RETAINED EARNINGS 1. Non-stock dividends shall be recognized as liabilities on the A. Date of Declaration B. Date of record C. Date of payment D. Date of issuing check 2. When shareholders may elect to receive receive cash in lieu of stock dividend, the amount to be charged to retained earnings is equal to A. Optional cash dividend B. Fair value of the shares C. Par value of the shares D. Book value of the shares 3. Treasury shares may be reissued as dividends in which case what amount should be charged to retained earnings A. Cost of the treasury shares B. Par value of the treasury share C. Fair value of the treasury shares on the date of declarations D. Fair value of the treasury shares on the date of issuance 4. If the share dividend is less than 20%, what amount of the retained earnings should be capitalized? A. Par value of the shares B. Fair value of the shares on the date of declaration C. Fair value of the shares on the date of record D. Fair value of the shares on the date of issuance 5. If the share dividend is less than 20%, what amount of the retained earnings should be capitalized? A. Par value of the shares B. Fair value of the shares on the date of declaration C. Fair value of the shares on the date of record D. Fair value of the shares on the date of issuance 6. An entity issued what is called a "20% share dividend": At what amount per share should retained earnings be reduced for the transaction? A. Zero B. Par value C. Fair value at the declaration D. Fair value at the date of issuance 7. The declaration and issuance of a 25% share dividend A. Increases ordinary shares outstanding and total equity B. Decreases retained earnings but does not change total equity C. May increase or decrease share premium but does not change total equity D. Increases retained earnings and total equity 8. Which of the following statements is incorrect concerning retained earnings? A. Appropriated retained earnings shall be clearly distinguished from appropriated retained earnings B. A deficit is a debit balance in retained earnings C. A deficit in retained earnings shall be presented as an asset D. When the deficit exceeds the total of the other capital account balances, the excess is a capital deficiency 9. Appropriations of retained earnings should be reported as A. Component of equity as part of share premium B. Component of equity as part as total retained earnings C. Component of total liabilities as current liability D. When the deficit exceeds the total of the other capital account balances, the excess is a capital deficiency 10. An entity shall measure a liability to distribute non cash asset as dividend to the owners at A. Carrying amount of the asset distributed B. Fair value of the asset distributed C. Either the carrying amount or fair value of the asset D. Neither the carrying amount nor fair value 11. An entity shall review and adjust the carrying amount of the dividend payable at the end of each reporting period and at the date of settlement with any changes in the carrying amount of the dividend payable recognized A. In equity as adjustment to the amount of distribution B. In profit or loss C. As adjustment of share premium D. As component of other comprehensive income 12. When an entity settles the property dividend payable, it shall recognized the difference between the carrying amount of the asset distributed and the carrying amount of the dividend payable in A. Profit or loss B. Other comprehensive income C. Equity D. Retained earnings 13. An entity shall measure a non current asset classified as held for distribution to owners at A. Carrying amount B. Fair value less cost to distribute C. Lower of carrying amount and fair value less cost to distribute D. Fair value 14. An entity declared a cash dividend on a certain date payable on another date. Retained earnings would A. Increase on the date of declaration B. Not be affected on the date of declaration C. Not be affected on the date of payment D. Decrease on the date of payment 15. The actual total amount of a cash dividend to be paid is determined on the date of A. Record B. Declaration C. Declaration or date of record, whichever is earlier D. Payment 16. A dividend which is a return to shareholders of a portion of their original investment is A. Liquidating dividend B. Patronage dividend C. Liability dividend D. Participating dividend 17. When an entity declared and paid a liquidating dividend, the distribution resulted in a decrease in A. Neither paid in capital nor retained earnings B. Both paid in capital and retained earnings C. Retained earnings and no effect on paid in capital D. Paid in capital and no effect on retained earnings 18. An entity declared a dividend a portion of which was liquidating. How would this declaration affect contributed capital and retained earnings, respectively? A. Decrease and No effect B. Decrease and Decrease C. No effect and Decrease D. No effect and No effect 19. The issuer should charge retained earnings for the fair value of shares issued in a A. 1 for 5 share dividend B. 1 for 8 share dividend C. 4 for 1 share split D. 2 for 1 share split 20. If the entity has only one class of share capital, a transfer from retained earnings to share capital equal to the fair value of the shares issued is ordinarily a characteristic of A. Either a share dividend or a share split B. Neither a share dividend nor a share split C. A share split but not a share dividend D. A share dividend but not a share split 21. Total shareholder's equity remains the same when there is A. Issuance of preference shares in exchange for convertible debentures B. Issuance of non-convertible bonds with share warrants C. Declaration of share dividend D. Declaration of cash dividend 22. Unlike a share split, a stock divided requires a formal journal entry in the accounting records because A. Stock dividends increases the relative book value of an individual's shareholdings B. Stock dividends increase the shareholder's equity in the issuing equity C. Stock dividends are payable on the date declared D. Stock dividends represents a transfer from retained earnings to share capital 23. Which of the following would not affect retained earnings? A. Conversion of preference shares into ordinary shares B. Share split C. Reissue of treasury share D. Share dividend 24. How would retained earnings be affected by the declaration of share dividend and share split, respectively? A. Decrease and Decrease B. No effect and Decrease C. No effect and No effect D. Decrease and No effect 25. When a share dividend is declared and issued A. Total shareholder's equity does not change B. Total shareholder's equity decreases C. The current ratio increases D. The amount of working capital decreases 26. Undistributed share dividends shall be reported as A. A current liability B. An addition to share capital outstanding C. A reduction in total shareholders' equity D. A note to financial statements 27. An entry is not made on the A. Date of declaration B. Date of record C. Date of payment D. An entry is made on all of these dates 28. Cash dividends are paid on the basis of the number of shares A. Authorized B. Issued C. Outstanding D. Outstanding less the number of treasury shares 29. If an entity wishes to "capitalize" retained earnings, it may issue A. Cash dividend B. Share dividend C. Property dividend D. Liquidating dividend 30. Liquidating dividend A. Are prohibited under IFRS B. Require a credit to share capital C. Reduce amounts paid in by shareholders D. All of the choices are correct 31. A retained earnings appropriation is used to A. Absorb a fire loss when an entity is self-insured B. Provide for a contingent loss that is probable and measurable C. Smooth periodic income D. Restrict earnings available for dividends 32. An appropriation of retained earnings for future plant expansion will result in A. The establishment of a fund to help finance future plant expansion B. The setting aside of cash to be used for future plant expansion C. A decrease in cash with an equal increase in the investment in fund D. The disclosure that management does not intend to distribute in the form of dividends assets equal to the amount of the appropriation 33. A restriction of retained earnings is most likely to be required by A. Purchase of property plant and equipment B. Purchase of treasury shares C. Payment of last maturing series of a serial bond issue D. Funding of past service cost 34. Retained earnings appropriated account is created for the purpose of A. Earmarking cash to be used for particular purposes B. Insuring the payment of dividends C. Protecting the working capital positions D. Preventing losses from contingencies 35. Which of the following statements is incorrect concerning the appropriation of retained earnings? A. Appropriations of retained earnings do not change the total amount of shareholders' equity B. Appropriations of retained earnings reflect funds set aside for a designated purpose, such as plant expansion C. Appropriations of retained earnings can made as a result of contractual requirements D. Appropriations of retained earnings can be made at the discretion of the board of directors 36. For which of the following purposes should an appropriation for possible loss contingencies be established? A. To match applicable costs with current revenue B. To reduce fluctuations in net income in order to lend stability of the entity C. To charge operations in periods of rising prices for the losses which may otherwise be absorbed in periods of falling prices D. To inform shareholders that a portion of retained earnings should be set aside from amounts available for dividends because of such contingencies 37. Which of the following statements is true concerning appropriations of retained earnings? A. Appropriation do not reduce total retained earnings B. The only proper way to eliminate an appropriation of retained earnings after it has served its purpose is to revert to the unappropriated retained earnings C. When treasury shares are purchased, retained earnings must be appropriated equal to the cost of the treasury shares D. All of these statements are true concerning appropriations of retained earnings 38. Which of the following is most likely to be found in corporate laws regarding payment of dividends? A. Dividends may be paid from legal capital B. Retained earnings are available for dividends unless restricted by contract or by statute C. Legal capital is available for any type of dividend D. Capital from donated asset is available for dividends 39. Which of the following is not a legal restrictions related to profit distribution? A. The amount distributed must be i compliance with the laws governing corporations B. The amount distributed can never exceed the net income reported for the year C. Profit distribution must be formally approved by the board of directors D. Dividends must be in full agreement with the capital contracts as to preferences 40. The use of equity reserves under international accounting standards A. Is strictly voluntary o the part of the management of an entity B. Is based on whether a reserve is part of distributable or non-distributable equity C. Is primarily for the benefit of shareholders rather than creditors D. Results in the elimination of retained earnings from the total shareholders' equity 41. The primary purpose of a quasi-reorganization is to give the entity the opportunity to A. Obtain relief from creditors B. Revalue understated assets at fair value C. Eliminate a deficit D. Distribute the shares of a newly-created subsidiary to the shareholders in exchange for part of their shares 42. When an entity goes through a quasi-reorganization, the carrying amounts are measured at A. Original cost B. Original carrying amount C. Replacement value D. Fair value 43. The accounting or quasi-reorganization usually includes A. Writeup of assets and writedown of retained earnings B. Writedown of both assets and retained earnings C. Writedown of assets and elimination of a deficit D. Writeup of assets and elimination of a deficit 44. Immediately after a quasi-reorganization, the retained earnings account A. Has a zero balance B. Remains the same as it was before C. Is frozen and dated and subsequent transactions will be shown separately D. Has a debit balance equal to the writedown of the assets which were overstated
