Question 1

In IFRS, preferred stock subject to redemption at the option of the preferred shareholders appears

Accepted Answer

A) between liabilities and shareholders' equity. 
B) as a liability. 
C) as a shareholders' equity. 
D) as a revenue. 
E) as an expense. 
A) between liabilities and shareholders' equity. 
B) as a liability. 
C) as a shareholders' equity. 
D) as a revenue. 
E) as an expense.

Question 2

The usual entry to record the conversion of convertible bonds or preferred stock into common shares ignores _____ and shows the swap of common shares for bonds or preferred stock at their _____.

Accepted Answer

A) current market prices; carrying value 
B) carrying value; current market prices 
C) current market prices; par value 
D) carrying value; par value 
E) present value of future cash flows; current market prices 
A) current market prices; carrying value 
B) carrying value; current market prices 
C) current market prices; par value 
D) carrying value; par value 
E) present value of future cash flows; current market prices

Question 3

Treasury stock can be defined as

Accepted Answer

A) unissued stock, that is shares that have never been sold by the corporation. 
B) designated stock, that is shares used for the specific purpose of converting preferred stock to common stock. 
C) investment stock, that is shares acquired from a subsidiary company. 
D) reacquired stock, that is outstanding shares purchased on the open market by the issuing corporation. 
E) reacquired stock, that is outstanding shares purchased on the open market by the Treasury. 
A) unissued stock, that is shares that have never been sold by the corporation. 
B) designated stock, that is shares used for the specific purpose of converting preferred stock to common stock. 
C) investment stock, that is shares acquired from a subsidiary company. 
D) reacquired stock, that is outstanding shares purchased on the open market by the issuing corporation. 
E) reacquired stock, that is outstanding shares purchased on the open market by the Treasury.

Question 4

Which of the following is/are not true?

Accepted Answer

A) Firms may issue capital stock (preferred or common) for cash or for noncash assets. 
B) Firms usually issue shares for cash at the time of their initial incorporation and at periodic intervals as they need additional shareholder funds. 
C) Firms sometimes issue shares to employees as compensation. 
D) The issue price for preferred stock usually approximates its par value. 
E) none of the above 
A) Firms may issue capital stock (preferred or common) for cash or for noncash assets. 
B) Firms usually issue shares for cash at the time of their initial incorporation and at periodic intervals as they need additional shareholder funds. 
C) Firms sometimes issue shares to employees as compensation. 
D) The issue price for preferred stock usually approximates its par value. 
E) none of the above

Question 5

Corporations often sell, or exchange for goods and services, various call options on their shares.Describe the process of issuing call options.

Accepted Answer

ISSUE UNDER OPTION ARRANGEMENTS
Corporat

Question 6

If the firm becomes insolvent, in order to settle debts creditors can claim

Accepted Answer

A) the assets of the corporate entity. 
B) the owners' business and personal assets of partnerships. 
C) the owner's business and personal assets of sole-proprietorships. 
D) all of the above. 
E) none of the above. 
A) the assets of the corporate entity. 
B) the owners' business and personal assets of partnerships. 
C) the owner's business and personal assets of sole-proprietorships. 
D) all of the above. 
E) none of the above.

Question 7

Discuss the various laws and contracts that govern the rights and obligations of a shareholder.

Accepted Answer

Various laws and contracts govern the ri

Question 8

In what way are stock rights generally different from stock warrants?

Accepted Answer

A) Stock rights are generally granted to current shareholders only. 
B) Stock rights are non-transferable. 
C) Stock warrants are only issued with bonds. 
D) Stock warrants are only issued with preferred stocks. 
E) Rights and warrants differ in no way; they convey the same rights 
A) Stock rights are generally granted to current shareholders only. 
B) Stock rights are non-transferable. 
C) Stock warrants are only issued with bonds. 
D) Stock warrants are only issued with preferred stocks. 
E) Rights and warrants differ in no way; they convey the same rights

Question 9

Convertible preferred shares require the holder of preferred shares to convert the preferred shares into a specified number of common shares under certain specified conditions.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is/are true concerning an employee stock options' benefit element?

Accepted Answer

A) One cannot measure the amount of the benefit element before the exercise date. 
B) Stock options with exercise prices less than the current market price of the stock have a higher value, other things equal, than stock options with exercise prices exceeding the current market price of the stock. 
C) Stock options that are "in the money" have a higher value, other things equal, than stock options that are "out of the money". 
D) choices a and b, only. 
E) choices a, b, and c. 
A) One cannot measure the amount of the benefit element before the exercise date. 
B) Stock options with exercise prices less than the current market price of the stock have a higher value, other things equal, than stock options with exercise prices exceeding the current market price of the stock. 
C) Stock options that are "in the money" have a higher value, other things equal, than stock options that are "out of the money". 
D) choices a and b, only. 
E) choices a, b, and c.

Question 11

A firm decides to issue stock, pursuant to a stock split, on a 2-for-1 basis.What entry is necessary for this issuance?

Accepted Answer

A) Retained Earnings Common Stock--Par Value 
B) Additional Paid-in Capital Common Stock--Par Value 
C) Retained Earnings Common Stock--Par Value
Common Stock--Additional Paid-in Capital 
D) Common Stock--Par Value Common Stock--Additional Paid-in Capital
Retained Earnings 
E) No journal entry is necessary but the par value of the stock must be restated on a per share basis. 
A) Retained Earnings Common Stock--Par Value 
B) Additional Paid-in Capital Common Stock--Par Value 
C) Retained Earnings Common Stock--Par Value
Common Stock--Additional Paid-in Capital 
D) Common Stock--Par Value Common Stock--Additional Paid-in Capital
Retained Earnings 
E) No journal entry is necessary but the par value of the stock must be restated on a per share basis.

Question 12

Discuss the accounting for treasury shares.

Accepted Answer

ACCOUNTING FOR TREASURY SHARES
U.S.GAAP

Question 13

Corporations often sell, or exchange for goods and services, various call options on their shares.Which of the following is not true?

Accepted Answer

A) A call option gives the holder the right to acquire shares of common stock at a fixed or determinable price, called the strike price or exercise price. 
B) If the market price of the shares increases above the exercise price, the holder of the option can benefit by exercising the option to purchase shares. 
C) The excess of the exercise price over the market price is the option's intrinsic value. 
D) Many firms pay part of the compensation of some employees by issuing call options on their own shares referring to these arrangements as employee stock options (ESOs). 
E) Firms may also sell or exchange call options for goods and services with counterparties other than employees. 
A) A call option gives the holder the right to acquire shares of common stock at a fixed or determinable price, called the strike price or exercise price. 
B) If the market price of the shares increases above the exercise price, the holder of the option can benefit by exercising the option to purchase shares. 
C) The excess of the exercise price over the market price is the option's intrinsic value. 
D) Many firms pay part of the compensation of some employees by issuing call options on their own shares referring to these arrangements as employee stock options (ESOs). 
E) Firms may also sell or exchange call options for goods and services with counterparties other than employees.

Question 14

Which of the following is true?

Accepted Answer

A) Employees receive stock rights as a form of compensation. 
B) Employees in general may not transfer or sell stock rights to others. 
C) Shareholders may exercise the stock rights or sell them to others. 
D) The stock rights usually do not trade in public markets. 
E) Firms grant stock rights to current employees. 
A) Employees receive stock rights as a form of compensation. 
B) Employees in general may not transfer or sell stock rights to others. 
C) Shareholders may exercise the stock rights or sell them to others. 
D) The stock rights usually do not trade in public markets. 
E) Firms grant stock rights to current employees.

Question 15

The _____ has the legal authority to declare dividends.When considering whether to declare dividends, they must conclude that declaring a dividend is both legal (under law and contract) and financially desirable.

Accepted Answer

A) chief financial officer 
B) chief operating officer 
C) chief executive officer 
D) board of directors 
E) financial analysts 
A) chief financial officer 
B) chief operating officer 
C) chief executive officer 
D) board of directors 
E) financial analysts

Question 16

On September 30, Pineville Corporation declared and issued a 10% common stock dividend.Prior to this dividend, Pineville had 50,000 shares of $5 par value common stock issued and outstanding.The fair value of Pineville's common stock was $52 per share on September 30.As a result of this stock dividend, Pineville's total stockholders' equity

Accepted Answer

A) increased by $25,000. 
B) decreased by $25,000. 
C) increased by $260,000. 
D) decreased by $260,000. 
E) did not change. 
A) increased by $25,000. 
B) decreased by $25,000. 
C) increased by $260,000. 
D) decreased by $260,000. 
E) did not change.

Question 17

Most publicly traded firms operate as corporations.Which of the following is/are not true?

Accepted Answer

A) If the corporation becomes insolvent, creditors can claim only the assets of the corporate entity and cannot claim the assets of the individual owners. 
B) To settle debts of general partnerships, creditors have a claim on the owners' business and personal assets. 
C) To settle debts of sole proprietorships, creditors have a claim on the owners' business and personal assets.. 
D) In recent years, many partnerships and sole proprietorships have become limited liability companies (LLCs), or limited liability partnerships (LLPs), to limit their owners' personal liability for business debts and other obligations. 
E) none of the above 
A) If the corporation becomes insolvent, creditors can claim only the assets of the corporate entity and cannot claim the assets of the individual owners. 
B) To settle debts of general partnerships, creditors have a claim on the owners' business and personal assets. 
C) To settle debts of sole proprietorships, creditors have a claim on the owners' business and personal assets.. 
D) In recent years, many partnerships and sole proprietorships have become limited liability companies (LLCs), or limited liability partnerships (LLPs), to limit their owners' personal liability for business debts and other obligations. 
E) none of the above

Question 18

Jurisdiction-specific corporate laws limit directors' freedom to declare dividends.Which of the following is/are true?

Accepted Answer

A) The board may declare dividends "out of capital," that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners. 
B) The board may not declare dividends "out of earnings" by debiting them against the Retained Earnings account, which results from earnings transactions. 
C) "Capital" may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders. 
D) No jurisdictions allows corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period 
E) none of the above 
A) The board may declare dividends "out of capital," that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners. 
B) The board may not declare dividends "out of earnings" by debiting them against the Retained Earnings account, which results from earnings transactions. 
C) "Capital" may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders. 
D) No jurisdictions allows corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period 
E) none of the above

Question 19

In recent years, many partnerships and sole proprietorships have become limited liability companies (LLCs), or limited liability partnerships (LLPs), to limit their owners' personal liability for business debts and other obligations.

Accepted Answer

A) True 
 B)False

Question 20

A stock split that is accomplished by a change in par value that is not proportional to the new number of shares or if the firm does not change the par value, the firm

Accepted Answer

A) does not require a journal entry. 
B) decreases Additional Paid-In Capital or Retained Earnings. 
C) increases Additional Paid-In Capital or Retained Earnings. 
D) decreases Cash or Retained Earnings. 
E) increases Cash or Retained Earnings. 
A) does not require a journal entry. 
B) decreases Additional Paid-In Capital or Retained Earnings. 
C) increases Additional Paid-In Capital or Retained Earnings. 
D) decreases Cash or Retained Earnings. 
E) increases Cash or Retained Earnings.

In IFRS, preferred stock subject to redemption at the option of the preferred shareholders appears

The usual entry to record the conversion of convertible bonds or preferred stock into common shares ignores _ and shows the swap of common shares for bonds or preferred stock at their _.

Treasury stock can be defined as

Which of the following is/are not true?

Corporations often sell, or exchange for goods and services, various call options on their shares.Describe the process of issuing call options.

If the firm becomes insolvent, in order to settle debts creditors can claim

Discuss the various laws and contracts that govern the rights and obligations of a shareholder.

In what way are stock rights generally different from stock warrants?

Convertible preferred shares require the holder of preferred shares to convert the preferred shares into a specified number of common shares under certain specified conditions.

Which of the following is/are true concerning an employee stock options' benefit element?

A firm decides to issue stock, pursuant to a stock split, on a 2-for-1 basis.What entry is necessary for this issuance?

Discuss the accounting for treasury shares.

Corporations often sell, or exchange for goods and services, various call options on their shares.Which of the following is not true?

Which of the following is true?

The _____ has the legal authority to declare dividends.When considering whether to declare dividends, they must conclude that declaring a dividend is both legal (under law and contract) and financially desirable.

Most publicly traded firms operate as corporations.Which of the following is/are not true?

Jurisdiction-specific corporate laws limit directors' freedom to declare dividends.Which of the following is/are true?

In recent years, many partnerships and sole proprietorships have become limited liability companies (LLCs), or limited liability partnerships (LLPs), to limit their owners' personal liability for business debts and other obligations.

A stock split that is accomplished by a change in par value that is not proportional to the new number of shares or if the firm does not change the par value, the firm

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

Exam 15: Shareholders Equity: Capital Contributions and Distributions

In IFRS, preferred stock subject to redemption at the option of the preferred shareholders appears

The usual entry to record the conversion of convertible bonds or preferred stock into common shares ignores _____ and shows the swap of common shares for bonds or preferred stock at their _____.

Treasury stock can be defined as

Which of the following is/are not true?

Corporations often sell, or exchange for goods and services, various call options on their shares.Describe the process of issuing call options.

If the firm becomes insolvent, in order to settle debts creditors can claim

Discuss the various laws and contracts that govern the rights and obligations of a shareholder.

In what way are stock rights generally different from stock warrants?

Convertible preferred shares require the holder of preferred shares to convert the preferred shares into a specified number of common shares under certain specified conditions.

Which of the following is/are true concerning an employee stock options' benefit element?

A firm decides to issue stock, pursuant to a stock split, on a 2-for-1 basis.What entry is necessary for this issuance?

Discuss the accounting for treasury shares.

Corporations often sell, or exchange for goods and services, various call options on their shares.Which of the following is not true?

Which of the following is true?

The _____ has the legal authority to declare dividends.When considering whether to declare dividends, they must conclude that declaring a dividend is both legal (under law and contract) and financially desirable.

Most publicly traded firms operate as corporations.Which of the following is/are not true?

Jurisdiction-specific corporate laws limit directors' freedom to declare dividends.Which of the following is/are true?

In recent years, many partnerships and sole proprietorships have become limited liability companies (LLCs), or limited liability partnerships (LLPs), to limit their owners' personal liability for business debts and other obligations.

A stock split that is accomplished by a change in par value that is not proportional to the new number of shares or if the firm does not change the par value, the firm

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

The usual entry to record the conversion of convertible bonds or preferred stock into common shares ignores _ and shows the swap of common shares for bonds or preferred stock at their _.