Tom and Jane Are the Founders and Only Shareholders and Directors

question 27

True/False

Tom and Jane are the founders and only shareholders and directors of Shinestone Corp, which carries on a business selling semi-precious stones.They want to declare and pay a dividend to themselves.They think that the corporation will be able to pay its debts after payment of the dividend and have received advice from their accountants that the market value of the assets of the corporation exceeds the total amount owed to creditors and the amount they paid into the corporation for shares.One of its creditors, Nova Bank, hears about their plan to pay a dividend and says that, in its view, the market value of the corporation's assets is not high enough to meet this test after the dividend is paid.Tom and Jane can still declare the dividend.

Recognize the importance of ethics and regulations in accounting (Sarbanes-Oxley Act, ethical standards).

Account for the initial and subsequent measurement of assets, liabilities, and equity.

Understand the role of dividends in a business and their effect on equity.

Comprehend the purpose and importance of accounting as an information and measurement system.

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Definitions:

Equivalent

Having equal value, function, or meaning.

Teamwork

The collaborative effort of a group to achieve a common goal or to complete a task in the most effective and efficient way.

Paint

A substance used to add color or texture to surfaces, typically made from pigments suspended in a liquid.

Predicate

In grammar, the part of a sentence that tells what the subject does or is; in logic, the part of a proposition that affirms or denies something about the subject.