Exam 16: Retained Earnings and Earnings Per Share

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

Exhibit 16-1 The Zeller Corporation's stockholders' equity accounts have the following balances as of December 31, 2014: -Refer to Exhibit 16-1. On January 2, 2015, the board of directors of Zeller declared a 25% stock dividend to be distributed on January 31, 2015. 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

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

The board of directors of the Theater Visions Corporation is trying to establish the dividends policy for 2014 for the company. The board has asked you, the vice president of finance, to attend the meeting in order to get your input. You were asked to discuss and evaluate stock dividends from the perspective of both (1) the stockholders, and (2) the issuing corporation's viewpoint. Required: a.Theoretically, from a stockholder's viewpoint, stock dividends have several disadvantages. Discuss the disadvantages associated with stock dividends from the stockholder's perspective. b.Discuss the advantages associated with a stock dividend from the issuing corporation's viewpoint. c.For financial accounting purposes, explain how the cost of a stock dividend is measured at the date of declaration.

The Rico company began 2014 with $90,000 balance in retained earnings. The following events occurred during the year: 1) Cash dividends of $15,000 were declared. 2) Three thousand shares of callable preferred stock were recalled and retired for a price of $125 per share. The stock was originally issued for $110 per share. 3) Net income was $125,000. 4) Treasury stock was acquired at a cost of $25,000. The state of Rico's incorporation requires by a law a restriction of retained earnings equal to the amount acquired. The company reports the restriction in a note to the financial statements. 5) A material error in net income for a previous period was corrected. The error decrease retained earnings by $15,000 after a related income tax credit of $$5,250. The company is subject to a 35% tax rate. Required: Prepare the statement of retained earnings for the year ended 2014, prepare any note disclosures separately.

Exhibit 16-1 The Zeller Corporation's stockholders' equity accounts have the following balances as of December 31, 2014: -Refer to Exhibit 16-1. On January 2, 2015, the board of directors of Zeller declared a 5% stock dividend to be distributed on January 31, 2015. 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

On January 1, 2014, Laura Corporation had 18,000 shares of common stock outstanding, and reacquired 2,000 shares on July 1. The company earned net income of $110,800 and paid a cash dividend on its preferred stock of $36,000. The earnings per share for the year was

Which one of the following statements concerning earnings per share amounts is true?

A board of directors may decide to restrict retained earnings to meet legal requirements or to meet a contractual restriction.

What is the basic earnings per share calculation? What is the weighted average shares calculation?

A simple capital structure is one that consists of common stock outstanding and possibly convertible preferred stock.

On January 1, 2014, Samuel Company had 21,000 shares of common stock outstanding and issued an additional 4,500 shares on May 1. The company declared and paid a cash dividend of $45,000 and earned $375,000 net income. The earnings per share for the year was

During an audit of Madison Company's December 31, 2015 records it was discovered that the company did not accurately accrue for $12,500 of depreciation expense. As well as the accrual for interest expense was missed in the amount $4,500. These errors occurred in 2014 and have a material impact on Madison's financial records. Madison's net income for the year was $123,000. The company is subject to a 35% tax rate. The company had a retained earnings balance of $557,500 on January 1, 2015, no dividends were paid. Required: 1) Prepare the necessary journal entries to correct the accounting records of Madison Company's books. 2) Prepare the statement of retained earnings for 2015. (Headings are not necessary)

West, Inc. determined the following information concerning its common stock during 2014: Required: What should West, Inc. use as the denominator for its basic earnings per share calculation for 2014?

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.

The Mark Company has $250,000 to pay dividends. The company has 25,000 shares of 8%, $50 par, preferred stock and 100,000 shares of $5 par common stock outstanding. The common stock is currently selling for $43 per share and the preferred stock is selling for $95 per share on the stock market. Required: Determine the amount of dividends to be paid for each class of stock in each of the independent situations. 1) Preferred stock is nonparticipating and cumulative; dividends are in the arrears for 1 year at the beginning of the year. 2) Preferred stock is fully participating and cumulative. 3) Preferred stock is nonparticipating and noncumulative. 4) Compute the dividend yield on the preferred stock and common stock for number 3.

Tulip Corp. has $1,000,000, 6%, nonconvertible bonds due in 2015 and $1,500,000, 3%, convertible bonds due in 2016. The basic earnings per share are $1.25 and the diluted earnings per share are $1.18. Based upon this information, Tulip must disclose

Green Thumb, Inc. had 18,000 shares of common stock outstanding on January 1. An additional 6,000 shares were issued on May 1. The company also had 1,000 shares of 5.5%, $100 par, convertible preferred stock outstanding during the year. Each share is convertible into 8 shares of common stock. Net income for the year was $82,500. Required: Compute the appropriate earnings per share amount(s) that would appear on the Green Thumb's income statement.

Below is a list of key terms: a.deficit b.restriction c.date of record d.potential common shares e.ex-dividend date f.liquidating dividends g.if-converted method h.appropriation i.scrip dividend j.simple capital structure Required: Match the appropriate key term with the correct definition below.

In the determination of the diluted earnings per share, convertible securities are