61 gupta corp purchased its own shares on january 1 2017 for 20 000 and debited trea 4314618

61.Gupta Corp. purchased its own shares on January 1, 2017 for $20,000 and debited Treasury Sharesfor the purchase price. The shares were subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a debit to

a) Contributed Surplus to the extent that previous net “gains” from sales or retirements of the same class of shares are included therein; otherwise, to retained earnings.

b) Contributed Surplus regardless of whether there have been previous net “gains” from sales or retirements of the same class of shares included therein.

c) Retained Earnings.

d) Loss from Sale of Treasury Shares.

*62.An acceptable method of reporting Treasury Shares in the balance sheet is

a) as a contra to contributed surplus.

b) as a contra to the share capital account.

c) as an account with a debit balance after retained earnings.

d) as a current asset.

*63.Common shares issued would exceed common shares outstanding as a result of the

a) declaration of a cash dividend.

b) declaration of a stock dividend.

c) purchase of treasury shares.

d) payment in full of subscribed shares.

*64.At its date of incorporation, Emm Inc. sold 100,000 of its $10 par common shares at $11 per share. During the current year, Emm acquired 20,000 of these common shares at $16 per share to hold as treasury shares. Subsequently, these shares were sold at $12 per share. Emm has had no other sales or acquisitions of its common shares. What effect does the sale of the treasury shares have on the following accounts?

Retained EarningsContributed Surplus

a) decreasedecrease

b) no effectdecrease

c) decreaseno effect

d)no effectno effect

*65.The reacquisition of issued and outstanding shares will cause the number of shares outstanding to decrease if they are accounted for

As Treasury SharesBy Retirement

a) yesno

b) nono

c) yesyes

d) noyes

*66.For a two-year period following a properly implemented financial reorganization, Grant Corporation operated profitably and paid dividends equal to 10% of its net income in each year. How could one determine that the financial reorganization had occurred?

a) could not unless comparative statements of financial position were presented

b) fromthe shareholders’ equity section

c) by the conservative dividend policy

d) fromthe disclosure of the reorganization in the notes to the financial statements

*67.Immediately after a financial reorganization, the retained earnings account

a) has a zero balance.

b) remains the same as it was before the financial reorganization.

c) is frozen and dated, and subsequent transactions will be shown separately.

d) has a debit balance equal to the writedown of the assets which were overstated.

*68.Which of the following statements is FALSE concerning the requirements that must be fulfilled under a financial reorganization?

a) The corporation’s shareholders must approve the financial reorganization.

b) Immediately after the financial reorganization, the corporation must have a credit balance in retained earnings.

c) New asset valuations should not deliberately over- or understate assets or liabilities.

d) The corporation may have additional contributed surplus arising from the financial reorganization.

*69.Which of the following statements is correct?

a) IFRS gives specific guidance for reacquisition of shares.

b) IFRS does not give explicit guidance for accounting for financial reorganizations.

c) IFRS requires that changes in retained earnings are presented in a retained earnings statement, and that changes in capital accounts are given in the notes.

d) ASPEdoes not give guidelines for accounting for financial reorganizations.

*70. Which statement is FALSE regarding financial reorganizations?

a) The proposed reorganization should receive the approval of the corporation’s shareholders before it is put into effect.

b) The new asset and liability valuations should be fair.

c) Subsequent to the financial reorganization, no disclosures are required in subsequent periods.

d) After the reorganization, the corporation must have a zero balance in the Retained Earnings account.