Practice Exercise #10-1

False

Retained earnings is an income account.

True or false

False

The amount to be debited to retained earnings is based on the market value of the shares if a 25% share dividend is declared.

True or false

False

Subscription receivable is included in the calculation of the book value per share.

True or false

False

One year current dividend for a participating preference share is deducted from the net income in computing for the earnings per share of ordinary share, whether or not there is a declaration of dividends.

True or false

True

Gain on the sale of treasury share should be recorded in a share premium account only.

True or false

False

When treasury share is purchased, retained earnings must be appropriated to the extent of the cost of the cost of the treasury shares or their par value, whichever is higher.

True or false

False

A share dividend is a distribution of corporate assets in the form of shares of

stock.

True or false

False

Book value per share is the amount that should be paid to each share when the corporation is being liquidated today

True or false

False

In computing the earnings per share where a firm has only one class of share, the net income is divided by the total issued ordinary shares.

True or false

False

The sale of treasury shares at an amount higher than the cost increases a corporation’s net income.

True or false

True

The earnings per share is computed for ordinary shares only.

True or false

True

For dividend purposes, a subscriber is considered to have acquired a full status of a shareholder. This means that he/she is entitled to dividends even though he/she has not yet fully paid his/her subscription.

True or false

True

Preference shares will always have a par value as required by law.

True or false

False

Total contributed capital decreases as a result of share dividend.

True or false

False

In computing for the book value per share, treasury shares and subscription receivable are deducted, while accumulated profits, share capital, subscribed share capital, share premiums, and share dividend distributable are added to arrive at total shareholders’ equity.

True or false