Lorella Entered into a Common Share Subscription Contract for 1,000

question 164

Multiple Choice

Lorella entered into a common share subscription contract for 1,000 shares at a subscription price of $20.She paid 20% of the total price as a down payment and also paid the next two 20% instalments (she paid 60% in all) .Lorella then defaulted on the contract and refused to pay any more.Assuming the company must issue shares in proportion to the cash paid, the entry to record the default would include:

• A)dr.common shares subscribed $20,000
• B)dr.common shares subscribed $12,000
• C)dr.subscriptions receivable $8,000
• D)dr.common shares $12,000

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Definitions:

Vertical Equity

A principle in taxation where taxpayers with a greater ability to pay, pay more in taxes, demonstrating a progressive tax system.

Small Economy

An economy that is limited in size, characterized by a smaller population, lower GDP, and less impact on international markets compared to larger economies.

Horizontal Equity

A principle in taxation that asserts that individuals with the same income or resources should pay the same amount in taxes.

Vertical Equity

A principle in tax policy that states taxpayers with a greater ability to pay should contribute more in taxes.