AC 1104 Theories

1. Which of the following statements is or are true?

Statement 1: A corporation cannot be held liable for personal indebtedness of a shareholder
Statement 2: Share with par value maybe issued for a consideration less than Php5 per share
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 or 2
2. Which of the following statements is or are true?
Statement 1: If a shareholder dies, the corporation is dissolved
Statement 2: Shares of stocks are not transferrable as they are not considered as assets of the
corporation
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 or 2
3. One of the following is not a characteristic of the corporate form of organization
a. Limited liability of shareholders
b. Mutual agency
c. Continuous existence
d. Centralized authority
4. Which of the following statements is or are true?
Statement 1: If the source of an asset is the net income earned by the corporation the
shareholders equity account retained earnings would be debited.
Statement 2: If a corporation reduces its assets by purchasing its stocks from a shareholder, the
contra equity account treasury stock is credited.
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 or 2
5. Which of the following statement/s are false?
Statement 1: Subscribed share capital is the portion of authorized share capital that has been
subscribed and fully paid
Statement 2: Outstanding share are the shares issued and in the hands of the shareholders
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 or 2
6. Which of the following statements is/are true?
Statement 1: Two alternative methods of accounting, it may be authorization and issuance of
share capital are memorandum method and journal entry method

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 Statement 2: If the method of accounting of share capital is not indicated in the problem then
the assumption is journal entry
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 or 2
7. Which of the following statements is/are true?
Statement 1: Ordinary shares have voting rights
Statement 2: Treasury shares have no voting rights as long such stocks remain in the treasury
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2

8. Which of the following statement is/are true?

Statement 1: The equivalent IAS term of additional paid in capital is contributed capital
Statement 2: The equivalent IAS term for retained earnings is accumulated profits
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2

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 Answer Key

1. C
2. D
3. B
4. D; Statement 1: Retained earnings is credited if net income, Statement 2: Cash is credited,
treasury stock is debited
5. A
6. A
7. C
8. D; Statement 2: accumulated profits AND LOSSES

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