Answered: When a preference share is cumulative…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

1. When a preference share is cumulative and non-participating:

a. Any dividends not distributed from the previous distribution would not be distributed anymore and any excess from the dividends to be distributed would go to ordinary shareholders.

b. Any dividends not distributed from the previous distribution would be distributed also to the preference shareholders for current year along with the current year dividends and any excess from the dividends declared will be divided to both the preference and ordinary shareholders base on their total par value

c. Any dividend not distributed from the previous distribution would be distributed also to the preference shareholders for current year along with the current year dividends and any excess from the dividends declared will all go to ordinary shareholders.

d. Any dividend not distributed from the previous distribution would be distributed also to the preference shareholders for current year along with the current year dividends and any excess from the dividends declared will all go to preference shareholders.

2. All of the following will affect the retained earnings account, except

a. Declaration of 10% bonus issue

b. Quasi-reorganization thru recapitalization

c. Adjustment due to overstatement of depreciation expense from previous reporting period and was known only this current year

d. Issuance of treasury shares at P 29 per share when its cost is P 25 per share

3. Which of the following changes the total shareholder's equity balance?

a. Declaration of large bonus issue

b. Declaration of cash dividends

c. Issuance of share certificates due to subscription receivable fully paid

d. Issuance of share rights

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