Multiple Choice Questions (2 marks each)

Q1 Shareholders of a corporation do not have the right to:

A) Receive Dividends declared by the Board

B) Vote in board elections

C) Hire staff

D) Sign contracts for the corporation

E) All of the above are rights of a shareholder.

Q2 When a corporation carried out a share split, the following changes occur:

A) A journal entry is made to record the change

B) The retained earnings account is reduced and the contributed capital account is increased

C) The market value per share will remain unchanged

D) The number of shares increases in the Equity section of the statements

E) All of the above.

Q3 All of the following are characteristics of a corporation, except:

A) Separate legal entity

B) Ownership rights are transferrable

C) Continuous life

D) Exempt from taxation

E) Limited liability for shareholders.

True or False Questions (1 mark each)

True / False Dividends can be paid as long as the Retained Earnings account has a Credit Balance.

True / False Share splits can only be done if two shares are issued for each share outstanding.

Short Answer (4 Marks)

Q1 Identify two reasons why a corporation might issue Preferred shares.