IAI – SUMMATIVE THEORY & PRACTICE

NORTH CENTRAL MINDANAO COLLEGE

Formerly: Central Mindanao Technical College
Maranding, Lala, Lanao del Norte
For Excellence Service & Quality – TO GOD BE THE GLORY

THEORY OF ACCOUNTS
SUBMIT BY SEPTEMBER 18, 2021
1. Which of the following is not considered cash for financial reporting purposes?
a. Petty cash funds and change funds c. Coin, currency, and available funds.
b. Money orders, certified checks, and personal checks. D. Postdated checks and IOU’s
2. Which of the following is considered cash?
a. Certificates of deposit (CDs) c. Money market savings certificates
b. Money market checking accounts d. Postdated checks
3. Travel advances should be reported as
a. Supplies b. Cash because they represent the equivalent of money c. investments d. none of the above
4. Which of the items should not be included in the Cash caption on the balance sheet?
a. Coins and currency in the cash register
b. Checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand
5. A cash equivalent in a short-term, high liquid investment that is readily convertible into known amounts of cash
and a. is acceptable as a means to pay current liabilities
c. Has a current market value that is greater than its original cost.
d. Bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation.
e. Is so near its maturity that it presents insignificant risk of changes in interest rates.
6. Bank overdrafts, if material, should be
a. Reported as a deduction from the current asset section.
b. Reported as a deduction from cash.
c. Netted against cash and a net cash amount reported.
d. Reported as a current liability.
7. Deposits held as compensating balances
a. Usually do not earn interest
b. If legally restricted and held against short-term credit may be included as cash.
c. If legally restricted and held against long-term credit may be incuded among current assets.
d. None of these.
8. The category “trade receivables” includes
a. Advances to officers and employees.
b. Income tax refunds receivable.
c. Claims against insurance companies for casualties sustained.
d. None of these
9. Which of the following should be recorded in Accounts Receivable?
a. Receivables from officers c. Dividends receivable
b. Receivables from subsidiaries d. None of these
10. What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a
balance sheet?
a. As offsets to capital
b. By means of footnotes only.
c. As assets but separately from other receivables.
d. As trade notes and accounts receivable if they otherwise qualify as current assets.
11. When a customer purchases merchandise inventory from a business organization, she may be given a discount
which is designed to induce prompt payment. Such a discount is called a(an)
a. Trade discount b. nominal discount c. enhancement discount d. cash discount
12. Trade discounts are
a. Not recorded in the accounts, rather they are a means of computing a price.
b. Used to avoid frequent changes in catalogues.
c. Used to quote different prices for different quantities purchased.
d. All of the above.
13. If a company employs the gross method of recording accounts receivable from customers, then sales discounts
taken should be reported as
a. A deduction from sales in the income statement.
b. An item of “other expense” in the income statement.
c. A deduction from accounts receivable in determining the net realizable value of accounts receivable.
d. Sales discounts forfeited in the cost of goods sold section of the income statement.
14. Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the
cash to be received in the future, failure to follow this practice usually does not make the balance sheet
misleading because
a. Most short-term receivables are not interest bearing.
b. The allowance for uncollectible accounts includes a discount element.
c. The amount of the discount is not material.
d. Most receivables can be sold to a bank or factor.
15. Which of the following methods of determining bad debt expense does not properly match expense and
revenue?
a. Charging bad debts with a percentage of sales under the allowance method.
b. Charging bad debts with an amount derived from a percentage of accounts receivable under the
allowance method.
c. Charging the bad debts with an amount derived from aging accounts receivable under the allowance
method.
d. Charging bad debts as accounts are written off as uncollectible.
16. Which of the following methods of determining annual bad debt expense best achieves the matching concept?
a. Percentage sales c. Percentage of average accounts receivable.
b. Percentage of ending accounts receivable. d. Direct write-off
17. Which of the following is a generally accepted method of determining the amount of adjustment to bad debt
expense?
a. A percentage of sales adjusted for the balance in the allowance.
b. A percentage of sales not adjusted for the balance in the allowance.
c. A percentage of accounts receivable not adjusted for the balance in the allowance.
d. An amount derived from aging accounts receivable and not adjusted for the balance in the allowance.
18. The advantage of relating a company’s bad debt expense to its outstanding accounts receivable is that this
approach
a. Gives a reasonable correct statement of receivables in the balance sheet.
b. Best relates bad debt expense to the period of sale.
c. Is the only generally accepted method for valuing accounts receivable.
d. Makes estimates of uncollectible accounts unnecessary.
19. At the beginning of 2015, Finley Company received a three-year zero interest bearing P1,000 trade note. The
market rate for equivalent notes was 8% at that time. Finley reported this note as a P1,000 trade note
receivable on its 2015 year-end statement of financial position and P1,000 as sales revenue for 2015. What
effect did this accounting for the note have on Finley’s net earnings for 2015, 2016, 2017, and its retained
earnings at the end of 2017, respectively?
a. Overstate, overstate, understate, zero
b. Overstate, understate, understate, understate
c. Overstate, overstate, overstate, overstate
d. None of these
20. 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 receivables are used as collateral for a promissory note issued to the factor by the owner of the
receivables.
c. The factor assumes the risk of collectability and absorbs any credit losses in collecting the receivables.
d. The financing cost (interest expense) should be recognized ratably over the collection period of the
receivables.
21. Which of the following statements is incorrect regarding the classification of accounts and notes receivable?
a. Segregation of the different types of receivables is required if they are material.
b. Disclose any loss contingencies that exist on the receivables.
c. Any discount or premium resulting from the determination of present value in notes receivable
transactions is an asset or liability respectively.
d. Valuation accounts should be appropriately offset against the proper receivable accounts.
22. Of the following conditions, which is the only one that is not required if the transfer of receivables with recourse
is to be accounted for as a sale?
a. The transferor is obligated to make a genuine effort to identify those receivables that are uncollectible.
b. The transferor surrenders control of the future economic benefits of the receivables.
c. The transferee cannot require the transferor to repurchase the receivables.
d. The transferor’s obligation under the recourse provisions can be reasonably estimated.
23. The accounts receivable turnover ratio measures the
a. Number of times the average balance of accounts receivable is collected during the period.
b. Percentage of accounts receivable turned over to a collection agency during the period.
c. Percentage of accounts receivable arising during certain seasons.
d. Number of times the average balance of inventory is sold during the period.
24. The accounts receivable ratio is computed by dividing
a. Gross sales by ending net receivables.
b. Gross sales by average net receivables
c. Net sales by ending net receivables.
d. Net sales by average net receivables.
25. Which of the following is not true?
a. The imprest petty cash system in effect adheres to the rule of disbursement by check.
b. Entries are made to the Petty Cash account only to increase or decrease the size of the fund or to adjust
the balance if not replenished at year end.
c. The Petty Cash account is debited when the fund is replenished.
d. All of these are not true.
26. A Cash Over and Short account is
a. Not generally accepted.
b. Debited when the petty cash fund proves out over. D. A contra account to cash
c. Debited when the petty cash fund proves out short.
27. The journal entries for a bank reconciliation
a. Are taken from the balance per bank section only.
b. May include a debit to Office Expense for bank service charges.
c. May include a credit to Accounts Receivable for an NSF check.
d. May include a debit to Accounts Payable for an NSF check.
28. When preparing a bank reconciliation, bank credits are
a. Added to the bank statement balance
b. Deducted from the bank statement balance.
c. Added to the balance per books .
d. Deducted from the balance per books.
29. When using a perpetual inventory system,
a. No purchases account is used. c. Two entries are required to record a sale.
b. A cost of goods sold account is used. d. All of these.
30. Goods in transit which are shipped F.O. B. shipping point should be
a. Included in the inventory of the seller. c. Included in the inventory of the shipping company.
b. Included in the inventory of the buyer. d. None of these.
31. Goods in transit which are shipped F.O.B. destination should be
a. Included in the inventory of the seller. c. Included in the inventory of the shipping company.
b. Included in the inventory of the buyer. d. None of these.
32. Which of the following items should be included in a company’s inventory at the balance sheet dated?
a. Goods in transit which were purchased f.o.b. destination.
b. Goods received from another company for sale on consignment.
c. Goods sold to a customer which are being held for the customer to call for at his/her convenience.
d. None of these.
33. Goods on consignment are
a. Included in the consignee’s inventory.
b. Recorded in a Consignment Out account which is an inventory account.
c. Recorded in a Consignment In account which is an inventory account.
d. All of these.
34. Valuation of inventories requires the determination of all of the following except
a. The costs to be included in inventory.
b. The physical goods to be included in inventory.
c. The cost of goods held on consignment from other companies.
d. The cost flow assumption to be adopted.
35. The failure to record a purchase of merchandise on account even though the goods are properly included in the
physical inventory results in
a. An overstatement of assets and net income.
b. An understatement of assets and net income.
c. An understatement of cost of goods sold and liabilities and an overstatement of assets.
d. An understatement of liabilities and an overstatement of owner’s equity.
36. It is a marketing scheme whereby an entity grants award credits to customers and the entity can redeem the
award credits to customers and the entity can redeem the award credits in exchange for free discounted goods
or services.
a. Customer loyalty program b. premium plan c. marketing plan d. loyalty award
37. The award credits granted to customers under customer loyalty program is often described as
a. Points b. awards c. credits d. royalty
38. A retail store received cash and issued gift certificates that are redeemable in merchandise. The gift certificates
lapse one year after they are issued. How would the deferred revenue account be affected by the redemption
and lapse of certificates, respectively.
a. Decrease and No effect c. No effect and No effect.
b. Decrease and Decrease c. No effect and Decrease.
39. A magazine subscriptions collected in advance are treated as
a. A contra account to magazine subscriptions received.
b. Deferred revenue in the liability section.
c. Deferred revenue in the shareholders’ equity section.
d. Magazine subscription refund in the income statement in the period collected.
40. An entity received an advance payment for special order goods that are to be manufactured and delivered within
six months. The advance payment shall be reported in the entity’s statement of financial position as
a. Deferred charge b. Contra asset account c. Current liability d. Noncurrent liability
41. Under a royalty agreement with another entity, an entity will receive royalties from the assignment of a patent
for four years. The royalties received in advance shall be reported as revenue
a. In the period received. c. Evenly over the life of the royalty agreement.
b. In the period earned. d. At the date of the royalty agreement.
42. Estimated liabilities are disclosed in financial statements by
a. Note to financial statements.
b. Showing the amount among the liabilities but not extending to the liability total.
c. An appropriation of retained earnings.
d. Appropriately classifying them as regular liabilities in the statement of financial position.
43. Unearned rent revenue would normally appear in the statement of financial position as
a. Plant asset b. Current liability c. Noncurrent liability d. Current asset
44. Rent revenue collected one year in advance should be reported as
a. Revenue in the year collected. c. Separate item of shareholders’ equity.
b. Current liability d. Accrued liability.
45. Which of the following is the correct definition of a provision?
a. A possible obligation arising from past event.
b. A liability of uncertain timing or amount.
c. A liability which cannot be easily measured.
d. An obligation to transfer funds to an entity.
46. It is an event that creates a legal or constructive obligation because the entity has no other realistic alternative
but to settle the obligation.
a. Obligating event b. Past event c. Subsequent event d. Current event
47. Where there is a continuous range possible outcomes, and each point in that range is as likely as any other, the
range to be used is the
a. Minimum b. Maximum c. Midpoint d. Summation of the minimum and maximum.
48. Where the provision being measured involves a large population of items, the obligation is estimated by
“weighting” all possible outcomes by their associated probabilities. The name for this statistical method of
estimation is
a. Expected value b. Present value c. Current value d. Extrapolation
49. Which of the following is within the PAS 37?
a. Financial instrument carried over at fair value.
b. Future payment under the employment contract.
c. Future payment on vacant leasehold premises.
d. An insurance entity’s policy liability.
50. It is a contract in which the unavoidable costs of meeting the obligation under the contract exceed the
economic benefits to be received under the contract.
a. Onerous contract b. Executory contract c. Executed contract d. Sale contract
51. This is defined as “a structured program that is planned and controlled by the management that materially
changes either the scope of a business of an entity or the manner in which that business is conducted”.
a. Restructuring b. Liquidation c. Recapitalization d. Corporate revamp
52. Which is a cost of restructuring?
a. Cost retraining or relocating continuing staff.
b. Marketing or advertising cost.
c. Investment in new system and distribution network.
d. Cost of relocating business activities from one location to another.
53. It is the abusive practice of manipulation and creative accounting by dumping all kinds of provisions under the
banner of provision for restructuring.
a. Big bath provision b. Creative accounting c. Cookie jar d. General reserve
54. A legal obligation is an obligation that is derived from all of the following, except
a. Legislation b. A contract c. Other operation of law d. As established pattern of past practice.
55. For which of the following should a provision be recognized?
a. Future operating losses.
b. Obligations under insurance contracts.
c. Reductions in fair value of financial instruments.
d. Obligations for plant decommissioning costs.
56. Which of the following is incorrect concerning a contingent liability?
a. A contingent liability is not recognized in the financial statements.
b. A contingent liability is disclosed only.
c. If the contingent liability is remote, no disclosure is required.
d. A contingent liability is both probable and measurable.
57. It is a possible asset that arises from past event and whose existence will be confirmed only by the occurrence
or nonoccurrence of one or more uncertain future events not wholly within the control of the entity.
a. Contingent asset b. Other asset c. Suspense account d. Current asset
58. The likelihood that the future event will or will not occur can be expressed by a range of outcome. Which range
means that the future event occurring is very slight?
a. Probable b. Reasonably possible c. Certain d. Remote
59. An entity did not record an accrual for a present obligation but disclose the nature of the obligation and the
range of the loss. How likely is the loss?
a. Remote b. Reasonably possible c. Probable d. Certain
60. An item that is not a contingent liability is
a. Premium offer to customers for labels or box tops.
b. Accommodation endorsement on customer note.
c. Additional compensation that may be payable on a dispute now being arbitrated.
d. Pending lawsuit.
61. Which of the following is the proper accounting treatment of a contingent asset?
a. An accrued account c. Deferred earnings d. A disclosure only
b. An account receivable with an additional disclosure explaining the nature of the transaction
62. Pending litigation would generally be considered
a. Nonmonetary liability c. Estimated liability
b. Contingent liability d. Current liability
 NORTH CENTRAL MINDANAO COLLEGE
Maranding, Lala, Lanao del Norte

THEORY OF ACCOUNTS REVIEW – ACCTG REV 1

NAME________________________________________________DATE______________SCORE_______________
COURSE/YEAR_____________________________CLASS SCHEDULE________________DAYS________________
INSTRUCTOR GREGORIA G. UNGAB
SUBMIT BY SEPTEMBER 19, 2021

TEST I – MULTIPLE CHOICE. SELECT THE BEST ANSWER AND ENCIRCLE THE LETTER OF YOUR CHOICE
ANSWER. AVOID ERASURES OR ALTERATIONS BECAUSE IT MEANS WRONG.

1. Bonds payable not designated at fair value through profit loss shall be measured initially at
a. Fair value c. Fair value minus bond issue costs.
b. Fair value plus bond issue costs d. Face amount
2. Costs incurred in connection with the issuance of ten-year bonds which sold at a slight premium shall be
a. Charged to retained earnings when the bonds are issued.
b. Expensed in the year in which incurred.
c. Capitalized as organization cost.
d. Reported in the statement of financial position as a deduction from bonds payable and amortized over
the ten year bond term.
3. The issuer of a ten-year term bond sold at par three years ago with interest payable May 1 and November 1
each year, shall report in its December 31 statement of financial position
a. Liability for accrued interest c. Increase for deferred charges
b. Addition to bonds payable d. Contingent liability
4. Under the international accounting standard, the valuation method used for bonds payable is
a. Historical cost c. Discounted cash flow valuation at yield rate at issuance.
b. Discounted cash flow valuation at current yield rate d. Maturity amount.
5. What is the market rate of interest for a bond issue which sells for more than its face value?
a. Less than the rate stated on the bond. c. Higher than rate stated on the bond.
b. Equal to rate stated on the bond. d. Independent of rate stated on the bond.
6. A 20-year bond was issued at a premium with a call provision to retire the bond. When the bond issuer
exercised the call provision on an interest date, the call price exceeded the carrying amount of the bond. The
amount of bond liability removed from the accounts should have equaled the
a. Cash paid c. Call price plus unamortized premium.
b. Face amount plus unamortized premium d. Current market price.
7. When interest expense is calculated using the effective interest method, interest expense equals
a. Actual amount of interest paid.
b. Carrying amount of the bonds multiplied by the stated interest rate.
c. Carrying amount of the bonds multiplied by the effective interest rate.
d. Maturity value of the bonds multiplied by the effective interest rate.
8. When an entity issued bonds payable for working capital needs, the proceeds from the sale of the bonds
payable
a. Will always be equal to the face amount. d. Will always be more than the face
amount.
b. Will always be less than the face amount.
c. May be equal, more or less than the face amount depending on market interest rate
9. An entity issued bonds payable with non-detachable share warrants. In computing interest expense for the first
year, the effective interest rate is multiplied by the
a. Proceeds received from sale of the bonds. c. Fair value of the bonds ex-warrant.
b. Face value of the bonds d. Share warrants outstanding.
10. The proceeds from bonds issued with non-detachable share warrants shall be accounted for
a. Entirely as bonds payable
b. Entirely as shareholders’ equity
c. Partly as unearned revenue and partly as bonds payable.
d. Partly as bonds payable and partly as shareholders’ equity.
11. A bond or similar instrument convertible by the holder into a fixed number of ordinary shares of the entity is
a. A compound financial instrument c. A derivative financial instrument.
b. A primary financial instrument d. An equity instrument.
12. An entity shall measure initially a note payable not designated at fair value through profit or loss at
a. Face amount c. Fair value plus transaction cost.
b. Fair value d. Fair value minus transaction cost.
13. Under the fair value option, an entity shall measure the note payable initially at
a. Face amount. c. Fair value minus transaction cost.
b. Fair value plus transaction cost. d. Fair value, excluding transaction cost.
 14. If the present value of a note issued in exchange for a property is less than its face amount, the difference shall
be a. Included in the cost of the asset.
b. Amortized as interest over the life of the note.
c. Amortized as interest expense over the life of the asset.
d. Included in interest expense in the year of issuance.
15. The discount resulting from the determination of the present value of a note payable shall be reported in the
statement of financial position as
a. Deferred credit separate from the note.
b. Direct deduction from the face amount of the note.
c. Deferred charge separate from the note.
d. Addition to the face amount of the note.
15. Under a debt restructuring involving substantial modification of terms, the future cash flows under the new terms
shall be discounted using
a. Original effective interest rate. c. Market rate of interest.
b. Interest rate under the new terms. d. Prime interest rate.
17.. The difference between the carrying amount of a financial liability extinguished and the fair value of equity
instruments issued or fair value of liability extinguished in the absence of the fair value of equity instruments issued
shall be recognized in
a. Profit or loss c. Retained Earnings
b. Other comprehensive income d. General reserve
18. The difference between the carrying amount of a financial liability extinguished and the consideration given shall
a. Be recognized in profit or loss c. Be included in retained earnings
b. Be included in equity d. Not be recognized.
19. The appropriate valuation of an operating lease in the statement of financial position of the lessee is
a. Zero b. The absolute sum of the lease payments.
c. The present value of the sum of the lease payments discounted at an appropriate rate.
d. The market value of the asset at the inception of the lease.
20. Rent received in advance by the lessor in an operating lease shall be recognizes as revenue
a. When received c. At the lease expiration
b. At the lease inception d. In the period specified by the lease
21. Lease payments under an operating lease shall be recognized as an expense in the income statement on
a. Straight line basis over the lease term unless another systematic basis is representative of the time
pattern of the user’s benefit.
b. Diminishing balance basis. C. Sum of units basis d. Cash basis
22. It is an arrangement whereby one party sells a property to another party and then immediately leases the
property back from the new owner.
a. Sale b. Leaseback c. Sale and leaseback d. Operating lease
23. It is a contract that transfers substantially all the risks and rewards incidental to ownership of an asset,
although title may or may not eventually be transferred.
a. Lease b. Finance lease c. Operating lease d. Lease purchase.
24. It is that portion of the residual value of the leased asset, the realization of which by the lessor is not
assured or is guaranteed solely by a party related to the lessor.
a. Residual value c. Unguaranteed residual value
b. Guaranteed residual value d. minimum lease payment
25. The accounting concept that is principally used to classify leases into operating and finance is
a. Substance over form b. Prudence c. Neutrality d. Completeness
26. Which of the following should be considered an executor cost?
a. Minimum lease payment c. Bargain purchase option
b. Interest expense incurred d. Maintenance cost
27. Lessors shall recognize asset held under a finance lease as a receivable at an amount equal to
a. Gross investment in the lease c. Gross rentals
b. Net investment in the lease d. Residual value, whether guaranteed or unguaranteed.
28. Under a sales type lease, what is the meaning of “gross investment in the lease”?
a. Present value of minimum lease payments.
b. Absolute amount of minimum lease payments.
c. Present value of minimum lease payments plus present value of unguaranteed residual value.
d. Aggregate of minimum lease payments and unguaranteed residual value.
29. It is the deferred tax consequence attributable to a taxable temporary difference.
a. Deferred tax liability c. Current tax liability
b. Deferred tax asset d. Current tax asset.
30. It is the amount of income tax payable in respect of the taxable profit.
a. Current tax expense c. Deferred tax expense
b. Total Income tax expense d. Deferred tax benefit
31. It is the amount attributable to an asset or liability for tax purposes.
a. Carrying amount c. Measurement base
b. Tax base d. Taxable amount
32. Recognizing tax benefit in a loss year due to a loss carry forward requires
a. Only a footnote disclosure c. Creating a deferred tax asset
b. Creating a new carry forward for the next year. d. Creating a deferred tax liability
33. These are all forms of consideration given by an entity in exchange for services rendered by employees.
a. Employee benefits c. Fringe benefits
b. Employee compensation d. Salaries and wages
34. What is the mandated method of determining the present value of the defined benefit obligation?
a. Projected unit credit method c. Individual level premium method
b. Entry age normal method d. Aggregate method
35. These are assets held by an entity, the fund itself, that is legally separate from the reporting entity and
exists solely to pay or fund employee benefits.
a. Plan assets b. Trust fund c. Retirement fund d. Pension assets
36. An entity’s employees are each entitled to 20 days of paid holiday leave per calendar year. Unused holiday
leave cannot be carried forward and does not vest. The holiday leave is
a. A short term employee benefit c. Other long-term employee benefit
b. A post- employment benefit d. A termination benefit
37. An entity maintains a defined benefit pension plan for its employees. The service cost component of the net
periodic pension cost is measured using the
a. Unfunded accumulated benefit obligation c. Projected benefit obligation
b. Unfunded vested benefit obligation d. Expected return on plan assets
38. An employer’s obligation for post- retirement health benefits that are expected to be provided to an
employee must be fully accrued by the date the
a. Employee is fully eligible for benefits c. Benefits are utilized
b. Employee retires d. Benefits are paid
39. Retirement benefit plan investments shall be carried at
a. Fair value b. Historical cost less impairment c. Net realizable value d. Value in use
40. Gains and losses on retirement of treasury shares shall not be included in profit or loss. If the retirement
results in a gain, such gain shall be credited to
a. Share premium b. Retained earnings c. Share capital d. Income
41. A redeemable preference share is
a. An equity instrument c. Either equity instrument or a financial liability
b. A financial liability d. Neither an equity instrument nor a financial liability
42. At the date of the financial statements, shares issued would exceed shares outstanding as a result of
a. Declaration of share split c. Purchase of treasury shares
b. Declaration of a stock dividend d. Payment in full of subscribed shares
43. Share warrants outstanding shall be reported as
a. Liability b. Reduction of share premium c. Share capital d. Share premium
44. Non-stock dividends shall be recognized as liabilities on the
a. Date of declaration b. date of record c. date of payment d. date of issuing check
45. When shareholders may elect to receive cash in lieu of stock dividend, the amount to be charged to retained
earnings is equal to
a. Optional cash dividend c. Par value of the shares
b. Fair value of the shares d. Book value of the shares
46. If the stock dividend is less than 20%, how much of the retained earnings should be capitalized?
a. Par value of the shares
b. Fair value of the shares on the date of declaration.
c. Fair value of the shares on the date of record.
d. Fair value of the shares on the date of issuance.
47. In closely held entities, if stock dividends are declared , retained earnings shall be capitalized at
a. Par or stated value c. Fair value on date of declaration
b. Book value d. Fair value on date of issue
48. The actual total amount of a cash dividend to be paid is determined on the date of
a. Record b. Declaration c. Declaration or date of record, whichever is earlier d. Payment
49. A dividend which is a return to shareholders of a portion of their original investment is
a. Liquidating dividend c. Liability dividend
b. Patronage dividend d. Participating dividend
50. the issuer shall directly charge retained earnings for the par value of the shares issued in
a. Two for one share split c. Twenty percent stock dividend
b. share options d. Share appreciation right
51. Which of the following would not affect retained earnings?
a. Conversion of preference shares into ordinary shares b. Share split
c. Reissue of treasury shares d. Stock dividend
52. How would retained earnings be affected by the declaration of stock dividend and share split, respectively?
a. Decrease and decrease c. No effect and No effect
b. No effect and decrease d. Decrease and No effect
53. When a dividend is declared and paid in stock
a. Total shareholders’ equity does not change. C. The current ratio increases.
b. Total shareholders’ equity decreases. D. The amount of working capital decreases.
54. Undistributed stock dividends shall be reported as
a. A current liability c. A reduction in total shareholders’ equity
b. An addition to share capital outstanding. D. A note to financial statements.
55. Under international accounting standards, which of the following equity reserves is part of distributable
equity? A. Par value of shares c. Revaluation reserve
b. Capital redemption reserve d. Retained earnings