Question 1

In order to receive a dividend, a stockholder must have owned the stock as of the declaration date.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would be treated as a prior period adjustment by Gold Corporation in 2010?

Accepted Answer

A)  In 2010, it was discovered that Gold Corporation recorded the purchase of a warehouse in 2007 as a debit to Repairs Expense. 
B)  In 2010, Gold Corporation switched from the straight-line method of depreciation to another method of computing depreciation. 
C)  In 2010, Gold Corporation's management decided that the estimated useful life of its computer equipment should be changed from five years to nine years. 
D)  In 2010, Gold Corporation sold a segment of the business that it has operated since 1996. 
A)  In 2010, it was discovered that Gold Corporation recorded the purchase of a warehouse in 2007 as a debit to Repairs Expense. 
B)  In 2010, Gold Corporation switched from the straight-line method of depreciation to another method of computing depreciation. 
C)  In 2010, Gold Corporation's management decided that the estimated useful life of its computer equipment should be changed from five years to nine years. 
D)  In 2010, Gold Corporation sold a segment of the business that it has operated since 1996.

Question 3

Treasury stock appears as:

Accepted Answer

A)  An asset account. 
B)  A liability account. 
C)  An expense account. 
D)  An equity account. 
A)  An asset account. 
B)  A liability account. 
C)  An expense account. 
D)  An equity account.

Question 4

What was the average issue price per share of preferred stock?

Accepted Answer

Answer
Average issue price per

Question 5

General Corporation was organized on January 1 and issued 500,000 shares of common stock on that date. On July 1, an additional 200,000 shares were issued for cash. Net income for the year was $5,184,000. Net earnings per share amounted to:

Accepted Answer

A)  $7.41. 
B)  $7.98. 
C)  $8.41. 
D)  $8.64. 
A)  $7.41. 
B)  $7.98. 
C)  $8.41. 
D)  $8.64.

Question 6

Fuller Mfg.'s financial statements for the current year include the following: Income from continuing operations $663,200
Prior period adjustment (increase in prior-year net income, net of taxes) 180,000
Cash dividends paid to preferred stockholders 196,800
Gain from discontinued operations (net of taxes) 433,600
Extraordinary loss (net of tax benefit) 174,400
On the basis of this information, net income for the current year is:

Accepted Answer

A)  $488,800. 
B)  $922,400. 
C)  $725,600. 
D)  $1,102,400. 
A)  $488,800. 
B)  $922,400. 
C)  $725,600. 
D)  $1,102,400.

Question 7

Diluted earnings per share represents a hypothetical case, showing what earnings per share would be if certain securities were converted into additional shares of common stock.

Accepted Answer

A) True 
 B)False

Question 8

Platinum Company reports net income of $520,000 for 2009 and declared a cash dividend of $1 per share on each of its 100,000 shares of common stock outstanding. What are earnings per share for 2009?

Accepted Answer

A)  $5.20 per share. 
B)  $1.00 per share. 
C)  $1.20 per share. 
D)  $4.80 per share. 
A)  $5.20 per share. 
B)  $1.00 per share. 
C)  $1.20 per share. 
D)  $4.80 per share.

Question 9

It would be reasonable to assume that:

Accepted Answer

A)  Basic earnings per share should exceed diluted earnings per share. 
B)  Diluted earnings per share should exceed basic earnings per share. 
C)  Basic earnings per share should be equal to diluted earnings per share. 
D)  Basic earnings per share would not be presented with diluted earnings per share. 
A)  Basic earnings per share should exceed diluted earnings per share. 
B)  Diluted earnings per share should exceed basic earnings per share. 
C)  Basic earnings per share should be equal to diluted earnings per share. 
D)  Basic earnings per share would not be presented with diluted earnings per share.

Question 10

Comprehensive income can be displayed to users of financial statements in which of the following way(s):

Accepted Answer

A)  As a second income statement. 
B)  As a single income statement that includes both the components of net income and the components of other comprehensive income. 
C)  As an element in the changes in stockholders' equity displayed as a column in the statement of stockholders' equity. 
D)  Either as a second income statement, as a single income statement that includes both the components of net income and the components of other comprehensive income, or as an element in the changes in stockholders' equity displayed as a column in the statement of stockholders' equity. 
A)  As a second income statement. 
B)  As a single income statement that includes both the components of net income and the components of other comprehensive income. 
C)  As an element in the changes in stockholders' equity displayed as a column in the statement of stockholders' equity. 
D)  Either as a second income statement, as a single income statement that includes both the components of net income and the components of other comprehensive income, or as an element in the changes in stockholders' equity displayed as a column in the statement of stockholders' equity.

Question 11

An example of an extraordinary gain or loss is:

Accepted Answer

A)  A large loss arising from inability to collect an account receivable from a bankrupt customer. 
B)  A large gain from disposal of a segment of the business. 
C)  A gain or loss from sale of an expensive machine no longer needed in the business. 
D)  A loss due to the expropriation of assets by a foreign government. 
A)  A large loss arising from inability to collect an account receivable from a bankrupt customer. 
B)  A large gain from disposal of a segment of the business. 
C)  A gain or loss from sale of an expensive machine no longer needed in the business. 
D)  A loss due to the expropriation of assets by a foreign government.

Question 12

A statement of stockholders' equity is not a required financial statement and need not be prepared along with a statement of retained earnings.

Accepted Answer

A) True 
 B)False

Question 13

Shown below is information relating to operations of R. Brook, Inc for the current year:
Continuing operations:
  
In the space provided, complete the income statement for R. Brook, Inc., including earnings per share figures. R. Brook, Inc. has 100,000 shares of a single class of common stock outstanding throughout the year.
R. BROOK, INC.
Condensed Income Statement
For the Year Ended December 31, 2009

Accepted Answer

The answer of Shown below is information relating to operations...

Question 14

The numerator in calculating earnings per share is reduced for:

Accepted Answer

A)  Preferred dividends. 
B)  Common dividends. 
C)  Common stock dividends. 
D)  Any form of dividend. 
A)  Preferred dividends. 
B)  Common dividends. 
C)  Common stock dividends. 
D)  Any form of dividend.

Question 15

On January 31, Village Bank had 500,000 shares of $3 par value common stock outstanding. On that date, the company declared a 10% stock dividend when the market price of the stock was $62 per share. The immediate effect of this dividend upon Village Bank was:

Accepted Answer

A)  A reduction in cash of $3,794,500. 
B)  A reduction in retained earnings of $3,100,000. 
C)  A reduction in retained earnings of $150,000. 
D)  A liability to the stockholders of $150,000. 
A)  A reduction in cash of $3,794,500. 
B)  A reduction in retained earnings of $3,100,000. 
C)  A reduction in retained earnings of $150,000. 
D)  A liability to the stockholders of $150,000.

Question 16

Equity transactions-journal entries
A partial list of the ledger accounts of Soundview Corporation is shown below, followed by a list of transactions. Indicate the accounts that would be debited and credited in recording each transaction by placing the appropriate account number(s) in the space provided. If no journal entry is required for a particular transaction, use "None."

Accepted Answer

The answer of Equity transactions-journal entries
A partial list of the...

Question 17

A company had 240,000 shares of common stock outstanding on January 1 and then sold 60,000 additional shares on April 30. Net income for the year was $426,750. What are earnings per share?

Accepted Answer

A)  $1.42. 
B)  $1.52. 
C)  $1.78. 
D)  $7.11. 
A)  $1.42. 
B)  $1.52. 
C)  $1.78. 
D)  $7.11.

Question 18

On January 31, 2009, Village Bank had 500,000 shares of $2 par value common stock outstanding. On that date, the company declared a 14% stock dividend when the market price of the stock was $37 per share. The immediate effect of this dividend upon Village Bank was:

Accepted Answer

A)  A reduction in cash of $2,590,000. 
B)  A reduction in retained earnings of $2,590,000. 
C)  A reduction in retained earnings of $140,000. 
D)  A liability to the stockholders of $140,000. 
A)  A reduction in cash of $2,590,000. 
B)  A reduction in retained earnings of $2,590,000. 
C)  A reduction in retained earnings of $140,000. 
D)  A liability to the stockholders of $140,000.

Question 19

A restriction of retained earnings:

Accepted Answer

A)  Reduces the dollar amount of retained earnings shown in the balance sheet. 
B)  Appears in the statement of retained earnings as a reduction of ending retained earnings. 
C)  Appears in the liability section of the balance sheet. 
D)  Limits the dollar amount of dividends a corporation may declare. 
A)  Reduces the dollar amount of retained earnings shown in the balance sheet. 
B)  Appears in the statement of retained earnings as a reduction of ending retained earnings. 
C)  Appears in the liability section of the balance sheet. 
D)  Limits the dollar amount of dividends a corporation may declare.

Question 20

In an attempt to appeal to investors, a company may be tempted to overstate net income.

Accepted Answer

A) True 
 B)False

Exam 12: Income and Changes in Retained Earnings

In order to receive a dividend, a stockholder must have owned the stock as of the declaration date.

Which of the following would be treated as a prior period adjustment by Gold Corporation in 2010?

Treasury stock appears as:

What was the average issue price per share of preferred stock?

General Corporation was organized on January 1 and issued 500,000 shares of common stock on that date. On July 1, an additional 200,000 shares were issued for cash. Net income for the year was $5,184,000. Net earnings per share amounted to:

Diluted earnings per share represents a hypothetical case, showing what earnings per share would be if certain securities were converted into additional shares of common stock.

Platinum Company reports net income of $520,000 for 2009 and declared a cash dividend of $1 per share on each of its 100,000 shares of common stock outstanding. What are earnings per share for 2009?

It would be reasonable to assume that:

Comprehensive income can be displayed to users of financial statements in which of the following way(s):

An example of an extraordinary gain or loss is:

A statement of stockholders' equity is not a required financial statement and need not be prepared along with a statement of retained earnings.

The numerator in calculating earnings per share is reduced for:

On January 31, Village Bank had 500,000 shares of $3 par value common stock outstanding. On that date, the company declared a 10% stock dividend when the market price of the stock was $62 per share. The immediate effect of this dividend upon Village Bank was:

A company had 240,000 shares of common stock outstanding on January 1 and then sold 60,000 additional shares on April 30. Net income for the year was $426,750. What are earnings per share?

On January 31, 2009, Village Bank had 500,000 shares of $2 par value common stock outstanding. On that date, the company declared a 14% stock dividend when the market price of the stock was $37 per share. The immediate effect of this dividend upon Village Bank was:

A restriction of retained earnings:

In an attempt to appeal to investors, a company may be tempted to overstate net income.

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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