Fundamentals Of Financial Accounting 5th Canadian Edition By Fred Phillips – Test Bank

Chapter 11
Shareholders’ Equity

True / False Questions

1. A sole proprietorship is an unincorporated business owned by one person.
TRUE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 11-S1 Account for Owner’s Equity in Other Forms of Business.
Topic: 11-18 Owner’s Equity for a Sole Proprietorship

2. A partnership is any business owned by two or more people.
TRUE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 11-S1 Account for Owner’s Equity in Other Forms of Business.
Topic: 11-19 Owner’s Equity for a Partnership

3. Shareholders can vote on the appointment of external auditors.
TRUE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 11-01 Explain the Role of Shares (also Called Stocks) in Financing a Corporation.
Topic: 11-01 Corporate Ownership

4. Outstanding shares include all shares issued by a corporation which would include treasury stocks held by the issuing corporation.
FALSE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 11-02 Explain and Analyze Common Share Transactions.
Topic: 11-04 Authorization, Issuance, and Repurchase of Shares

5. Under IFRS changes in capital accounts are disclosed in the notes to the financial statements.
FALSE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 11-S1 Account for Owner’s Equity in Other Forms of Business.
Topic: 11-17 Owner’s Equity for Other Forms of Business

6. A corporation’s charter establishes the market value of the company’s shares.
FALSE

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 11-02 Explain and Analyze Common Share Transactions.
Topic: 11-04 Authorization, Issuance, and Repurchase of Shares

7. A 3 for 2 share split is the same as fifty percent share dividend.
TRUE

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 11-02 Explain and Analyze Common Share Transactions.
Topic: 11-08 Stock Splits

8. When a company records a stock repurchase, it is tracking a shareholder’s sale of shares to another investor.
FALSE

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Easy
Learning Objective: 11-02 Explain and Analyze Common Share Transactions.
Topic: 11-04 Authorization, Issuance, and Repurchase of Shares

9. When a company issues and sells shares at a price higher than the original issue price, the difference is considered contributed surplus.
TRUE

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 11-02 Explain and Analyze Common Share Transactions.
Topic: 11-03 Common Share Transactions

10. Common shares have stated liquidation value just like preferred shares.
FALSE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 11-04 Describe the Characteristics of Preferred Shares and Analyze Transactions Affecting Preferred Shares.
Topic: 11-09 Preferred Shares