Name________________________________________ Yr & Section _____________

A. True or False

1. All incorporators are shareholders but not all shareholders are incorporators.
2. A corporation, like partnership, may be formed by the mere agreement of five or more persons.
3. The journal entry method may be used in recording authorized share capital and other stock transactions
relating to a no-par and no stated value share capital.
4. The authorized shares represent the maximum numbers of shares that a corporation me issue.
5. Unissued shares represent the number of shares that may still be subscribed.
6. It is legal to issue share capital at par or at more than par but not at less than par.
7. When share capital is issued for consideration in the form of property other than cash, the net book value of the
property is used to record the transaction.
8. The highest bidder is the one who is willing to pay the entire unpaid subscription plus any expenses incurred in
the delinquency sale and at the same time getting the highest number of shares.
9. Share capital that has been sold and issued to a shareholder is called an outstanding share capital.
10. The owners of a stock corporation are called shareholders; the owners of non-stock corporation are called
members.
11. When the memorandum entry method is used, the account Share Capital is credited upon issuance of stocks.
12. Under the journal entry method, the amount of share capital issued in determined by deducting the balance of
unissued share capital account from the balance of authorized share capital account.
13. When a partnership is incorporated, a new set of books should always be opened for the new corporation.
14. Partnership net assets that are transferred to the corporation should be recorded in the new corporations’ books
at their book value.
15. a stock certificate is issued to the subscriber upon full payment of his subscription.
16. Both the partnership’s owners and a corporation’s owners have limited liability for business debts.
17. Additional paid-in capital for the excess of the stock subscription price over par or stated value is recorded at
the time of subscription.
18. Organization (pre-operating) costs are expenditures associated with incorporating a new business. Such costs
should be recognized as expense in the first year operations.
19. A corporation issues a share capital on a subscription basis that is payable in three installments. Each time a
corporation receives a payment, Share Capital account is credited.
20. Convertible preference shares allow the issuing to redeem the shares.

B. Matching Type. Use capital letter.

A. 50 years K. Ordinary share capital

B. Corporation L. Stated value
C. P5.00 M. Par value
D. Pre operating costs/organization costs N. Receivable from Highest Bidder
E. Outstanding share capital O. Incorporation
F. Preference share capital P. Domestic corporation
G. Stock certificate Q. Goodwill
H. Incorporators R. Delinquent subscriber
I. 25% S. Paid in capital in excess of stated value
J. Subscription T. Subscribed shares

1. An artificial being created by operation of law formed by five or more persons.

2. The process of formulizing the organization of a corporation.
3. A corporation organized under the Philippine laws.
4. The persons originally formed the corporation.
5. Costs incurred in connection with the incorporation. They include cost of printing stick certifications and filing
fees.
6. A value that may be assigned to no-par stock by the board of directors of a corporation.
7. Class of share capital which entitles the holder to an equal or prorata division of profits without any preference
or advantage over any class of stock.
8. Class of share capital which enables the holder to enjoy preferences as to receipt of dividends.
9. A nominal value stated on the face of the stock certificate and in articles of incorporation.
10. It represents residual ownership equity.
11. A share capital issued to a shareholder.
12. A subscriber who fails to pay his subscription balance.
13. The minimum percentage of authorized share capital that has to be subscribed by incorporators.
14. The minimum percentage of the subscription in share capital that has to be paid by the incorporators.
15. The account credited for the excess of the subscription or issue price over the stated value of ordinary share
capital.
16. The minimum amount upon which no-par, no-stated value share capital are to be subscribed or issued.
17. The maximum number of years life of a corporation.
18. The document evidencing share capital ownership in a corporation.
19. The account charged for all expenses relating to delinquent subscription.
20. The asset recognized upon incorporation of a partnership which represents the excess of the value of the share
capital issued by the corporation over the fair value of the net assets of the partnership transferred to the new
corporation.
C. Multiple Choice. Encircle the letter corresponding to your answer.

1. Which of the following would not be considered a characteristic of a corporation?

a. separate legal entity c. mutual agency
b. limited liability of shared holders d. both a and c

2. Which of the following statements describing a corporation is not true?

a. shareholders are the owners of a stock corporation.
b. when ownership of a corporation changes, the corporation does not terminate.
c. Shareholders own the business and manage its day-today affairs.
d. A corporation is subject to a greater governmental regulation than a single proprietorship or
partnership.

3. The par value of a share capital

a. is usually different from its market value
b. is often higher for preference share than for ordinary share
c. is an arbitrary amount assigned to a share of stock
d. all of these

4. The ownership share capital entitles ordinary shareholders to all of the following rights except:
a. voting right
b. right to receive a proportionate share of assets in corporate liquidation
c. right to receive guaranteed dividends
d. preemptive right

5. Which of the following statements about preference share capital is not true?
a. Preference share capital usually carries the right to vote.
b. Preference share capital dividends are usually paid prior to payment of ordinary share capital
dividends.
c. Preference share capital usually shares right to receive assets pro-rata with the ordinary shareholders
in case of corporate liquidation.
d. In addition to being paid dividends prior to those paid to ordinary shareholders, preference
shareholders, have the right to receive assets pro-rata with ordinary shareholders in the event of
corporate liquidation.

6. The maximum number of shares of stock that the government gives a corporation permission to issue is the
a. granted shares c. issued shares
b. authorized shares d. outstanding shares

7. The cost of organizing a corporation should be

a. expensed in the year of organization c. reported as tangible asset
b. reported as an intangible asset d. deducted for share capital

8. A non-cash asset received in exchange for share capital is recorded at

a. its book value c. the lower of its book value or fair market value
b. its fair market value d. the higher of its book value or fair market value

9. The entry to record the issuance of ordinary share capital for fully paid stock subscription is
a. memorandum entry
b. debit ordinary share capital subscribed and credit ordinary share capital
c. debit ordinary share capital subscribed and credit additional paid-in capital
d. debit ordinary share capital subscribed and credit subscription receivable

10. The issuance of shares of ordinary share capital to shareholders

a. increases ordinary share capital authorized c. increases ordinary share capital outstanding
b. decreases ordinary share capital authorized d. decreases ordinary share capital outstanding

11. On June 1, authorized ordinary share capital was sold on subscription basis at a price excess of par value, and
40% of the subscription price was collected. On October 1, the remaining 60% of the subscription price was
collected. Ordinary share premium will be credited on
June 1 October 1
a. No yes
b. No yes
c. Yes no
d. Yes yes

12. When there is no bidder for delinquent subscription, the subscribed shares
a. will be issued to the delinquent subscriber c. will be reverted back to unsubscribed shares
b. will be issued in the name of the corporation d. none of these

13. Violet Inc. issued 8,000 shares of P20 par ordinary share capital for P24 per share. In recording this sale of
share capital, Violet will include a credit to
a. gain on issuance of stock for P32,000
b. ordinary share capital for P192,000
c. paid-in capital in excess of par for P32,000
d. discount on ordinary share capital for P16,000