Exam 12: Income and Changes in Retained Earnings

The common stock of Securetech Corporation consistently sells at a market price of 20 times earnings .What would be the most likely effect of a 10 cent increase in Securetech's basic EPS?

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.

Discontinued operations The operations of Global Entertainment,Inc.,for the current year are summarized below: Global Entertainment had 400,000 shares of capital stock outstanding.Complete the following condensed income statement for the year,including the appropriate earnings per share figures.

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.

Income statement and earnings per share Shown below is information relating to operations of Broadway Industries for 2015: In the space provided,complete the income statement for Broadway Industries,including earnings per share figures.Broadway Industries has 100,000 shares of a single class of common stock outstanding throughout the year.

Which of the following items would be included in comprehensive income but not reported as a component of net income?

The amount of cash dividends paid to common stockholders is part of the computation of earnings per share.

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

Of the items listed,which would appear closest to the bottom of the income statement?

Sovereign Foods suffered a $1,500,000 loss (net of tax)when the FDA prohibited the sale of food products containing red dye no.3.On its other products,Sovereign Foods had net sales of $6,580,000 and costs and other expenses of $6,505,000.Which of the following statements is not true? (Ignore taxes)

A prior period adjustment to retained earnings is made when a discovery of a material error was made to prior years' income.

Family Fashions Corporation discontinued Kid-Choice,its entire line of children's clothing,in November of 2015.Prior to the disposal,Kid-Choice generated a loss of $600,000 (net of tax)for the period from January through the sale date.Because of the value of the real estate and machinery,there was a gain of $850,000 (net of tax)on the actual sale.How should this situation be reported in the financial statements of Family Fashions for 2015?

A company failed to make an adjusting entry in the prior year to accrue earned revenue.To correct this they should:

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

The statement of stockholders' equity:

Designs,Inc.had 4,000 shares of $7,$100 par p

In computing earnings per share,the number of shares used is:

During the year 2015,Tosco Corporation suffered an $800,000 loss when its factory was destroyed in a flood.Assuming the corporate income tax rate is 36%,what amount will Tosco report as an extraordinary loss on its income statement for 2015? Assume floods are not common in this area.

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.