Question 1

Who uses information about "equity" and what information about equity is useful to financial statement users?

Accepted Answer

As equity has legal priority below that of liabilities in general-meaning that available funds go toward paying off liabilities prior to paying equity claims should the enterprise be liquidated-equity holders are more concerned about the equity accounts than creditors.Equity holders who do have residual claims on the enterprise are concerned about the size of their claims,and they need to be aware of changes to their share of profits.Consequently,accounting reports need to provide detailed information about the composition of equity and changes in equity that can result in the dilution of owners' stakes in the business.Equity holders are interested in distinguishing (i)changes in equity due to direct contributions or withdrawals of capital from (ii)changes in equity derived from return on equity capital (i.e.,income).This categorization is natural because it separates capital transactions with owners from the entity's income generating transactions with non-owners such as customers,employees,and suppliers.

Question 2

Nala Company has two classes of shares that were both issued on January 1,2010:
Class A,$10 par value,8% preferred shares,275,000 shares issued and outstanding;
Class B,no par value common shares issued at $30/share,1,300,000 shares issued and outstanding.
Due to challenging start-up problems in 2010 and 2011 there were no dividends paid; in 2012 dividends of $8,000,000 were paid; and,for 2013,dividends paid totaled $16,000,000.
Requirement:
How much was the amount of dividends paid to preferred and common shares in 2010 to 2013? First assume that the preferred shares are non-cumulative,then assume that they are cumulative.

Accepted Answer

If preferred shares are non-cumulative,their shareholders get their entitlement for the year only if any dividends are paid and the balance can go to common shareholders.However,if the preferred shares are cumulative,then all current and arrears dividends must be paid before the common shareholders get any dividends.

Question 3

Which statement is correct about the "single transaction method" for treasury shares?

Accepted Answer

A) This method increases the contributed surplus when the repurchased shares are later re-sold. 
B) This method has the same effect on contributed surplus to that of the two transaction method. 
C) This method treats the reacquisition and subsequent sale separately for accounting. 
D) This method increases contributed surplus at the time of re-purchase. 
A) This method increases the contributed surplus when the repurchased shares are later re-sold. 
B) This method has the same effect on contributed surplus to that of the two transaction method. 
C) This method treats the reacquisition and subsequent sale separately for accounting. 
D) This method increases contributed surplus at the time of re-purchase. A

Question 4

Which statement about "common shares" is not correct?

Accepted Answer

A) They have the most upside potential if a company performs well. 
B) A corporation does not need to issue any class of common shares. 
C) Common shares represent the ownership interest of the equity holders. 
D) They have the most downside risk if a company does not perform well. 
A) They have the most upside potential if a company performs well. 
B) A corporation does not need to issue any class of common shares. 
C) Common shares represent the ownership interest of the equity holders. 
D) They have the most downside risk if a company does not perform well.

Question 5

Which statement about "equity" is not correct?

Accepted Answer

A) Equity is the ownership interest in the company. 
B) Equity is the residual interest in the company. 
C) It is not necessary to provide information about the equity. 
D) Equity is the difference between assets and liabilities. 
A) Equity is the ownership interest in the company. 
B) Equity is the residual interest in the company. 
C) It is not necessary to provide information about the equity. 
D) Equity is the difference between assets and liabilities.

Question 6

Below are details relating to balances for the equity accounts of Isha Company,and changes to those balances.Note that AOCI is accumulated other comprehensive income.
   Requirement:
Prepare a statement of changes in equity for the years ended December 31,2011.

Accepted Answer

The answer of Below are details relating to balances for...

Question 7

Which statement about "share buy-back" is correct?

Accepted Answer

A) If the repurchase price if below the issue price,an accounting "gain" results. 
B) If the repurchase price if below the issue price,the difference goes to "common shares." 
C) If the repurchase price if below the issue price,the difference goes to "contributed surplus." 
D) If the repurchase price if below the issue price,an accounting "loss" results. 
A) If the repurchase price if below the issue price,an accounting "gain" results. 
B) If the repurchase price if below the issue price,the difference goes to "common shares." 
C) If the repurchase price if below the issue price,the difference goes to "contributed surplus." 
D) If the repurchase price if below the issue price,an accounting "loss" results.

Question 8

If 700 shares with a par value of $35/share,a dividend rate of 5% and redeemable for $50/share,are sold for $45/share how much dividend will the equity holders be entitled to?

Accepted Answer

A) $525 
B) $1,225 
C) $1,575 
D) $1,750 
A) $525 
B) $1,225 
C) $1,575 
D) $1,750

Question 9

Milton Corporation declared and distributed a 8% stock dividend.Milton had 440,000 common shares outstanding and 940,000 common shares authorized before the stock dividend.The board of directors determined the appropriate market value per share as $10.
Requirement:
How much should be recorded for the stock dividend? Record the journal entry (if any)for the shares distributed.

Accepted Answer

The answer of Milton Corporation declared and distributed a 8%...

Question 10

If 10,000 shares with par value of $15/share are issued for $20/share,how much will be presented as "contributed surplus" for financial statement purposes?

Accepted Answer

A) $10,000 
B) $50,000 
C) $150,000 
D) $200,000 
A) $10,000 
B) $50,000 
C) $150,000 
D) $200,000

Question 11

The following is an extract from the balance sheet as at December 31,1011:
   The company did not declare dividends on preferred shares in 2011.Transactions in 2012 include the following:
i.March 15: Hewitt purchased 15,000 preferred shares on the stock exchange for $15.25 per share and held these in treasury.
ii.March 28: The company redeemed 5,000 preferred shares directly from shareholders.
iii.July 1: The market price of common shares shot up to $5 per share,so Hewitt decided to split the common shares two to one.
iv.August 1: Hewitt cancelled 14,000 preferred shares that were held in treasury.
v.December 31: The company declared dividends of $0.50 per common share.
Requirement:
Prepare the journal entries to record the above transactions.The company uses the single-transaction method to account for treasury shares.

Accepted Answer

The answer of The following is an extract from the...

Question 12

What kind of transaction is "appropriated reserves"?

Accepted Answer

A) An example of "par value" preferred shares. 
B) An example of a transaction with owners. 
C) An example of a "retained earnings." 
D) An example of a "other comprehensive income." 
A) An example of "par value" preferred shares. 
B) An example of a transaction with owners. 
C) An example of a "retained earnings." 
D) An example of a "other comprehensive income."

Question 13

Mountip Inc.was incorporated under provincial legislation with a December 31 year-end.The company has a single class of shares.As at December 31,2011,it had 150,000 shares issued and outstanding.These shares had a book value of $5,700,000 on the balance sheet.During 2012,Mountip repurchased 5% of the issued shares from one of the minority shareholders at a cost of $48 per share.The company held these in treasury and later found a buyer for half of these shares at $52.The other half were sold at $46 to another investor.
Requirement:
Record the share transactions using the alternative two-transaction method for treasury stock.

Accepted Answer

Two-transaction method: Note that the ba

Question 14

Assume that a company issued 10,000 shares for $30/share and a par value of $5/share.1,000 shares were repurchased back at $22/share.Which statement about share repurchases and cancellation is correct?

Accepted Answer

A) Contributed surplus from the share repurchase can be netted against the contributed surplus from share issuance. 
B) Contributed surplus from the share repurchase must be separated from the contributed surplus on share issuance. 
C) Contributed surplus arising from share repurchase must be debited in this transaction. 
D) Contributed surplus from the initial share issuance must now be credited in this transaction. 
A) Contributed surplus from the share repurchase can be netted against the contributed surplus from share issuance. 
B) Contributed surplus from the share repurchase must be separated from the contributed surplus on share issuance. 
C) Contributed surplus arising from share repurchase must be debited in this transaction. 
D) Contributed surplus from the initial share issuance must now be credited in this transaction.

Question 15

When does a company record dividends payable?

Accepted Answer

A) On date of record. 
B) On ex-dividend date. 
C) On payment date. 
D) On declaration date. 
A) On date of record. 
B) On ex-dividend date. 
C) On payment date. 
D) On declaration date.

Question 16

Which statement about dividends is correct?

Accepted Answer

A) Dividends on cumulative preferred shares are not discretionary payments. 
B) Dividends are mandatory payments required for both common and preferred shares. 
C) Dividends are discretionary payments that can be made for common and preferred shares. 
D) Dividends must be paid on common shares before dividends can be paid on preferred shares. 
A) Dividends on cumulative preferred shares are not discretionary payments. 
B) Dividends are mandatory payments required for both common and preferred shares. 
C) Dividends are discretionary payments that can be made for common and preferred shares. 
D) Dividends must be paid on common shares before dividends can be paid on preferred shares.

Question 17

What does "priority" mean?

Accepted Answer

A) Higher priority means preferential payout before lower priority claimants. 
B) Refers to the amount of payment that will be made upon bankruptcy. 
C) Lower priority means preferential payout before higher priority claimants. 
D) Debtors will be paid after the equity holders if there is a bankruptcy. 
A) Higher priority means preferential payout before lower priority claimants. 
B) Refers to the amount of payment that will be made upon bankruptcy. 
C) Lower priority means preferential payout before higher priority claimants. 
D) Debtors will be paid after the equity holders if there is a bankruptcy.

Question 18

Which statement best describes the accounting when a company cancels its own shares at an amount higher than the average share value?

Accepted Answer

A) Contributed surplus and retained earnings will be credited. 
B) Contributed surplus and retained earnings will be debited. 
C) Contributed surplus will be credited,thereby increasing equity. 
D) Contributed surplus will be debited,thereby decreasing equity. 
A) Contributed surplus and retained earnings will be credited. 
B) Contributed surplus and retained earnings will be debited. 
C) Contributed surplus will be credited,thereby increasing equity. 
D) Contributed surplus will be debited,thereby decreasing equity.

Question 19

What is the "ex-dividend" date for the Toronto Stock Exchange?

Accepted Answer

A) 2 business days after the declaration date. 
B) 2 business days after the date of record. 
C) 2 business days before the date of record. 
D) 2 business days before the declaration date. 
A) 2 business days after the declaration date. 
B) 2 business days after the date of record. 
C) 2 business days before the date of record. 
D) 2 business days before the declaration date.

Question 20

Which statement about "common shares" is correct?

Accepted Answer

A) Common shares have the lowest claim to residual profit of all shares. 
B) Common shares have the lowest priority of all shares issued by a company. 
C) Common shares have the highest priority of all shares issued by a company. 
D) Common shares have the highest claim to residual profit of all shares. 
A) Common shares have the lowest claim to residual profit of all shares. 
B) Common shares have the lowest priority of all shares issued by a company. 
C) Common shares have the highest priority of all shares issued by a company. 
D) Common shares have the highest claim to residual profit of all shares.

Who uses information about "equity" and what information about equity is useful to financial statement users?

Which statement is correct about the "single transaction method" for treasury shares?

Which statement about "common shares" is not correct?

Which statement about "equity" is not correct?

Below are details relating to balances for the equity accounts of Isha Company,and changes to those balances.Note that AOCI is accumulated other comprehensive income. Requirement: Prepare a statement of changes in equity for the years ended December 31,2011.

Which statement about "share buy-back" is correct?

If 700 shares with a par value of $35/share,a dividend rate of 5% and redeemable for $50/share,are sold for $45/share how much dividend will the equity holders be entitled to?

If 10,000 shares with par value of $15/share are issued for $20/share,how much will be presented as "contributed surplus" for financial statement purposes?

What kind of transaction is "appropriated reserves"?

Assume that a company issued 10,000 shares for $30/share and a par value of $5/share.1,000 shares were repurchased back at $22/share.Which statement about share repurchases and cancellation is correct?

When does a company record dividends payable?

Which statement about dividends is correct?

What does "priority" mean?

Which statement best describes the accounting when a company cancels its own shares at an amount higher than the average share value?

What is the "ex-dividend" date for the Toronto Stock Exchange?

Which statement about "common shares" is correct?

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Filters

Exam 13: Equities

Who uses information about "equity" and what information about equity is useful to financial statement users?

Which statement is correct about the "single transaction method" for treasury shares?

Which statement about "common shares" is not correct?

Which statement about "equity" is not correct?

Below are details relating to balances for the equity accounts of Isha Company,and changes to those balances.Note that AOCI is accumulated other comprehensive income. Requirement: Prepare a statement of changes in equity for the years ended December 31,2011.

Which statement about "share buy-back" is correct?

If 700 shares with a par value of $35/share,a dividend rate of 5% and redeemable for $50/share,are sold for $45/share how much dividend will the equity holders be entitled to?

If 10,000 shares with par value of $15/share are issued for $20/share,how much will be presented as "contributed surplus" for financial statement purposes?

What kind of transaction is "appropriated reserves"?

Assume that a company issued 10,000 shares for $30/share and a par value of $5/share.1,000 shares were repurchased back at $22/share.Which statement about share repurchases and cancellation is correct?

When does a company record dividends payable?

Which statement about dividends is correct?

What does "priority" mean?

Which statement best describes the accounting when a company cancels its own shares at an amount higher than the average share value?

What is the "ex-dividend" date for the Toronto Stock Exchange?

Which statement about "common shares" is correct?

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Filters