Question 1

What type of shares would an investor purchase if he or she were primarily interested in steady dividends?

Accepted Answer

The answer of What type of shares would an investor...

Question 2

The president of the corporation can declare dividends.

Accepted Answer

The board of directors of a corporation is typically responsible for declaring dividends, not the president. The president may recommend or advise on dividends, but the final decision rests with the board.

Question 3

What type of shares would an investor purchase if he or she were primarily interested in a safe investment?

Accepted Answer

The answer of What type of shares would an investor...

Question 4

When 1,000 common shares are sold at $3.75 per share,Share Capital will:

Accepted Answer

When 1,000 common shares are sold at $3.75 per share, the total amount of Share Capital will increase by 1,000 x $3.75 = $3,750. Therefore, the correct answer is C, increase $3,750.

Question 5

Name several accounts that would appear in the shareholders' equity section of a balance sheet.

Accepted Answer

The answer of Name several accounts that would appear in...

Question 6

What effect does an investment of cash in a corporation have on the corporation's balance sheet?

Accepted Answer

When cash is invested in a corporation, the corporation's cash account increases, which increases assets on the balance sheet. At the same time, there is no increase in liabilities, so the total shareholders' equity also increases. This means that the investment increases assets and increases shareholders' equity.

Question 7

Quo Corporation issues 100 common shares for $12 per share.This transaction will include a:

Accepted Answer

The issuance of common shares results in an increase in the company's equity. Therefore, the best choice is to credit the Common Shares account for $1,200 (the total amount received from issuing 100 shares at $12 each).

Question 8

The issuance of preferred shares requires a:

Accepted Answer

The issuance of preferred shares results in an increase in the Share Capital, Preferred account, which is a part of the equity section of the balance sheet. Therefore, the correct answer is a credit to Share Capital, Preferred, which is only available in option D.

Question 9

Explain the fundamental difference between retained earnings and share capital.

Accepted Answer

The answer of Explain the fundamental difference between retained earnings...

Question 10

When shares are issued in exchange for a piece of equipment,the transaction is valued at the fair value of the equipment received.

Accepted Answer

According to accounting principles, when shares are issued in exchange for a piece of equipment, the transaction is valued at the fair value of the equipment received. This is known as a non-monetary transaction and is accounted for based on the fair value of the assets exchanged.

Question 11

Blu corporation issued 1,000 common shares in exchange for a new commercial band saw.At the time of this transaction the shares were trading at $10 and the fair value of the saw was at $12,000.This transaction would be recorded at $10,000.

Accepted Answer

The transaction would be recorded at the fair value, which is $12,000, not $10,000.

Question 12

What type of shares would an investor purchase if he or she were primarily interested in increasing dividends?

Accepted Answer

The answer of What type of shares would an investor...

Question 13

Suppose 100 common shares are issued for $12.50 per share.The entry to record this issuance includes a:

Accepted Answer

The entry to record the issuance of 100 common shares for $12.50 per share would be:

Debit    Cash                      $1,250
Credit  Common Shares     $1,250

There would be no impact on Retained Earnings, Contributed Surplus, or Preferred Shares.

Question 14

Assets received in exchange for the issuance of stock should be recorded at:

Accepted Answer

Assets received in exchange for the issuance of stock should be recorded at fair market value as determined by a good-faith estimate from independent appraisers. This approach ensures that the transaction is recorded at a value that represents the most accurate estimate of the value of the assets at the time of the transaction. Historical cost and book value prior to the issuance may not reflect the current value of the assets, while using accumulated amortization taken to date may not be appropriate for assets that have not yet been fully depreciated.

Question 15

The entry to record the issuance of 12,500 common shares at $2.50 per share includes a:

Accepted Answer

When common shares are issued, the account Common Shares is credited for the total value of shares issued, which in this case is $31,250 (12,500 x $2.50). There is no impact on Retained Earnings or Contributed Surplus, as these accounts are only impacted by transactions related to the company's earnings or past transactions with shareholders, respectively.

Question 16

When shares are issued,their stated value is set by the board of directors.

Accepted Answer

The board of directors is responsible for setting the stated value of shares when they are issued, which is often used for accounting purposes.

Question 17

List several characteristics of a corporation.Indicate,wherever appropriate,if the characteristic is an advantage or a disadvantage of the corporate form of business.

Accepted Answer

The answer of List several characteristics of a corporation.Indicate,wherever appropriate,if...

Question 18

Assets other than cash should be recorded at their current fair market values when received from the issuance of shares.

Accepted Answer

According to generally accepted accounting principles (GAAP), assets received in exchange for the issuance of shares should be recorded at their fair market value at the date of the transaction. This is to ensure that the financial statements reflect the true value of the assets and the transaction.

Question 19

The issuance of common shares requires a:

Accepted Answer

Issuing common shares increases the equity of a company, which requires a credit to the Common Shares account.

Question 20

The entry to record the sale of 100 shares for $2,500 would include a debit to Share Capital of $2,500.

Accepted Answer

The entry to record the sale of shares typically includes a debit to Cash (or Bank) for the amount received ($2,500 in this case) and a credit to Share Capital for the par value of the shares sold. Any amount received over the par value is credited to Additional Paid-In Capital or Share Premium, not debited to Share Capital.

Quiz 9: Shareholders Equity

What type of shares would an investor purchase if he or she were primarily interested in steady dividends?

The president of the corporation can declare dividends.

What type of shares would an investor purchase if he or she were primarily interested in a safe investment?

When 1,000 common shares are sold at $3.75 per share,Share Capital will:

Name several accounts that would appear in the shareholders' equity section of a balance sheet.

What effect does an investment of cash in a corporation have on the corporation's balance sheet?

Quo Corporation issues 100 common shares for $12 per share.This transaction will include a:

The issuance of preferred shares requires a:

Explain the fundamental difference between retained earnings and share capital.

When shares are issued in exchange for a piece of equipment,the transaction is valued at the fair value of the equipment received.

Blu corporation issued 1,000 common shares in exchange for a new commercial band saw.At the time of this transaction the shares were trading at $10 and the fair value of the saw was at $12,000.This transaction would be recorded at $10,000.

What type of shares would an investor purchase if he or she were primarily interested in increasing dividends?

Suppose 100 common shares are issued for $12.50 per share.The entry to record this issuance includes a:

Assets received in exchange for the issuance of stock should be recorded at:

The entry to record the issuance of 12,500 common shares at $2.50 per share includes a:

When shares are issued,their stated value is set by the board of directors.

List several characteristics of a corporation.Indicate,wherever appropriate,if the characteristic is an advantage or a disadvantage of the corporate form of business.

Assets other than cash should be recorded at their current fair market values when received from the issuance of shares.

The issuance of common shares requires a:

The entry to record the sale of 100 shares for $2,500 would include a debit to Share Capital of $2,500.