QUESTION 9

Magnum Company, which had 45 000 of its ordinary shares originally issued at $3 now has a 3-for-1 share split.

The market price of the share was $30 per share before the split.

Which of the following is true as a result of the split?

1. The balance in the ordinary shares account increased to $135 000
2. There were 15 000 ordinary shares on issue after the split
3. The contributed capital does not change
4. The market price of the share was not affected

QUESTION 10

Brumfield issued 8 000 ordinary shares for $28 per share.

In addition to the increase in cash, what effect does this transaction have on Brumfield's accounting equation?

1. Ordinary shares increases $224 000
2. Ordinary shares decreases $224 000 and contributed capital increases $224 000
3. Ordinary shares increases $175 000 and the gain on share issuance increases $175 000
4. Ordinary shares increases $8 000 and retained earnings increases $168 000