Polytechnic University of the Philippines

College Of Accountancy and Finance

Final Final Departmental Examination
March 8, 2015
True or False
1. The liquidation that convert non cash assets into cash at the different dates are called lump sum liquidation.
2. Any premium or paid in capital on share capital sold through a subscription is recorded at the time subscription
contract is signed, rather than when the capital share is issued.
3. Treasury shares is one that gives the holder a preference over the holders of ordinary shares with respect to the
payment of dividends.
4. Shareholders own the business and manage the day-to-day affairs of the corporation.
5. An ordinary share holder has the right to vote in the election of board of directors.
6. When a partnership is liquidated a partner erases his deficiency by declaring bankruptcy.
7. The cost of organizing a corporation should be expensed in the year of organization.
8. The order of partnership liquidation process is pays liabilities, sells assets and distribute cash to partners.
9. In the final liquidation transaction, the remaining cash is distributed to the partners according to their profitsharing ratios.
10. A 10% dividends on preference share capital means that each shareholder receives a cash dividend equal to 10%
of the market value of the stock.
11. Dividend in arrears must be reported in the footnotes to the financial statements.
12. When small share dividends are declared, Retained Earnings is debited for the fair market value of the share
capital on the date of distribution.
13. Cash dividends declared but not paid as of the statement of financial position date are reported as current liability.
14. A debit balance in the Retained Earnings account is reported as a contra equity.
15. Because corporations are characterized by limited liability, the law protects the interest of the corporate creditors
by requiring a corporation to maintain in its equity an amount at least equal to its legal capital.
16. The first step in the accounting cycle of a corporation is the preparation of worksheet.
17. The Retained Earnings balance represents the undistributed earnings of the corporation. It could either be
appropriated or unappropriated.
18. Dividends are distribution of corporate earnings to stockholders in proportion to the number of shares held by
them.
19. It is illegal to issue stock at less than par.
20. A partnership is tax like a corporation.
21. Share split reduces the stockholders equity.
22. When a share split is made, all issued shares will be included in the split including treasury shares.
23. Stock dividend increases both the contributed capital and the retained earnings.
24. The appropriation od retained earnings reduces total retained earning account.
25. The transfer of one capital to another capital are called bonus.
26. Stockholders is the term refers to the owner of a stock corporation while for a non stock corporation it is called
shareholders.
27. A cumulative preferred stock is entitled to dividend in arrears even if there is loss.
28. Cash dividends decreases total assets and total shareholders equity.
29. A corporation has the power to acquire its own assets and incur financial obligations.
30. No liability is recognized by a corporation upon declaration of share dividend (bonus issue).
31.Book value per share is total shareholders equity divided by shares issued minus treasury shares plus subscribed
shares.