Q: Which formula correctly represents the calculation of comprehensive income under IFRS?

$$\text{Comprehensive Income} = \text{Net Income} + \text{Other Comprehensive Income}$$

Q: A company has 100,000 shares outstanding and declares a 10% stock dividend when the market price is $15. What is the value of the stock dividend?

$$100,000 \times 10\% \times \15$$ = \$$150,000$$

Q: Which formula correctly calculates the Price-to-Earnings (P/E) ratio?

$$\text{P/E} = \frac{\text{Market price per share}}{\text{Earnings per share}}$$

Q: Which formula is used to calculate the dividend payout ratio?

$$\text{Dividend payout ratio} = \frac{\text{Dividends per share}}{\text{Earnings per share}}$$

Q: Which formula is used to calculate Return on Shareholders’ Equity (ROE)?

$$\text{ROE} = \frac{\text{Net income} - \text{Preferred dividends}}{\text{Average common shareholders’ equity}}$$

Question 1

Which formula correctly represents the calculation of comprehensive income under IFRS?

Accepted Answer

$$	ext{Comprehensive Income} = 	ext{Net Income} + 	ext{Other Comprehensive Income}$$

Question 2

A company has assets of $$1,000,000 and liabilities of 700$$,000. What is the shareholders’ equity?

Accepted Answer

$$\300$$,000$

Question 3

Which of the following is NOT a component of shareholders’ equity under the acronym 'CCRA'?

Accepted Answer

Dividends Payable

Question 4

If a company repurchases shares for more than the average price per share originally issued, which account is reduced after contributed surplus is depleted?

Accepted Answer

Retained Earnings

Question 5

Which journal entry is correct for declaring a cash dividend?

Accepted Answer

DR Retained Earnings, CR Dividends Payable

Question 6

A company has 100,000 shares outstanding and declares a 10% stock dividend when the market price is $15. What is the value of the stock dividend?

Accepted Answer

$$100,000 	imes 10\% 	imes \15$$ = \$$150,000$$

Question 7

Which of the following statements about stock splits is TRUE?

Accepted Answer

Stock splits increase the number of shares outstanding but do not change shareholders’ equity.

Question 8

What is the effect of a cash dividend on retained earnings and total shareholders’ equity?

Accepted Answer

Retained earnings decrease; total shareholders’ equity decreases.

Question 9

Which formula correctly calculates the Price-to-Earnings (P/E) ratio?

Accepted Answer

$$	ext{P/E} = \frac{	ext{Market price per share}}{	ext{Earnings per share}}$$

Question 10

A company has 500,000 shares outstanding and $$2,500,000 in share capital. If it repurchases 20,000 shares at 4 $$per share, what is the correct journal entry?

Accepted Answer

DR Common Shares $$100,000; CR Cash 80$$,000; CR Contributed Surplus $20,000

Question 11

Which formula is used to calculate the dividend payout ratio?

Accepted Answer

$$	ext{Dividend payout ratio} = \frac{	ext{Dividends per share}}{	ext{Earnings per share}}$$

Question 12

Which account is credited when a company records compensation expense for employee stock options?

Accepted Answer

Contributed Surplus

Question 13

If a company issues 50,000 shares at $1 per share, what is the correct journal entry?

Accepted Answer

DR Cash $$50,000; CR Common Shares 50$$,000

Question 14

Which formula is used to calculate Return on Shareholders’ Equity (ROE)?

Accepted Answer

$$	ext{ROE} = \frac{	ext{Net income} - 	ext{Preferred dividends}}{	ext{Average common shareholders’ equity}}$$

Question 15

Which of the following is TRUE regarding treasury shares?

Accepted Answer

Treasury shares are issued but not outstanding.

Question 16

A company declares a 6% stock dividend on 20,000 shares with a fair market value of $10 per share. What is the correct journal entry?

Accepted Answer

DR Retained Earnings $$12,000; CR Common Shares 12$$,000

Question 17

Which of the following is NOT an effect of a stock split?

Accepted Answer

Increase in total shareholders’ equity

Question 18

Which formula is used to calculate dividend yield?

Accepted Answer

$$	ext{Dividend yield} = \frac{	ext{Dividends per share}}{	ext{Price per share}}$$

Shareholders’ Equity: Structure, Transactions, and Analysis

Study Guide - Practice Questions

Study Guide - Flashcards