Question 1

Which of the following is NOT a characteristic of a corporation?

Accepted Answer

Unlimited liability for owners

Question 2

A company issues 10,000 common shares at $8 per share. What is the correct journal entry to record this transaction?

Accepted Answer

Debit Cash $$80,000; Credit Common Shares 80$$,000

Question 3

Which of the following best describes the effect of a stock split?

Accepted Answer

Increases the number of shares and decreases the market price per share

Question 4

A corporation declares a cash dividend of $2 per share on 50,000 shares. What is the total amount of dividends declared?

Accepted Answer

$100,000

Question 5

Which of the following is a reason a corporation might repurchase its own shares?

Accepted Answer

To distribute cash to shareholders

Question 6

Preferred shares often have which of the following features?

Accepted Answer

Dividend preference over common shares

Question 7

A company declares a 10% stock dividend when there are 40,000 shares outstanding and the market price is $20 per share. What is the total value transferred from retained earnings?

Accepted Answer

$80,000

Question 8

Which of the following is TRUE regarding the presentation of shareholders’ equity under IFRS?

Accepted Answer

A statement of changes in equity is required

Question 9

Calculate the payout ratio given the following: Cash dividends declared on common shares = $$50,000; Net income = 200$$,000.

Accepted Answer

25\%

Question 10

Which of the following best describes the effect of a cash dividend on the accounting equation?

Accepted Answer

Decreases assets and decreases retained earnings

Question 11

A company has net income of $$120,000, preferred dividends of 20$$,000, and 50,000 weighted average common shares outstanding. What is the basic earnings per share (EPS)?

Accepted Answer

$2.40

Question 12

Which of the following is NOT a step in the repurchase of common shares?

Accepted Answer

Increase the number of shares outstanding

Question 13

A company has the following: Net income = $$300,000; Preferred dividends = 30$$,000; Average common shareholders’ equity = $1,350,000. What is the return on common shareholders’ equity?

Accepted Answer

$0.22

Question 14

Which of the following statements about stock dividends is TRUE?

Accepted Answer

They increase the number of shares outstanding

Question 15

If a company repurchases its shares above average cost, which accounts are affected?

Accepted Answer

Share capital, contributed surplus, and retained earnings

Question 16

Which of the following is a feature of cumulative preferred shares?

Accepted Answer

Dividends in arrears must be paid before common dividends

Question 17

A company has 100,000 common shares outstanding. It declares a 2-for-1 stock split. How many shares will be outstanding after the split?

Accepted Answer

200,000

Question 18

Which of the following is included in accumulated other comprehensive income under IFRS?

Accepted Answer

Unrealized gains and losses on revaluation of property, plant, and equipment

Question 19

Which of the following is TRUE regarding the record date for dividends?

Accepted Answer

It is the date when ownership of shares is determined for dividend purposes

Question 20

A company has 60,000 common shares and 10,000 preferred shares outstanding. If the company declares a $1.50 per share cash dividend on preferred shares, what is the total preferred dividend?

Accepted Answer

$15,000

Reporting and Analyzing Shareholders’ Equity (Chapter 11) – Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards