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Which statement about contributed surplus is correct

 Which statement about contributed surplus is correct?

A) Contributed surplus can only arise from the issuance of shares.

B) Contributed surplus can arise from the issuance of stock options.

C) Contributed surplus arising from share repurchase gives rise to a debit journal entry.

D) Contributed surplus arising from share issuance gives rise to a debit journal entry.

 

17) Which statement best describes the accounting when a company cancels its own shares at an amount greater than their par value?

A) Retained earnings will be debited at an amount equal to the par value of the shares.

B) Retained earnings will be credited at an amount equal to the par value of the shares.

C) Contributed surplus will be debited at an amount equal to the par value of the shares.

D) Share capital will be debited at an amount equal to the par value of the shares.

 

18) Which statement about a "reverse stock split" is correct?

A) The economic position of the investors is diluted after a stock split.

B) The economic position of the investors is increased after a stock split.

C) The economic position of the investors is decreased after a stock split.

D) The economic position of the investors is unaffected after a stock split.

19) Which statement about a "share buy-backs" is correct?

A) The EPS of the company will decrease after a share buy-back.

B) Share buy-back decreases the information asymmetry for investors.

C) It is an administratively cumbersome way to award stock compensation.

D) Accounting is the same whether repurchased shares are cancelled or not.

 

20) Assume that a company issued 10,000 shares for $30 and a par value of $1/share. What entry would be required to record the repurchase and cancellation of 1,000 shares at $28/share?

A) Debit to common shares for $28,000

B) Debit to common shares for $1,000

C) Credit to contributed surplus for $29,000

D) Credit to contributed surplus for $1,000

 

21) Assume that a company issued 10,000 shares for $30 and a par value of $2/share. What entry would be required to record the repurchase and cancellation of 1,000 shares at $28/share?

A) Debit to common shares for $2,000

B) Debit to common shares for $28,000

C) Debit to contributed surplus for $1,000

D) Credit to contributed surplus for $1,000

 

22) Assume that a company issued 10,000 shares for $30/share. What entry would be required to record the repurchase and cancellation of 1,000 shares at $28/share?

A) Credit to common shares for $28,000

B) Credit to common shares for $30,000

C) Credit to contributed surplus for $29,000

D) Credit to contributed surplus for $2,000

23) Which statement about a "treasury shares" is correct?

A) The company does not pay dividends on these shares.

B) These shares must be cancelled upon re-purchase.

C) These shares are disclosed as issued and outstanding.

D) These shares continue to have voting rights.

 

24) Which statement best describes the accounting when a company cancels its own shares at an amount lower than the average share value?

A) Contributed surplus and retained earnings will be credited.

B) Contributed surplus and retained earnings will be debited.

C) Contributed surplus will be credited, thereby increasing equity.

D) Contributed surplus will be debited, thereby decreasing equity.

 

25) Which statement best describes the accounting when a company cancels its own shares at an amount higher than the average share value?

A) Contributed surplus and retained earnings will be credited.

B) Contributed surplus and retained earnings will be debited.

C) Contributed surplus will be credited, thereby increasing equity.

D) Contributed surplus will be debited, thereby decreasing equity.

 

 

 

26) Which statement best explains the "single transaction method" for treasury shares?

A) This method treats the reacquisition as the end of the initial share issuance transaction.

B) This method treats the subsequent sale as the start of another transaction.

C) This method treats the reacquisition and subsequent sale separately for accounting.

D) This method treats the reacquisition and subsequent sale as two parts of the same transaction.

27) Which statement does not explain the "two transaction method" for treasury shares?

A) This method treats the reacquisition as the end of the initial share issuance transaction.

B) This method treats the subsequent sale as the start of another transaction.

C) This method treats the reacquisition and subsequent sale separately for accounting.

D) This method treats the reacquisition and subsequent sale as two parts of the same transaction.

 

28) Which statement is correct about the "single transaction method" for treasury shares?

A) This method increases the contributed surplus when the repurchased shares are later re-sold.

B) This method has the same effect on contributed surplus to that of the two transaction method.

C) This method treats the reacquisition and subsequent sale separately for accounting.

D) This method increases contributed surplus at the time of re-purchase.

 

29) Which statement is correct about the "two transaction method" for treasury shares?

A) This method decreases the contributed surplus when the repurchased shares are later re-sold.

B) This method has the same effect on contributed surplus to that of the two transaction method.

C) This method treats the reacquisition and subsequent sale as once cycle for accounting.

D) This method increases contributed surplus at the time of re-purchase.

 

30) Which statement is correct about the "single transaction method" for treasury shares?

A) This method has the same effect on contributed surplus to that of the two transaction method.

B) This method uses a separate "treasury shares" account upon re-purchase.

C) This method treats the reacquisition and subsequent sale separately for accounting.

D) This method decreases contributed surplus at the time of re-purchase.

Dec 12 2019 View more View Less

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