1
Q
50. The entry to record share issue costs will never affect: A. Earnings. B. Share Capital. C. Retained Earnings. D. Liabilities.
A
a
2
Q
51. ABC Inc. issued 1,000 common shares and 3,000 preferred shares for a lump sum of $25,000. The fair market value of each share on the date of issue was $6 per common share and $8 per preferred share. How much of the proceeds received should be allocated to the preferred shares on the date of issue? A. $5,000 B. $20,000 C. $6,250 D. $19,750
A
b
3
Q
52. The conversion from one type of share to another should be accounted for at: A. Book Value. B. Fair Market Value. C. Book Value or Fair Market Value. D. A discounted amount
A
a
4
Q
- Preferred shares, which have the most restrictive features, are:
A. Noncumulative, non-participating, nonvoting.
B. Fully participating, nonvoting.
C. Noncumulative, fully participating, nonvoting.
D. Non-participating, cumulative, nonvoting.
A
a
5
Q
54. Gains on sale of treasury stock should be credited to: A. Additional contributed capital. B. Other income. C. Share capital. D. Retained earnings
A
a
6
Q
- Which of the following statements is correct?
A. Par value shares are prohibited under the CBCA.
B. Legal capital is that which would be distributed back to shareholders in the event of liquidation.
C. Contributed Capital is the amount on which dividend payments should be based.
D. Contributed Capital represents the proceeds from a share issue in jurisdictions where par values are allowed.
A
a
7
Q
see 56
A
see 56
8
Q
see 57
A
see 57
9
Q
- LS issued 200 common shares to BH (last share transaction was a year prior when LS sold 10 shares at $4 per share), and received a patent in full payment. The patent had a current market value of $2,000 and was carried on the books of BH at $1,500. Under ASPE, common shares should be credited for:
A. $800
B. $1,500
C. $1,800
D. $2,000
E. This transaction has no commercial substance, therefore no entry is required.
A
a
10
Q
se 59
A
see 59
11
Q
- DWWR purchased its own common shares for $20,000 and debited the treasury stock account for the purchase price. The shares were subsequently sold for $17,000. The $3,000 difference between the cost and sale price should be recorded as a reduction of:
A. Contributed capital from treasury stock transactions without regard as to whether or not there have been previous net “gains” from sales or retirements of the same class of shares.
B. Contributed capital from treasury stock transactions to the extent of previous net “gains” from sales or retirements of the same class of shares; otherwise retained earnings should be reduced.
C. The beginning balance of retained earnings.
D. Revenues on the income statement.
A
b
12
Q
61. XHC had only two share transactions. Initially, XHC issued 1,000 common shares, at $15 per share. XHC later bought back 200 shares at $16 per share. Under the single-transaction method, what is the amount that should be recorded in the treasury stock account? A. $2,000 B. $3,000 C. $3,200 D. $3,600
A
c
13
Q
- Identify the missing component (X) in the following equation: Retained earnings, ending balance = Net income to date + prior period adjustments to date - cash and property dividends to date - X
A. Stock dividends and splits to date.
B. Stock dividends to date.
C. Stock splits to date.
D. Net unrealized gain or loss on securities available for sale
A
b
14
Q
- Cash dividends sometimes are declared in one reporting period and are payable in the next reporting period. The dividend should be recorded on the:
A. Payment date.
B. Declaration date.
C. Record date.
D. Either the declaration, record, or payment date, as preferred by the company
A
b
15
Q
64. A property dividend causes a debit to retained earnings equal to the \_\_\_\_\_\_\_\_\_\_\_ of the property distributed. A. Book value B. Fair market value C. Original cost D. Income tax basis
A
b
16
Q
- CB Corporation issued a 2 for 1 stock split. Which of the following is NOT a true statement concerning the effect of the split?
A. The number of shares outstanding is increased.
B. There is a transfer of retained earnings to contributed capital.
C. A proportionate reduction in the par value per share occurs.
D. There is a continuation of retained earnings with no reduction in its balance.
A
b
17
Q
see 66
A
see 66`
18
Q
67. Which of the following dividends does not reduce retained earnings? A. Scrip dividend. B. Stock dividend. C. Cash dividend. D. Property dividend. E. Liquidating dividend.
A
e
19
Q
- For dividends, the date of record is the date:
A. The market price of the shares drops due to the dividend.
B. On which the list of shareholders is prepared.
C. The dividend is actually paid.
D. The dividend is announced
A
b
20
Q
- Major factors contributing to the growth of the corporate form of business includes all of the following except:
A. The facility to accumulate large amounts of resources.
B. Limited liability of the shareholders.
C. Easy transferability of ownership.
D. The lack of government regulation.
A
d
21
Q
- Total equities of a corporation usually include:
A. Assets plus contributed capital, and plus retained earnings.
B. Contributed capital plus retained earnings.
C. Contributed capital plus retained earnings, and plus creditors’ interest.
D. Total owners’ equity less treasury stock at cost.
A
b
22
Q
- Owners’ equity must equal the:
A. Total contributed capital plus retained earnings less liabilities.
B. Sum of the share capital account balances plus the total contributed capital in excess of par (or stated value).
C. Total assets minus total liabilities.
D. Total contributed capital less total retained earnings
A
c
23
Q
- ABC Inc. engages in a non-cash exchange with a third party whereby ABC Inc. issues common shares to the third party in exchange for some highly specialized Machinery & Equipment. The value of the shares issued was $15,000 while the appraised value of the Machinery & Equipment was $12,000. At what amount would this transaction be valued on ABC’s books?
A. $12,000 under IFRS and $15,000 under ASPE.
B. $15,000 under IFRS and $12,000 under ASPE.
C. $12,000 under either ASPE or IFRS.
D. $15,000 under either ASPE or IFRS.
A
a
24
Q
- Under IFRS, the treatment of any of a company’s foreign subsidiary is dependent upon:
A. The functional currency of the subsidiary.
B. The nature and extent of the parent company’s relationship with the subsidiary.
C. Whether the subsidiary is integrated or self-sustaining.
D. Managerial judgement
A
a
25
74. Which of the following is not a basic right of shareholders?
A. To inspect the books of account and to insist upon an audit in the event of dissatisfaction with results revealed by such inspection.
B. To participate in the management of the corporation through taking part in and voting in shareholders' meetings.
C. To participate in the profits of the corporation through dividends declared by the board of directors.
D. To share in the distribution of assets of the corporation at liquidation or through liquidating dividends.
E. To sell shares in the corporation at a price exceeding its cost.
a
26
75. Ownership of shares usually entitles the holders to all of the following rights except:
A. To elect the board of directors of the corporation.
B. To control the day-to-day operations of the corporation.
C. To purchase new shares when they are offered for sale.
D. To share in the profits of the corporation.
b
27
76. Authorized share capital refers to the total number of shares:
A. Outstanding.
B. Issued.
C. That can be issued in conformity with the corporation's charter.
D. Issued, less all treasury shares owned
c
28
77. Issued share capital refers to the number of shares:
A. Outstanding.
B. Outstanding less all shares held as treasury shares.
C. Outstanding plus all shares held as treasury shares.
D. That may be issued according to the corporate charter
c
29
78. Share capital may be classified primarily as:
A. Par Value, Common; or No- par, Preferred.
B. No-par, Common; or Par Value, Preferred.
C. Par Value, Common; No-par, Common; Par Value, Preferred; or No-par, Preferred.
D. Par Value, Common; Stated Value Common; or No-par, Preferred.
c
30
```
79. At the date of the financial statements, common shares issued would exceed common shares outstanding as a result of the:
A. Payment in full of subscribed shares.
B. Declaration of a stock split.
C. Declaration of a stock dividend.
D. Purchase of treasury stock.
```
d
31
```
80. Zygo sold 1,000 common shares (par $3) at $5 per share on a subscription basis. The entry to record this transaction included a credit to:
A. Accounts receivable.
B. Contributed capital in excess of par.
C. Cash.
D. Subscriptions receivable.
```
b
32
```
81. When a corporation sells some of its own common shares, all on credit, there should be a debit to the account:
A. Subscriptions receivable, common.
B. Accounts receivable.
C. Cash.
D. Notes receivable, common.
```
a
33
82. If preferred shares are noncumulative, then:
A. The preferred shareholders are entitled to current and arrears of dividends before common shareholders can receive dividends.
B. Cash dividends not declared in prior years are lost permanently.
C. The preferred shareholders are only entitled to a specific percent of the cash dividends, regardless of the amount declared.
D. Prior years' cash dividends must be paid to the preferred shareholders before any dividends may be paid to the common shareholders.
b
34
83. If preferred shares are non-participating, then:
A. Preferred shareholders are not entitled to vote.
B. Preferred dividends for the year are limited to a specific rate.
C. Preferred shareholders are not entitled to a prior year's dividend once that year has passed.
D. Preferred shareholders may receive dividends in excess of a specific rate if common stockholders receive more than that specific rate
b
35
84. The redemption privilege on preferred shares provides that the preferred shareholders can:
A. Purchase treasury shares any time they become available.
B. Purchase enough shares of any new issue, so that their percentage ownership remains the same.
C. Turn in the preferred shares for a specified cash price.
D. Exchange the preferred shares for common shares.
c
36
85. If preferred shares are callable, then:
A. The corporation may, at its option, purchase the preferred shares for a specified cash price.
B. The preferred shareholder can turn the preferred shares in for a specified cash price.
C. The shareholders can exchange the preferred shares owned for common shares.
D. There cannot be dividends in arrears
a
37
86. The order in which dividends are allocated to common and preferred shares depends upon the provisions in the respective stock contracts. Choose the correct statement regarding this allocation.
A. When noncumulative preferred shares are fully participating, the rate of dividends allocated to preferred shares is the ratio of total par of preferred shares outstanding to total par of both classes of shares outstanding.
B. When noncumulative preferred shares are not participating, the rate of dividends to common shares are limited to the ratio of total par of common shares outstanding to total par of both classes of shares outstanding.
C. When 8% cumulative preferred shares are participating to a total of 12%, any arrear dividends are ignored in the allocation since they pertain to a previous year.
D. When 8% noncumulative preferred shares are participating to a total of 12%, the preferred shares must receive all arrear dividends and 12% of total preferred shares par outstanding prior to common shares receiving any dividends.
a
38
87. As of January 1, 2013 there are 2 years of dividends in arrears on an issue of cumulative nonconvertible preferred shares. No dividends on preferred shares were declared in 2013. Therefore, under IFRS, on the Dec. 31, 2013 financial statements, the firm issuing the preferred shares:
A. Reports a liability equal to 3 years of dividends on preferred shares
B. Reports a liability equal to 2 years of dividends on preferred shares
C. Subtracts 2 years of dividends on preferred shares from earnings when computing earnings per share for 2013
D. Discloses in a footnote to 2013's balance sheet that there are 3 years of dividends on preferred shares in arrears
E. Discloses in a footnote to 2013's balance sheet that there are 2 years of dividends on preferred shares in arrears
d
39
88. The number of treasury shares held by a corporation equals:
A. The difference between issued shares and outstanding shares.
B. The difference between authorized shares and outstanding shares.
C. All shares held by the treasurer of the corporation.
D. All shares purchased by shareholders due to their pre-emptive right
a
40
```
89. Under the single transaction method, the difference between the cost of treasury stock and a subsequent higher selling price of the treasury stock should be credited to:
A. Retained earnings.
B. Share capital.
C. Gain from treasury stock transaction.
D. Contributed capital.
```
d
41
90. How should a gain from the sale of treasury stock be reflected when using the single transaction method of recording treasury stock transactions?
A. As an extraordinary item shown on the income statement
B. As ordinary earnings shown on the income statement
C. As contributed capital from treasury stock transactions
D. As an increase in the amount shown for common stock
c
42
91. Losses that a corporation suffers from dealing in its own stock may:
A. Be recorded as a long-term loss.
B. Be recorded in the retained earnings account.
C. Be recorded as a loss from peripheral or incidental transactions (i.e., not from continuing operations).
D. Never be recorded in the retained earnings account.
b
43
92. Which of the following is NOT a true statement? Treasury stock is:
A. Shares that cannot receive dividends nor vote.
B. Shares that are held by the issuing company but has not been retired.
C. Recorded in an equity account that has a debit balance.
D. Shares that have been issued but are no longer outstanding.
E. Shares that are included in earnings per share calculations.
e
44
93. When all of the preferred shares are purchased and formally retired by the issuing corporation for less than its original issue price, accounting for the retirement increases:
A. Retained earnings.
B. Contributed capital in excess of par, common stock.
C. Net income for the period.
D. Contributed capital from retirement of preferred shares.
d
45
see 94
see 94
46
see 95
see 95
47
```
96. On December 31, 2013, TTX reported owners' equity of $150,000. During 2014, TTX declared and paid cash dividends of $30,000; reported a net loss of $15,000; issued additional common shares (no par) for $70,000; and purchased treasury stock at a cost of $15,000 (cash), Therefore, the 2014 ending amount of shareholders' equity was:
A. $160,000
B. $170,000
C. $215,000
D. $230,000
```
a
48
see 97
see 97
49
98. On January 1, 2014, DDB agreed to purchase 4,000 of CTC's common shares at $5 per share. Cash payment in full, including 10% interest, is to be paid one year later at which time the shares will be issued. The appropriate journal entry for CTC to record the transaction on January 1, 2014, would include a:
A. Debit to Cash for $20,000.
B. Credit to Common Shares Subscribed for $20,000.
C. Credit to Cash $20,000.
D. Debit to Subscriptions Receivable for $18,000
b
50
99. During 2014, BV sold and issued the following shares for $20,000 cash:
Common shares, 600 shares (current market price per share, $23.50).
Preferred shares, 200 shares (no current market price available); original issue price, three years earlier, $22 per share.
```
The total issue price of $20,000 that should be apportioned to the preferred shares is:
A. $4,000
B. $4,400
C. $5,900
D. $8,000
```
c
51
100. ABC had 20,000 shares of treasury common stock, which it purchased for $7 per share. Until now, this was ABC's only treasury stock transaction. The shares were originally sold and issued at $5 per share. ABC uses the single-transaction method. ABC is now selling the treasury shares for $5 per share. The entry to record the resale would include a:
A. Credit to Treasury stock for $100,000.
B. Debit to Retained earnings for $40,000.
C. Debit to common shares for $140,000.
D. Credit to common shares for $100,000.
b
52
101. TTSS Corporation had 1,000 common shares issued and outstanding (sold at $40 each). It then made its first-ever purchase of treasury stock by buying 200 of its own shares for $50 per share. Assume sufficient retained earnings. The entry to record this purchase using the single-transaction method would include:
A. dr. common shares $8,000
B. dr. common shares $10,000
C. dr. contributed capital from treasury stock transactions $2,000
D. dr. treasury stock $10,000
d
53
```
102. When treasury stock accounted for by the single-transaction method is subsequently sold for more than its purchase price, the excess of the cash proceeds over the carrying value of the treasury stock should be recognized as:
A. an unusual gain.
B. Income from continuing operations.
C. Increase in contributed capital.
D. Increase in retained earnings
```
c
54
103. A restriction of retained earnings is most likely to be required by the:
A. payment of last maturing series of a serial bond issue.
B. amortization of intangible assets.
C. purchase of treasury stock.
D. exhaustion of potential benefits of the investment credit.
c
55
104. An appropriation of retained earnings of a significant amount:
A. Means that specific assets actually have been set aside for a specific purpose.
B. provides protection to the stockholders rather than to the creditors.
C. Can have a significant impact on the total amount of retained earnings when recorded.
D. Can be used to absorb extraordinary losses directly one of a significant amount.
E. Should be reversed when the purpose of the appropriation has been achieved
e
56
```
105. When noncash assets are issued as a dividend, those assets should be re-valued as of the:
A. Announcement date.
B. Recording date.
C. Declaration date.
D. Issuance date.
```
c
57
```
106. Which of the following represents the interest period for a scrip dividend?
A. Record date to payment date
B. Declaration date to payment date
C. Record date to ex-dividend date
D. Declaration date to ex-dividend date
```
b
58
```
107. X Corporation owns 15% of the outstanding shares of Z Corporation. The Z stock is distributed to the shareholders of X Corporation as a dividend at its current market value. This is an example of a:
A. scrip dividend.
B. cash dividend.
C. stock dividend.
D. property dividend
```
d
59
108. The declaration of a property dividend results in:
A. a debit to retained earnings.
B. a credit to retained earnings.
C. either a debit or a credit to retained earnings.
D. no effect on retained earnings.
a
60
109. If a company desires to pay a cash dividend, but does not want to increase its liabilities, it can:
A. pay the dividend only out of retained earnings.
B. issue a scrip dividend.
C. pay the dividend on declaration date.
D. pay the dividend on the ex-dividend date.
c
61
110. The declaration and payment of a cash or property dividend requires:
A. an appropriation of retained earnings.
B. the distribution of a current asset.
C. a reduction of both retained earnings and assets.
D. a decrease in retained earnings and a change in contributed (paid-in) capital.
c
62
```
111. On January 10, 2013, ZOE Corporation declared a cash dividend when the related shares were selling for $10 per share. ZOE prepared the list of shareholders on February 10, 2013 at which time the shares were still selling for $10 per share. However, on February 11, 2013 the shares were selling for $8 per share. The dividend was paid on March 1, 2013 when the shares were selling for $9 per share. The ex-dividend date must have been:
A. January 10/13.
B. February 10/13.
C. February 11/13.
D. March 1/13.
```
c
63
112. Cash dividends usually are declared on one date and paid on a subsequent date to shareholders of record on some intermediate date. On which of the following dates should an accrual basis shareholder recognize investment revenue?
A. Record date
B. Declaration date
C. Payment date
D. Either record date or declaration date
b
64
113. The declaration and issuance of a common stock dividend:
A. Does not change the internal content of retained earnings.
B. Does not change assets, liabilities or total owners' equity.
C. Decreases total owners' equity and increases the related common stock account.
D. Decreases assets and decreases total owner's equity.
b
65
114. A common stock dividend does not:
A. Change a shareholder's proportionate interest in the corporation.
B. Result in the shareholder receiving additional shares.
C. Change the proportions among the different sources of shareholders' equity.
D. Change the total amount in the related common shares account.
a
66
115. Stock splits are often issued primarily to:
A. Reduce the market price per share.
B. Increase permanent capital.
C. Decrease the liability for dividends in arrears.
D. Give the shareholders more voting rights.
a
67
116. A stock dividend:
A. If less than 20% to 25%, reduces retained earnings by the par value of shares distributed in the dividend
B. Increases the wealth of the recipient if the market value of the shares are unchanged by the stock dividend
C. Alters the par value of the common shares
D. If 100%, has no effect on the market value of the shares
b
68
117. Choose the most correct statement regarding a 2-for-1 stock split and a 100% stock dividend.
A. Neither affects par value
B. Both cause the same reduction in retained earnings
C. Both double the number of shares outstanding
D. Both cause a significant decrease in the common share account
E. Only one affects contributed capital in excess of par on common shares
c
69
118. A 3-for-1 common stock split,
A. Decreases retained earnings by the par value of shares distributed in the split
B. Will likely not affect the market value of the stock
C. Has no effect on common share account
D. Will cause a change in the allocation of dividends to common stock relative to preferred stock
c
70
119. The effect of a stock dividend is to reduce:
A. total stockholders' equity.
B. retained earnings and the par value of each share.
C. retained earnings and increase legal capital.
D. total assets and reduce total stockholders' equity.
c
71
120. Which of the following statements concerning stock dividends is correct?
A. The declaration of a stock dividend should not be recorded as a liability even though it has not yet been issued.
B. The issuance of a stock dividend increases total stockholders' equity.
C. Courts generally have held that stock dividends, once declared, are irrevocable by the board of directors; therefore, a stock dividend declared, but not yet issued is a liability.
D. A stock dividend cannot use treasury stock.
a
72
121. XY Company had the following shareholder equity: Common shares outstanding, 10,000; average issue price, $115; current market price, $140. Shares sold on a stock subscription basis are not issued until the subscription price is collected in full. Recording a declaration of a 10 percent stock dividend in conformity with generally accepted accounting principles would change retained earnings:
A. On the basis of the market value of shares.
B. By 10 percent of its balance before the dividend.
C. On the basis of an arbitrary value of shares.
D. On the basis of the average paid-in value of shares
a
73
122. Fractional share rights are usually issued:
A. When a corporation issues a stock split.
B. At the time a property dividend is declared.
C. At the time a cash dividend is declared.
D. At the time a stock dividend is declared.
d
74
```
123. When a corporation issues a dividend in excess of the balance of its retained earnings account, it is issuing a:
A. Scrip dividend.
B. Stock dividend.
C. Property dividend.
D. Liquidating dividend.
```
d
75
```
124. A dividend that constitutes a return of contributed capital rather than earnings is called a:
A. Property dividend.
B. Liability dividend.
C. Liquidating dividend.
D. Capital dividend.
```
c
76
125. If a corporation has dividends in arrears on preferred shares, they should also:
A. Capitalize retained earnings for the dividends.
B. Declare the dividends.
C. Record a liability for the dividends.
D. Report the dividends in arrears.
d
77
126. If a corporation has dividends in arrears of $25,000 on its cumulative preferred shares, it must:
A. Set aside cash for the amount of the dividends.
B. Pay the dividends in arrears before it can pay dividends to its common shareholders.
C. Capitalize this amount as a part of permanent capital.
D. Appropriate retained earnings for this amount.
b
78
```
127. XYZ reported the following on its December 31, 2014, balance sheet: common shares, no-par, $200,000; unappropriated retained earnings, $40,000; appropriation of retained earnings for bond sinking fund, $10,000; and reserve for possible future inventory losses, $5,000. Therefore, the last line on the retained earnings statement, total appropriated and unappropriated retained earnings should be:
A. $55,000
B. $15,000
C. $40,000
D. $10,000
```
a
79
```
128. A firm declares a property dividend to its shareholders. The assets to be distributed in the dividend have a combined book value of $40,000 and combined market value of $60,000. Before taxes, the net change in retained earnings as a result of this nonreciprocal transfer is:
A. $40,000
B. $60,000
C. $20,000
D. $0
```
a
80
129. You happened to look across the balance sheet of a firm, which discloses $40,000 of ending retained earnings, $10,000 of which is appropriated for plant expansion. This firm is not a natural resources firm. Therefore:
A. the firm has $30,000 of cash
B. the firm has $40,000 of cash
C. the maximum allowable dividend cannot exceed $30,000
D. the firm has never distributed a stock dividend
c
81
130. ABC declared a common stock dividend on March 10, at which time its shares were selling for $15 per share and 10,500 shares were outstanding. After the dividend, because only 13,650 shares were outstanding, some shareholders received fractional share rights. If the provisions of the dividend provided that one share was to be issued for each three shares previously owned, there must have been:
A. 1,050 fractional share rights outstanding.
B. 350 fractional share rights outstanding.
C. 117 fractional share rights outstanding.
D. Fractional shares outstanding not determinable based on the information given.
a
82
see 131
see 131
83
see 132
see 132
84
see 133
see 133
85
134. The dollar amount of total shareholders' equity remains the same for the:
A. Issuance of preferred shares in exchange for convertible debentures.
B. Issuance of nonconvertible bonds with detachable stock purchase warrants.
C. Declaration of a cash dividend.
D. Declaration of a stock dividend
d
86
```
135. On January 1, 2015, WVC split its common shares 4 for 1 when the market value was $80 per share. Prior to the split, WVC had 50,000 common shares issued and outstanding (average issue price $12 per share). After the split, the average issue price of the shares was reduced:
A. By $3 per share.
B. To $3 per share.
C. To $4 per share.
D. To $2.40 per share.
E. No change in the par value
```
b
87
136. Accounting recognition must be given to common share subscriptions on the subscription date:
A. to guarantee the receipt of dividends subsequent to the subscription date.
B. because the dollar amount is usually large.
C. because all events relating to the common share accounts must be disclosed.
D. because a legal contract is involved.
d
88
```
137. A company reacquires its own shares during the fiscal year and reports the transaction in the theoretically correct manner. What effect will this transaction have on shareholders' equity and earnings per share, respectively?
A. Increase and decrease
B. Decrease and decrease
C. Decrease and increase
D. Increase and no effect
```
c
89
138. XV Corporation has 1,000 shares of treasury stock (common shares). It was originally issued at $15 per share and was reacquired at $10 per share. XV Corporation has decided to formally retire these shares; the current market price is $9. The single-transaction method is used. The entry to record the retirement of the shares should include the following:
A. Contributed capital from common share retirement, credit, $5,000.
B. Gain on retirement of common shares, $5,000.
C. Unusual gain, $5,000.
D. Retained earnings credit, $5,000.
a
90
see 139
see 139
91
see 140
see 140
92
see 141
see 141
93
```
142. Lorella entered into a common share subscription contract for 1,000 shares at a subscription price of $20. She paid 20% of the total price as a down payment and also paid the next two 20% instalments (she paid 60% in all). Lorella then defaulted on the contract and refused to pay any more. Assuming the company must issue shares in proportion to the cash paid, the entry to record the default would include:
A. dr. common shares $12,000
B. dr. common shares subscribed $12,000
C. dr. subscriptions receivable $8,000
D. dr. common shares subscribed $20,000
```
d
94
see 143
SEE 143
95
```
144. YTC sold and issued 200 of its common shares, true no-par, at $12 per share. Assuming no specific legal requirements, the common share account should be credited for:
A. $200
B. $240
C. $2,000
D. $2,400
```
d
96
see 145
see 145
97
```
146. MNO declared a stock dividend when it had 40,000 shares outstanding. After issuing the dividend, 7,200 additional shares and 4,000 fractional share rights were outstanding. If it required five fractional share rights to acquire a new share, this dividend must have been a:
A. 5 percent stock dividend.
B. 10 percent stock dividend.
C. 15 percent stock dividend.
D. 20 percent stock dividend.
```
d
98
147. PQR Inc. had 1,000 common shares outstanding with a par value of $10 per share. There was $20,000 of contributed surplus arising from previous retirements of shares in this class. Assume that half of these shares were retired for $14 per share. The journal entry to record this transaction would include:
A. a debit to retained earnings of $40,000.
B. an income statement loss of $40,000.
C. a credit to retained earnings of $40,000.
D. a debit to retained earnings of $20,000 and a debit to contributed surplus of $20,000
d
FA3 Liabilities Intermediate
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