Question 1

A corporate income statement does not contain

Accepted Answer

A)  discontinued operations. 
B)  extraordinary gains and losses. 
C)  unrealized investment gains and losses. 
D)  earnings per share data. 
A)  discontinued operations. 
B)  extraordinary gains and losses. 
C)  unrealized investment gains and losses. 
D)  earnings per share data.

Question 2

a. Indicate on the blanks below the effect (I = increase, D = decrease, NE = no effect) of the entry to record the declaration of a common stock dividend on each of the items listed.
b. Indicate on the blanks below the effect (I = increase, D = decrease, NE = no effect) of the entry to record the distribution of a (previously declared and recorded) common stock dividend on each of the items listed.

Accepted Answer

The answer of a. Indicate on the blanks below the...

Question 3

On June 1, 2010, Sterling Corporation had 40,000 shares of $10 par value common stock outstanding. On June 2, 2010, Sterling declared a 40 percent stock dividend to be distributed on July 5, 2010, to shareholders of record on June 15, 2010. What amount of retained earnings should be transferred to contributed capital because of this dividend?

Accepted Answer

A)  None 
B)  Par value per share multiplied by the number of dividend shares 
C)  Market value of the stock at the date of distribution multiplied by the number of dividend shares 
D)  Market value of the stock at the date of declaration multiplied by the number of dividend shares 
A)  None 
B)  Par value per share multiplied by the number of dividend shares 
C)  Market value of the stock at the date of distribution multiplied by the number of dividend shares 
D)  Market value of the stock at the date of declaration multiplied by the number of dividend shares

Question 4

Lemma Corporation has total contributed capital of $600,000 and retained earnings of $305,000. It has 1,000 shares of $100 par value preferred stock with no dividends in arrears and 5,000 shares of $100 par value common stock. The preferred stock is callable at 105. The book value of each share of common stock is

Accepted Answer

A)  $161. 
B)  $86. 
C)  $160. 
D)  $181. 
A)  $161. 
B)  $86. 
C)  $160. 
D)  $181.

Question 5

A corporation should account for the declaration of a 10 percent stock dividend by

Accepted Answer

A)  transferring from retained earnings to contributed capital an amount equal to the legal capital represented by the dividend shares. 
B)  transferring from retained earnings to contributed capital an amount equal to the market value of the dividend shares. 
C)  transferring from retained earnings to contributed capital whatever amount the board of directors deems appropriate. 
D)  making only a memorandum entry in the general journal. 
A)  transferring from retained earnings to contributed capital an amount equal to the legal capital represented by the dividend shares. 
B)  transferring from retained earnings to contributed capital an amount equal to the market value of the dividend shares. 
C)  transferring from retained earnings to contributed capital whatever amount the board of directors deems appropriate. 
D)  making only a memorandum entry in the general journal.

Question 6

"Big baths" commonly occur when a company is having a good year.

Accepted Answer

A) True 
 B)False

Question 7

A debit balance in Deferred Income Taxes is classified as

Accepted Answer

A)  a liability. 
B)  revenue. 
C)  an asset. 
D)  an expense. 
A)  a liability. 
B)  revenue. 
C)  an asset. 
D)  an expense.

Question 8

Which of the following should be reported net of the related income tax effect on the income statement?

Accepted Answer

A)  Loss due to a discontinued segment of a business 
B)  Sale of a temporary investment at a loss 
C)  Loss due to shoplifting 
D)  Sale of an inventory item at a loss 
A)  Loss due to a discontinued segment of a business 
B)  Sale of a temporary investment at a loss 
C)  Loss due to shoplifting 
D)  Sale of an inventory item at a loss

Question 9

Which of the following is not true about a 35 percent stock dividend?

Accepted Answer

A)  The market value of the stock is needed to record the stock dividend. 
B)  Retained earnings decreases. 
C)  Contributed capital increases. 
D)  Par value per share remains the same. 
A)  The market value of the stock is needed to record the stock dividend. 
B)  Retained earnings decreases. 
C)  Contributed capital increases. 
D)  Par value per share remains the same.

Question 10

Discontinued operations and extraordinary items should be reported in the financial statements "net of tax."

Accepted Answer

A) True 
 B)False

Question 11

Income tax allocation procedures are justified by which of the following basic concepts?

Accepted Answer

A)  Cash basis accounting 
B)  Revenue recognition 
C)  Conservatism 
D)  Matching 
A)  Cash basis accounting 
B)  Revenue recognition 
C)  Conservatism 
D)  Matching

Question 12

In general, an accounting method or estimate that results in a higher current earnings produces a better quality of operating income.

Accepted Answer

A) True 
 B)False

Question 13

Income tax allocation procedures are applied to comply with the matching principle.

Accepted Answer

A) True 
 B)False

Question 14

The consistency convention requires that

Accepted Answer

A)  a company use the same independent auditors year after year. 
B)  all companies operating in the same industry use the same accounting methods. 
C)  the selection of a company's accounting policies be disclosed in its financial statements. 
D)  a company use the same accounting procedures year after year. 
A)  a company use the same independent auditors year after year. 
B)  all companies operating in the same industry use the same accounting methods. 
C)  the selection of a company's accounting policies be disclosed in its financial statements. 
D)  a company use the same accounting procedures year after year.

Question 15

On which of the following dates involving stock dividends does a liability arise?

Accepted Answer

A)  Date of distribution 
B)  Date of declaration 
C)  Date of record 
D)  On no date 
A)  Date of distribution 
B)  Date of declaration 
C)  Date of record 
D)  On no date

Question 16

A write-down is another term for a restructuring.

Accepted Answer

A) True 
 B)False

Exam 14: The Corporate Income Statement and the Statement of Stockholders Equity

A corporate income statement does not contain

A corporation should account for the declaration of a 10 percent stock dividend by

"Big baths" commonly occur when a company is having a good year.

A debit balance in Deferred Income Taxes is classified as

Which of the following should be reported net of the related income tax effect on the income statement?

Which of the following is not true about a 35 percent stock dividend?

Discontinued operations and extraordinary items should be reported in the financial statements "net of tax."

Income tax allocation procedures are justified by which of the following basic concepts?

In general, an accounting method or estimate that results in a higher current earnings produces a better quality of operating income.

Income tax allocation procedures are applied to comply with the matching principle.

The consistency convention requires that

On which of the following dates involving stock dividends does a liability arise?

A write-down is another term for a restructuring.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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