares are not publicly traded on the stock market and it is owned by private shareholders. The other options listed, Intel, General Electric, and Caterpillar Inc., are all publicly traded companies.

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