1- The net assets of a corporation are equal to:

a. Contributed capital

b. Retained earnings

c. Shareholders' equity

d. None of the above

2- Two of the three primary account classifications within shareholders' equity are:

a. Preference shares and retained earnings.

b. The par value of ordinary shares and retained earnings.

c. Issued capital and retained earnings.

d. Preference and ordinary shares.

3- Corporations are formed in accordance with:

a. The Model Business Corporation Act.

b. Federal statutes.

c. The corporation laws of the individual country or state.

d. Federal trade commission regulations.

4- Outstanding ordinary shares are:

a. Shares that are performing well on the stock exchange.

b. Shares that have been authorized for issue.

c. Shares held in the corporate treasury.

d. Shares in the hands of shareholders.

5- When more than one security is sold for a single price and the total selling price is not equal to the sum of the market prices, the cash received is allocated between the securities based on:

a. Relative book values.

b. Par values.

c. Relative market values.

d. The earnings per share.

6- Davis Company issued 4,000 ordinary shares and 2,000 preference share with $10 and $5 par value respectively for $250,000 cash. The market value of the ordinary share was $55 and preference share was $65. How to record additional issued capital for particularly ordinary share premium (reminder) in journal entry?

a. Dr. Ordinary share premium (reminder) $ 10,000

b. Cr. Ordinary share premium (reminder) $ 117,500

c. Dr. Ordinary share premium (reminder) $ 82,500

d. Cr. Ordinary share premium (reminder) $ 40,000

7- Davis Company issued 4,000 ordinary shares and 2,000 preference share with $10 and $5 par value respectively for $250,000 cash. The market value of the ordinary share was $55 and preference share was $65. Percentage for the allocation of preference share is?

a. 37%, $92,500

b. 37%, $157,500

c. 63%, $157,500

d. 63%, $92,500

8- Davis Company had 5,000 shares of $5 par value share that were issued for $45 per share is reacquired for $40 per share. Journal entry to record this transaction is?

a. Dr. Ordinary share capital $25,000, Dr. Ordinary share premium $225,000, Cr. Additional issued capital - share purchase $50,000, Cr. Cash $200,000.

b. Dr. Ordinary share capital $25,000, Dr. Ordinary share premium $200,000, Cr. Additional issued capital - share purchase $25,000, Cr. Cash $200,000.

c. Dr. Ordinary share capital $25,000, Dr. Ordinary share premium $200,000, Dr. Additional issued capital - share purchase $50,000, Cr. Cash $275,000.

d. Dr. Ordinary share capital $25,000, Dr. Ordinary share premium $225,000, Dr. Additional issued capital - share purchase $25,000, Cr. Cash $275,000.

9- Davis Company had 5,000 shares of $5 par value share that were issued for $40 per share is reacquired for $45 per share. How to record additional issued capital account in journal entry?

a. Dr. Additional issued capital - share repurchase $225,000

b. Dr. Additional issued capital - share repurchase $175,000

c. Dr. Additional issued capital - share repurchase $200,000

d. Dr. Additional issued capital - share repurchase $25,000

10- The compensation associated with restricted shares under a share award plan is:

a. the book value of an unrestricted same share times the number of shares

b. the estimated fair value of a similar share times the number of shares

c. allocated to expense over the service period which usually is the vesting period

d. the book value of a similar share times the number of shares

11- The most important accounting objective for executive share options is:

a. Measuring and reporting the amount of compensation expense during the service period

b. Measuring their fair value for statement of financial position purposes

c. To disclose increases or decreases in the share options held at the end of each accounting period

d. None of these is correct

12- The simple difference between the market price of the shares and the option price at which they can be acquired, is:

a. Far value

b. Intrinsic value

c. Fair value

d. Residual value

13- Davis company RSUs representing 5 million of its $1 par common shares to key executives at January 1, 2017 under its Restricted Stock Unit (RSU) plan. Shares have current market price of $15 per share. The shares are subject to forfeiture if employment is terminated within five years. How much compensation expense over 5 years?

a. $75,000,000 per year

b. $15,000,000 per year

c. $5,000,000 per year

d. $25,000,000 per year

14- Davis company RSUs representing 5 million of its $1 par common shares to key executives at January 1, 2017 under its Restricted Stock Unit (RSU) plan. Shares have current market price of $15 per share. The shares are subject to forfeiture if employment is terminated within five years. Journal entry to be recorded at December 31, 2017 to 2021?

a. Dr. Compensation expense $5,000,000, Cr. Paid in capital-restricted stock $5,000,000

b. Dr. Compensation expense $25,000,000, Cr. Paid in capital-restricted stock $25,000,000

c. Dr. Compensation expense $15,000,000, Cr. Paid in capital-restricted stock $15,000,000

d. Dr. Compensation expense $75,000,000, Cr. Paid in capital-restricted stock $25,000,000

15- Davis company RSUs representing 5 million of its $1 par common shares to key executives at January 1, 2017 under its Restricted Stock Unit (RSU) plan. Shares have current market price of $15 per share. The shares are subject to forfeiture if employment is terminated within five years. Journal entry to be recorded at December 31, 2017?

a. Dr. Paid in capital-restricted stock $75 million, Cr. Common stock $5 million, Cr. Paid in capital-excess of par $70 million.

b. Dr. Paid in capital-restricted stock $75 million, Cr. Common stock $70 million, Cr. Paid in capital-excess of par $5 million.

c. Dr. Paid in capital-restricted stock $25 million, Cr. Common stock $20 million, Cr. Paid in capital-excess of par $5 million.

d. Dr. Paid in capital-restricted stock $75 million, Cr. Common stock $60 million, Cr. Paid in capital-excess of par $15 million.

16- Davis Company reported net income of $250 million in 2019 (tax rate 40%). Its capital structure consisted of common stock at January 1, 90 million common shares were outstanding. How much basic EPS of Davis corporation?

a. $0.36

b. $3.66

c. $27.7

d. $2.77

17- Which of the following is not an inflow of cash?

a. Depreciation

b. Cash borrowed on a short-term note

c. Sale of a computer

d. Receive payment from customer

18- In a statement of cash flows in which operating activities are reported by the direct method, which of the following would increase reported cash flows from operating activities?

a. Gain on sale of equipment.

b. Interest revenue.

c. Gain on early extinguishment of bonds.

d. Purchase equipment

19-Interest payments to creditors are reported in a statement of cash flows as:

a. An investing activity only.

b. An operating activity only.

c. An operating activity or financing activity.

d. Not reported

20-How is the amortization of patents reported in a statement of cash flows that is prepared using the direct method?

a. Not reported.

b. An increase in cash flows from operating activities.

c. A decrease in cash flows from operating activities.

d. A decrease in cash flows from investing activities.

21- Cash equivalents generally would not include short-term investments in:

a. Commercial paper.

b. Certificates of deposit.

c. Held-to-maturity securities.

d. Money market funds.

22- When a company purchases a security it considers a cash equivalent, the cash outflow is:

a. Reported as an operating activity.

b. Reported as an investing activity.

c. Reported as a financing activity.

d. Not reported on a statement of cash flows.

23- In a statement of cash flows in which operating activities are reported by the direct method, which of the following would increase reported cash flows from operating activities?

a. Gain on sale of equipment.

b. Interest revenue.

c. Gain on early extinguishment of bonds.

d. Proceeds from sale of land.

24- Which of the following can be reported as an operating activity in the statement of cash flows?

a. The purchase of a building.

b. The sale of office equipment.

c. The payment of interest on long-term notes.

d. The bonus issue of shares.

25- Using the direct method, cash received from customers is calculated as sales:

a. Plus an increase in allowance for uncollectible accounts.

b. Minus an increase in allowance for uncollectible accounts.

c. Plus an increase in accounts receivable.

d. Plus a decrease in accounts receivable.

26- Of the following, which is not an investing activity?

a. Purchasing a new computer.

b. Buying treasury shares.

c. Selling a parcel of land.

d. Purchasing short-term investments.

27- Davis Company sold a printer with a cost of $68,000 and accumulated depreciation of $23,000 for $20,000 cash. This transaction would be reported as:

a. An operating activity

b. An investing activity

c. A financing activity

d. None of the above

28- Which of the following would not be a component of cash flows from investing activities?

a. Sale of land.

b. Purchase of securities.

c. Purchase of equipment.

d. Dividends paid.