EQUITY Flashcards
(20 cards)
A corporation is incorporated in only one country regardless of the number of countries in which it operates.
True
The preemptive right allows shareholders the right to vote for directors of the company.
False
Ordinary shares is the residual corporate interest that bears the ultimate risks of loss.
True
Earned capital consists of contributed capital and retained earnings.
False
True no-par shares should be carried in the accounts at issue price without any share premium reported.
True
Companies allocate the proceeds received from a lump-sum sale of securities based on the securities’ par values.
False
Companies should record shares issued for services or noncash property at either the fair value of the shares issued or the fair value of the consideration received.
True
Treasury shares are a company’s own shares that have been reacquired and retired.
False
The cost method records all transactions in treasury shares at their cost and reports the treasury shares as a deduction from ordinary shares.
False
When a corporation sells treasury shares below its cost, it usually debits the difference between cost and selling price to Share Premium—Treasury.
True
Participating preference shares require that if a company fails to pay a dividend in any year, it must make it up in a later year before paying any ordinary dividends.
False
Callable preference shares permit the corporation at its option to redeem the outstanding preference shares at stipulated prices.
True
The laws of some jurisdictions require that corporations restrict their contributed capital from distribution to shareholders.
True
Many companies pay dividends in amounts equal to their legally available retained earnings.
False
All dividends, except for liquidating dividends, reduce the total shareholders’ equity of a corporation.
False
Dividends payable in assets of the corporation other than cash are called property dividends or dividends in kind.
True
When a share dividend is declared on the ordinary shares outstanding, a company is required to transfer the par value of the shares issued from retained earnings.
True
Share splits and share dividends have the same effect on a company’s retained earnings and total shareholders’ equity.
False
The return on ordinary share equity is computed by dividing net income by the average ordinary equity.
False
The payout ratio is determined by dividing cash dividends paid to ordinary shareholders by net income available to ordinary shareholders.
True
