Sharehoder's Mutipe Choice

Difficuty: Easy Learning Objective: Discuss the characteristics of the

corporate form of organization
The cumuative preferred shares requires dividends that were not initiay paid in any year must be
made up in a ater year before dividends are distributed to norma hoders. t does not mean
sharehoders can accumuate pref. shares unti they are equa to the stated vaue of common shares

 Pref. shares are often issued instead of issuing a debt to avoid paying dividends to the common
sharehoders.
b) because a corporation’s debt-to-equity ratio has become to o high. c) to increase the market vaue
of the shares. d) to decrease the market vaue of the shares

2 A acorp. ses common shares on subscription . The shares account shoud credit when the (a) shares
are subscribed. (b) initia first payment made. (c) ast payment made. (d) ast paymen t made & shares
ssued.

 Sub Receivabe are reported as (a) non-current asset, (b_ a current asset, (c) deduction from
sh/equity,
()(d) current asset and deduction from sharehoders' equity.

 A probem in a umpsum share sae in accounting is the aocation of the proceeds among the casses
of securities. One acceptabe method of aocation is the (a) pro forma
(b) direct (c) indirect (d) reative FV vaue method.

5 When shares are reacquired at cost < AVG/sh vaue, the difference is credited to (a) share capita
account. (b) RE. (c) Contributed Surpus.

ANSWERS
 B
2 D
 D
 B
5 C