Question 1

A small stock dividend of 20,000 shares was declared and distributed during 2010. What was the market price per share on the date of declaration?

Accepted Answer

Market price per share on stoc

Question 2

Which of the following is (are) not true about a stock dividend?

Accepted Answer

A)  Total stockholders' equity does not change when a stock dividend is declared or when it is distributed. 
B)  Between the time a stock dividend is declared and when it is distributed, the company's commitment is presented in the balance sheet as a current liability. 
C)  Stock dividends do not change the relative portion of the company owned by individual stockholders. 
D)  Stock dividends have no impact on the amount of the company's assets. 
A)  Total stockholders' equity does not change when a stock dividend is declared or when it is distributed. 
B)  Between the time a stock dividend is declared and when it is distributed, the company's commitment is presented in the balance sheet as a current liability. 
C)  Stock dividends do not change the relative portion of the company owned by individual stockholders. 
D)  Stock dividends have no impact on the amount of the company's assets.

Question 3

To qualify as an extraordinary item, a gain or loss must:

Accepted Answer

A)  Affect the income of a prior period. 
B)  Be larger in amount than any other item in the income statement. 
C)  Be material in amount, unusual in nature, and not expected to recur. 
D)  Be associated with a segment of the business that has been discontinued during the current period. 
A)  Affect the income of a prior period. 
B)  Be larger in amount than any other item in the income statement. 
C)  Be material in amount, unusual in nature, and not expected to recur. 
D)  Be associated with a segment of the business that has been discontinued during the current period.

Question 4

Extraordinary items and the results of discontinued operations are shown in the income statement net of any related income tax effects.

Accepted Answer

A) True 
 B)False

Question 5

A prior period adjustment appears in the financial statements of the current year when:

Accepted Answer

A)  An error was made in computing the net income of the current period. 
B)  An error was made in measuring the net income of a previous year or years. 
C)  An extraordinary loss in a prior year was included among normal results of operations in the prior year. 
D)  Earnings per share figures from prior years are restated to reflect the increased number of shares outstanding due to a stock split or a stock dividend. 
A)  An error was made in computing the net income of the current period. 
B)  An error was made in measuring the net income of a previous year or years. 
C)  An extraordinary loss in a prior year was included among normal results of operations in the prior year. 
D)  Earnings per share figures from prior years are restated to reflect the increased number of shares outstanding due to a stock split or a stock dividend.

Question 6

A stock split changes the par value of a stock, whereas a stock dividend does not.

Accepted Answer

A) True 
 B)False

Question 7

Assume that all remaining treasury stock is reissued at a price of $18 per share in January of 2010. What amount should be credited to the account Additional Paid-in Capital: Treasury Stock Transactions in the journal entry to record this transaction?

Accepted Answer

A)  $96,000. 
B)  $140,000. 
C)  $112,000. 
D)  $288,000. 
A)  $96,000. 
B)  $140,000. 
C)  $112,000. 
D)  $288,000.

Question 8

Stock splits:

Accepted Answer

A)  Allow management to conserve cash. 
B)  Give stockholders more shares. 
C)  Cause no change in total assets, liabilities, or stockholders' equity. 
D)  Allow management to conserve cash, give stockholders more shares, and cause no change in total assets, liabilities, or stockholders' equity. 
A)  Allow management to conserve cash. 
B)  Give stockholders more shares. 
C)  Cause no change in total assets, liabilities, or stockholders' equity. 
D)  Allow management to conserve cash, give stockholders more shares, and cause no change in total assets, liabilities, or stockholders' equity.

Question 9

Assume all remaining treasury stock is reissued at a price of $24 per share in January of 2011. Prepare the journal entry to record this transaction:

Accepted Answer

Cash (30,000 shares x $24 per

Question 10

Which of the following items would not reduce retained earnings?

Accepted Answer

A)  A common stock dividend. 
B)  A preferred stock dividend. 
C)  A cash dividend. 
D)  Cash payment of a previously declared dividend. 
A)  A common stock dividend. 
B)  A preferred stock dividend. 
C)  A cash dividend. 
D)  Cash payment of a previously declared dividend.

Question 11

After preparing the financial statements for 2011, the accountant for the Dawson Corporation discovered that a prior period adjustment had been omitted from the 2009 financial statements. Which of the following is most likely to require correction as a result of this oversight?

Accepted Answer

A)  Earnings per share as originally computed. 
B)  Net income for 2011 as originally reported. 
C)  Ending retained earnings at December 31, 2011. 
D)  Extraordinary items as originally reported. 
A)  Earnings per share as originally computed. 
B)  Net income for 2011 as originally reported. 
C)  Ending retained earnings at December 31, 2011. 
D)  Extraordinary items as originally reported.

Question 12

Refer to the information above. What was the average issue price per share of preferred stock?

Accepted Answer

A)  $100. 
B)  $110. 
C)  $115. 
D)  $5. 
A)  $100. 
B)  $110. 
C)  $115. 
D)  $5.

Question 13

Dividends become a liability of a corporation:

Accepted Answer

A)  On the date the board of directors declares the dividend. 
B)  On the date of record. 
C)  On the date payment is to be made. 
D)  When cumulative preferred stock dividends are in arrears. 
A)  On the date the board of directors declares the dividend. 
B)  On the date of record. 
C)  On the date payment is to be made. 
D)  When cumulative preferred stock dividends are in arrears.

Question 14

In order for a loss on the disposal of a discontinued operation to be classified on the income statement as a discontinued operation, it must be unusual in nature.

Accepted Answer

A) True 
 B)False

Question 15

Retained earnings
At the beginning of 2009, Falcon Corporation had 2 million shares of $2 par value common stock outstanding and retained earnings of $17 million. During 2009, Falcon earned $12 million, declared a 5% stock dividend when the price of the stock was $19 per share, and paid a year-end cash dividend of $2.50 per share. (The cash dividend was declared after the stock dividend had been distributed.) At the end of 2009, what are the company's retained earnings?

Accepted Answer

Ending ret

Question 16

When a small (under 10%) stock dividend is declared, the market value of the stock is transferred from Retained Earnings into other stockholder equity accounts.

Accepted Answer

A) True 
 B)False

Question 17

A large stock dividend and a stock split are similar in that they both cause a:

Accepted Answer

A)  Reduction in total stockholders' equity. 
B)  Reduction in retained earnings. 
C)  Reduction in the par value per share. 
D)  Reduction in the market price per share. 
A)  Reduction in total stockholders' equity. 
B)  Reduction in retained earnings. 
C)  Reduction in the par value per share. 
D)  Reduction in the market price per share.

Question 18

Recent rulings by the SEC now require all corporations to prepare an expanded version of the Statement of Retained Earnings showing all equity accounts and their changes for the last three years.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would be classified as an extraordinary item?

Accepted Answer

A)  A large gift given to the company. 
B)  A loss from obsolete inventory. 
C)  A loss from a natural disaster that affects the company at infrequent intervals. 
D)  A loss from an enacted law that made inventory unsalable. 
A)  A large gift given to the company. 
B)  A loss from obsolete inventory. 
C)  A loss from a natural disaster that affects the company at infrequent intervals. 
D)  A loss from an enacted law that made inventory unsalable.

Question 20

How many shares of common stock are outstanding?

Accepted Answer

Answer
420,000 shares of commo

Exam 12: Income and Changes in Retained Earnings

A small stock dividend of 20,000 shares was declared and distributed during 2010. What was the market price per share on the date of declaration?

Which of the following is (are) not true about a stock dividend?

To qualify as an extraordinary item, a gain or loss must:

Extraordinary items and the results of discontinued operations are shown in the income statement net of any related income tax effects.

A prior period adjustment appears in the financial statements of the current year when:

A stock split changes the par value of a stock, whereas a stock dividend does not.

Assume that all remaining treasury stock is reissued at a price of $18 per share in January of 2010. What amount should be credited to the account Additional Paid-in Capital: Treasury Stock Transactions in the journal entry to record this transaction?

Stock splits:

Assume all remaining treasury stock is reissued at a price of $24 per share in January of 2011. Prepare the journal entry to record this transaction:

Which of the following items would not reduce retained earnings?

After preparing the financial statements for 2011, the accountant for the Dawson Corporation discovered that a prior period adjustment had been omitted from the 2009 financial statements. Which of the following is most likely to require correction as a result of this oversight?

Refer to the information above. What was the average issue price per share of preferred stock?

Dividends become a liability of a corporation:

In order for a loss on the disposal of a discontinued operation to be classified on the income statement as a discontinued operation, it must be unusual in nature.

When a small (under 10%) stock dividend is declared, the market value of the stock is transferred from Retained Earnings into other stockholder equity accounts.

A large stock dividend and a stock split are similar in that they both cause a:

Recent rulings by the SEC now require all corporations to prepare an expanded version of the Statement of Retained Earnings showing all equity accounts and their changes for the last three years.

Which of the following would be classified as an extraordinary item?

How many shares of common stock are outstanding?

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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