The issuer of an ordinary share dividend to ordinary shareholders should transfer from retained earnings to contributed capital an amount equal to the a. fair value of the shares issued. b. par or stated value of the shares issued. c. book value of the shares issued. d. minimum legal requirements.
1. The issuer of an ordinary share dividend to ordinary shareholders should transfer from
a. fair value of the shares issued.
b. par or stated value of the shares issued.
c. book value of the shares issued.
d. minimum legal requirements.
2. Statement 1: Treasury shares are a company’s own shares that have been reacquired and retired.
Statement 2: The cost method records all transactions in treasury shares at their cost and reports the treasury shares as a deduction from ordinary shares.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect.
3. The declaration and issuance of a share dividend
a. increases ordinary shares outstanding and increases total equity.
b. increases retained earnings and increases total equity.
c. decreases retained earnings but does not change total equity.
d. may increase share premium but does not change total equity.
4. Statement 1: Companies record and report long-term notes receivable on a discounted basis.
Statement 2: When the stated rate of interest exceeds the effective rate, the present value of the note receivable will be less than its face value.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect.
5. Which of the following is true when accounts receivable are factored without recourse?
a. The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the substance of the transaction.
b. The financing cost (interest expense) should be recognized ratably over the collection period of the receivables.
c. The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables.
d. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables.
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