Exam 16: Retained Earnings and Earnings Per Share

Why might prior period adjustment become necessary and how are they accounted for?

Common shares outstanding are increased as a result of a stock dividend or stock split. For purposes of calculating the earnings per share, when is the stock dividend or stock split considered to have occurred?

During 2016, Oddie Corp. had net income of $300,000. Included in net income was after-tax interest expense of $20,000 on convertible bonds. The $200,000 face value of convertible bonds can be converted into common stock at the rate of 200 shares per $1,000 bond. Prior to the conversion, there were 400,000 shares of common stock outstanding. What is the amount of fully diluted earnings per share?

IFRS and GAAP are similar in regard to computing earnings per share components. However, the calculation of the impact from the exercise of options differs. Required: a. Describe the difference in treatment of unrecognized compensation cost relating to options in the calculation of EPS. a. When applying the treasury stock method, GAAP adjusts for unrecognized compensation cost by adding it to the assumed exercise price when the options are not yet fully vested the required service period is not completed). This is a hypothetical number that serves as a surrogate for the potential premium that an employee might have to pay over the exercise price to be given the right to b. Explain why the IFRS approach will systematically result in lower reported diluted EPS.

Corporations with complex capital structures are required to report both the basic and diluted earnings per share amounts. In order to compute the diluted earnings per share, potential common shares must be considered. Required: List the sequence of steps necessary to include potential common shares in the diluted earnings per share calculation.

How will a company's total current liabilities and total stockholders' equity be affected by the declaration of a stock dividend? Assume the stock dividend is distributed at a later date.)

Which of the following stockholders' equity disclosures are required under both GAAP and IFRS?

On January 1, Buchanan Corporation had 50,000 shares of common stock outstanding. On April 1, the company declared a 20% stock dividend, and on August 1, the company had a 3-for-1 stock split. On December 1, the company issued an additional 6,000 shares. What is the denominator in the earnings per share calculation?

Reporting diluted earnings per share is required for which type of corporate capital structure?

For which one of the following components is earnings per share information required to be presented on the income statement?

Comprehensive income represents

Which of the following stockholders' equity disclosures are required under both GAAP and IFRS?

A small stock dividend is accounted for by transferring from retained earnings to contributed capital an amount equal to the par value of the additional shares issued.

Exhibit 16-1 The Zeller Corporation's stockholders' equity accounts have the following balances as of December 31, 2016: Common stock, $10 par 30,000 shares issued -Refer to Exhibit 16-1. On January 2, 2017, the board of directors of Zeller declared a 30% stock dividend to be distributed on January 31, 2017. The market price per share of Zeller's common stock was $30 on January 2 and $32 on January 31. As a result of this stock dividend, the retained earnings account should be decreased by

When a corporation has a loss from continuing operations, the basic earnings per share is

On January 1, Christopher's reported total stockholders' equity of $1,300. During the year, $50 of dividends were declared and paid, donated land with a donor book value of $14 and a current fair value of $38 was received, additional common stock was issued for $300, and treasury stock was acquired for $22. The reported total stockholders' equity at December 31 was $1,406. What was the reported net income or loss for the year?

A prior period adjustment can arise from an error found that occurred in a prior period, a change is accounting entity, or a change in accounting principle.

Which one of the following would least likely result in a negative effect on of stockholders' equity?

Johnson Company has retained earnings balance of $550,000 at the end of 2016. During 2016 Johnson issued $200,000 of 10 year, 10% bonds. As part of the bond issue the each year $20,000 of retained earnings will be unavailable to pay dividends. Required: Show the proper reporting requirements for Johnson's retained earnings restriction.

The following convertible securities will have a dilutive impact on earnings per share: 1) 10% convertible preferred stock with dividends of $7,000 declared during the year and shares convertible into 2,500 common shares 2) 6% convertible bonds with interest expense net of taxes) of $8,000 and convertible into 3,500 common shares 3) 8% convertible bonds with interest expense net of taxes) of $5,000 and convertible into 1,600 common shares What is the appropriate ranking of items 1, 2, and 3 above to indicate their impact on diluted earnings per share calculations from most dilutive to least dilutive?