Question 1

As a result of a 5% stock dividend:

Accepted Answer

A) Total stockholders' equity decreases by 5%. 
B) The par value per share decreases by 5%. 
C) The number of shares owned by each stockholder increases by 5%,but total stockholders' equity does not change. 
D) Both the number of shares outstanding and the total stockholders' equity increase by 5%. 
A) Total stockholders' equity decreases by 5%. 
B) The par value per share decreases by 5%. 
C) The number of shares owned by each stockholder increases by 5%,but total stockholders' equity does not change. 
D) Both the number of shares outstanding and the total stockholders' equity increase by 5%.

Question 2

A liquidating dividend:

Accepted Answer

A) Occurs when a corporation distributes shares of its own stock as a dividend,rather than cash. 
B) Occurs whenever a corporation distributes non-cash assets as a dividend to its stockholders. 
C) Represents a distribution of a corporation's profits to the stockholders. 
D) Represents a return of invested capital to a corporation's owners,the stockholders. 
A) Occurs when a corporation distributes shares of its own stock as a dividend,rather than cash. 
B) Occurs whenever a corporation distributes non-cash assets as a dividend to its stockholders. 
C) Represents a distribution of a corporation's profits to the stockholders. 
D) Represents a return of invested capital to a corporation's owners,the stockholders.

Question 3

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 4

Execucomp Corporation's financial statements in the current year show a loss from discontinued operations,a prior period adjustment,and an extraordinary gain.If Execucomp's income statement is prepared according to generally accepted accounting principles (as illustrated in your text),which of the following four items would appear second in sequence in the income statement?

Accepted Answer

A) Prior period adjustment. 
B) Income from continuing operations. 
C) Loss from discontinued operations. 
D) Extraordinary gain. 
A) Prior period adjustment. 
B) Income from continuing operations. 
C) Loss from discontinued operations. 
D) Extraordinary gain.

Question 5

All things being equal,if investors expect earnings to increase substantially from current levels,the price/earnings ratio will:

Accepted Answer

A) Be quite low. 
B) Be quite high. 
C) Not change. 
D) Not be affected by income expectations. 
A) Be quite low. 
B) Be quite high. 
C) Not change. 
D) Not be affected by income expectations.

Question 6

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 7

Corona Corporation's financial statements for the current year include the following:   On the basis of this information,net income for the current year is:

Accepted Answer

A) $1,359,600. 
B) $818,400. 
C) $1,485,000. 
D) $1,234,200. 
A) $1,359,600. 
B) $818,400. 
C) $1,485,000. 
D) $1,234,200.

Question 8

A liquidating dividend:

Accepted Answer

A) Occurs only when a company is going out of business. 
B) Occurs when a corporation pays a dividend that exceeds the balance in the retained earnings account. 
C) Is an expense to the corporation. 
D) Occurs only when the corporation has a loss for the year. 
A) Occurs only when a company is going out of business. 
B) Occurs when a corporation pays a dividend that exceeds the balance in the retained earnings account. 
C) Is an expense to the corporation. 
D) Occurs only when the corporation has a loss for the year.

Question 9

Which of the following has no effect on the computation of earnings per share for the current period?

Accepted Answer

A) The amount of cash dividends declared or paid to preferred stockholders. 
B) The amount of cash dividends declared or paid to common stockholders. 
C) Net income. 
D) The number of shares of common stock issued. 
A) The amount of cash dividends declared or paid to preferred stockholders. 
B) The amount of cash dividends declared or paid to common stockholders. 
C) Net income. 
D) The number of shares of common stock issued.

Question 10

At the beginning of the current year,Wilson Corporation had 200,000 shares of $1 par common stock outstanding and had retained earnings of $4,800,000.During the year,the company earned $1,675,000 and paid a year-end cash dividend of $3 per share.What was Wilson Corporation's retained earnings at the end of the year?

Accepted Answer

A) $6,275,000. 
B) $5,875,000. 
C) $6,475,000. 
D) $4,800,000. 
A) $6,275,000. 
B) $5,875,000. 
C) $6,475,000. 
D) $4,800,000.

Question 11

Platinum Company reports net income of $520,000 for 2015 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 2015?

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 12

Diluted earnings per share are shown to alert investors that earnings per share could be increased by the effects of conversions of securities into common stock.

Accepted Answer

A) True 
 B)False

Question 13

On January 31,2015,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 14

Special sections in an income statement
What is the purpose of arranging an income statement to show subtotals for Income from Continuing Operations and for Income before Extraordinary Items?

Accepted Answer

The purpose of developing subtotals such

Question 15

Comprehensive income differs from net income in that it includes events that are recognized but not realized.

Accepted Answer

A) True 
 B)False

Question 16

On January 1,2015,Alice Corporation had 20,000 shares of $6 par value common stock and 10,000 shares of 8%,$100 par value convertible p

Accepted Answer

A) 10,000. 
B) 20,000. 
C) 30,000. 
D) 50,000. 
A) 10,000. 
B) 20,000. 
C) 30,000. 
D) 50,000.

Question 17

Which of the following would be treated as a prior period adjustment by Gold Corporation in 2015?

Accepted Answer

A) In 2015,it was discovered that Gold Corporation recorded the purchase of a warehouse in 2012 as a debit to Repairs Expense. 
B) In 2015,Gold Corporation switched from the straight-line method of depreciation to another method of computing depreciation. 
C) In 2015,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 2015,Gold Corporation sold a segment of the business that it has operated since 2006. 
A) In 2015,it was discovered that Gold Corporation recorded the purchase of a warehouse in 2012 as a debit to Repairs Expense. 
B) In 2015,Gold Corporation switched from the straight-line method of depreciation to another method of computing depreciation. 
C) In 2015,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 2015,Gold Corporation sold a segment of the business that it has operated since 2006.

Question 18

While the price-earnings ratio is computed using historical earnings,it reflects investors' expectations of future earnings.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Doogle Corporation sold a segment of its operations in 2014 and suffered an extraordinary loss in 2015.Which of the following would be the most useful in attempting to predict Doogle's performance for 2016?

Accepted Answer

A) Doogle's income from continuing operations in 2014 and 2015. 
B) Doogle's net income in 2014 and 2015. 
C) Doogle's total assets at the end of 2015. 
D) Doogle's retained earnings at the end of 2015. 
A) Doogle's income from continuing operations in 2014 and 2015. 
B) Doogle's net income in 2014 and 2015. 
C) Doogle's total assets at the end of 2015. 
D) Doogle's retained earnings at the end of 2015.

Exam 12: Income and Changes in Retained Earnings

As a result of a 5% stock dividend:

A liquidating dividend:

Dividends become a liability of a corporation:

All things being equal,if investors expect earnings to increase substantially from current levels,the price/earnings ratio will:

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:

Corona Corporation's financial statements for the current year include the following: On the basis of this information,net income for the current year is:

A liquidating dividend:

Which of the following has no effect on the computation of earnings per share for the current period?

Platinum Company reports net income of $520,000 for 2015 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 2015?

Diluted earnings per share are shown to alert investors that earnings per share could be increased by the effects of conversions of securities into common stock.

On January 31,2015,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:

Special sections in an income statement What is the purpose of arranging an income statement to show subtotals for Income from Continuing Operations and for Income before Extraordinary Items?

Comprehensive income differs from net income in that it includes events that are recognized but not realized.

On January 1,2015,Alice Corporation had 20,000 shares of $6 par value common stock and 10,000 shares of 8%,$100 par value convertible p

Which of the following would be treated as a prior period adjustment by Gold Corporation in 2015?

While the price-earnings ratio is computed using historical earnings,it reflects investors' expectations of future earnings.

Stock splits:

Doogle Corporation sold a segment of its operations in 2014 and suffered an extraordinary loss in 2015.Which of the following would be the most useful in attempting to predict Doogle's performance for 2016?

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

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