Final Exams

True or False
1. When no-par ordinary shares without a stated value is issued for cash, the Ordinary
Shares account is credited for an amount equal to the cash proceeds.
2. The sale of shares in a corporation by one shareholder to another affects the total capital
of the corporation.
3. When ordinary shares are sold for a price higher than par value, the ordinary shares
account is credited only for the par value of the shares sold.
4. In reference to the previous question, any amount received in excess of the par value of
the ordinary shares sold is recorded as a credit to the retained earning account.
5. When ordinary shares with a par value are sold for a price that exceeds par value, the
Ordinary shares sild is recorded as a credit to the retained earnings account.
6. Ordinary shares may be issued at a price lower than its par value.
7. When treasury stock is sold at a price below its cost, the entry to record the sale has the
effect of reducing the total shareholder’s equity.
8. Treasury stock usually is recorded at par value when purchased.
9. When ordinary shares with par value are sold, the proceeds should be credited to the
ordinary shares account to the extent of the par value of the shares.
10. Preference share is considered the residual equity of a corporation.
11. The number of authorized shares should always equal or exceed the number of
outstanding shares.
12. Treasury stocks are part of the outstanding share capital of a corporation.
13. Assets received from shareholders as donation should be recorded at the fair market value
of the items received, with the credit going to share premium.
14. The death of shareholder results in the dissolution of the corporation.
15. Corporation are subject to less government control and regulation than are other forms of
business.
16. A corporation is a separate entity for legal purposes.
17. The interest or right of the owner in the management of the corporation, in its surplus
profits, and upon dissolution, in the balance of its assets after the payment of debts is
share of stock.
18. Retained earnings is a fund of cash accumulated from profitable operations of the
business.
19. When no-par ordinary shares have a stated value, the stated value of the shares issued
normally is considered the legal capital of the corporation.
20. The entire consideration received by the corporation for its no-par value shares shall be
treated as capital and shall not be available for distribution as dividends.
Multiple Choice
1. Treasury stock is considered to be
a. Authorized and issued shares
b. Issued and outstanding shares
 c. Authorized and unissued shares
d. Unissued and outstanding shares
2. An advantage of a partnership is
a. Limited Liability
b. Ability to raise capital
c. Ease of formation
d. Transfer of ownership
3. If a partner in a partnership dies,
a. Each remaining partner receives an equal share of the deceased partner’s
ownership of the business.
b. The partnership is dissolved
c. The partner’s spouse takes the deceased partner’s place.
d. A new partner is added to the partnership
4. An advantage of a corporation
a. Ease of formation
b. Limited liability
c. Regulation
d. Double taxation
5. If a significant amount of capital is needed to start a business, how should the business be
organized?
a. Corporation
b. General Partnership
c. Limited Liability Partnership
d. Sole Proprietorship
6. On the balance sheet, a corporation must disclosed all of the following except the number
of shares
a. Authorized.
b. Issued.
c. Unissued
d. Outstanding
7. Authorized shares are the
a. Number of shares that have been distributed to shareholders
b. Total number of shares that can be issued by the corporation at any time.
c. Number of shares that are owned by shareholders at the balance sheet date.
d. Number of shares the corporation has repurchased.
8. Issued shares are the
a. Number of shares that have been distributed to shareholders
b. Total number of shares that can be issued by the corporation at any time.
c. Number of shares that are owned by shareholders at the balance sheet date.
d. Number of shares the corporation has repurchased.
9. Outstanding shares are the
a. Number of shares that have been distributed to shareholders
b. Total number of shares that can be issued by the corporation at any time.
 c. Number of shares that are owned by shareholders at the balance sheet date.
d. Number of shares the corporation has repurchased.
10. Treasury shares are the
a. Number of shares that have been distributed to shareholders
b. Total number of shares that can be issued by the corporation at any time.
c. Number of shares that are owned by shareholders at the balance sheet date.
d. Number of shares the corporation has repurchased.
11. The difference between issued shares and outstanding shares of stock is
a. Authorized stock
b. Common stock
c. Preferred stock
d. Treasury stock
12. On a statement of financial position, treasury stock is shown as a(n):
a. Asset
b. Liability
c. Deduction from ordinary shares account
d. Deduction from total shareholder’s equity
13. Which of the following is a characteristic of ordinary shares?
a. Voting rights
b. Guaranteed dividends
c. Maturing date
d. Receives dividends before preference shareholders
14. Ordinary shareholders usually have all of the following rights except to
a. Vote to elect the board of directors
b. Share in the assets in a profitable liquidation
c. Participate in day-to-day operation of the entity
d. Received their proportional share of dividends, if dividends are declared.
15. Which of the following is a characteristic of preference shares?
a. Voting rights
b. Guaranteed dividends
c. Maturing date
d. Receives dividends before ordinary shareholders
16. Preference shares has preference over ordinary shares relative to
a. Dividends and voting rights
b. Dividends and assets at liquidation
c. Voting rights and assets at liquidation
d. Dividends and maturity date
17. ABS Corp. issued 10,000 shares of its ₱1 par value ordinary shares for a building. The
building has a fair value of ₱500,000. ABS’s ordinary shares is currently selling for ₱45
per share. ABS Corp. should record the building at
a. 10,000
b. 440,000
c. 450,000
 d. 500,000
18. A corporation might repurchase its own stock for all of the following reasons except to
a. Vote for the board of directors
b. Use for employee compensation
c. Improve financial ratios
d. Deter a takeover attempt
19. If a corporation reissued at ₱200 per share 100 shares of treasury stock that it had
previously acquired for ₱280 per share and there wasn’t any Share Premium-Treasury, it
would debit
a. Loss on Sale of Treasury Stocks for ₱8,000
b. Share Premium-Ordinary for ₱8,000
c. Retained Earnings for ₱8,000
d. Treasury Stock for ₱8,000
20. CBN Inc. has issued 200,000 shares at ₱1 par value ordinary shares at ₱15. If it
repurchases 5,000 shares during 2014 at ₱20
a. Profit would decrease by ₱25,000
b. Profit would decrease by ₱100,000
c. Shareholders’ equity would decrease by ₱25,000
d. Shareholders’ equity would decrease by ₱100,000