256. The purchase of treasury shares
a.decreases ordinary shares authorized.
b.decreases ordinary shares issued.
c.decreases ordinary shares outstanding.
d.has no effect on ordinary shares outstanding.
257.Preference shareholders have a priority over ordinary shareholders as to
a.dividends only.
b.assets in the event of liquidation only.
c.voting rights.
d.both dividends and assets in the event of liquidation.
258. On January 2, 2011, Pacer Corporation issued 30,000 shares of 5% cumulative preference shares at $100 par value. On December 31, 2014, Pacer Corporation declared and paid its first dividend. What dividends are the preference shareholders entitled to receive in the current year before any distribution is made to ordinary shareholders?
a.$0
b.$150,000
c.$450,000
d.$600,000
259. Which of the following statements about a cash dividend is
incorrect?
a.The legality of a cash dividend depends on government laws.
b.The legality of a dividend does not indicate a company's ability to pay a dividend.
c.Dividends are not a liability until declared.
d.Shareholders usually vote to determine the amount of income to be distributed in the form of a dividend.
260.The date a cash dividend becomes a binding legal obligation to a corporation is the
a.declaration date.
b.earnings date.
c.payment date.
d.record date.
261. Dillon Corporation splits its ordinary shares 2 for 1, when the market value is $40 per share. Prior to the split, Dillon had 50,000 ordinary shares with a $20 par value issued and outstanding. After the split, the par value of the shares
a.remains the same.
b.is reduced to $2 per share.
c.is reduced to $10 per share.
d.is reduced to $20 per share.
262. Which of the following statements about retained earnings restrictions is
incorrect?
a.Many jurisdictions require a corporation to restrict retained earnings for the cost of treasury shares purchased.
b.Long-term debt contracts may impose a restriction on retained earnings as a condition for the loan.
c.The board of directors of a corporation may voluntarily create retained earnings restrictions for specific purposes.
d.Retained earnings restrictions are generally disclosed through a journal entry on the books of a company.
263.Prior period adjustments
a.may only increase retained earnings.
b.may only decrease retained earnings.
c.may either increase or decrease retained earnings.
d.do not affect retained earnings.
264. Jennifer Company reports the following amounts for 2014:
Net income$ 135,000
Average shareholders' equity1,000,000
Preference dividends35,000
Par value preference shares200,000
The 2014 rate of return on ordinary shareholders' equity is
a.12.5%.
b.11.3%.
c.13.5%.
d.16.9%.
a265.At December 31, the shareholders’ equity included
Share capital–ordinary, $5 par value; 1,100,000 shares issued
and 1,000,000 shares outstanding$5,500,000
Share premium–ordinary1,600,000
Retained earnings3,500,000
Treasury shares, (100,000 shares) (700,000)
Total equity$9,900,000
The book value per ordinary share is
a.$9.00
b.$9.90
c.$10.60
d.$9.64
Answers to Multiple Choice Questions