Question 1

The statement of comprehensive income shows:

Accepted Answer

A)  all owner changes in equity and other comprehensive income. 
B)  only changes in net income. 
C)  all nonowner changes in equity and other comprehensive income. 
D)  the changes in assets over the period. 
E)  the changes in equity over the period. 
A)  all owner changes in equity and other comprehensive income. 
B)  only changes in net income. 
C)  all nonowner changes in equity and other comprehensive income. 
D)  the changes in assets over the period. 
E)  the changes in equity over the period.

Question 2

A company made an error in calculating and reporting depreciation expense in 2011. The error was discovered in 2012. The item should be reported as a prior period adjustment:

Accepted Answer

A)  on the 2011 statement of changes in equity. 
B)  on the 2011 income statement. 
C)  on the 2012 statement of changes in equity. 
D)  on the 2012 income statement. 
E)  accounted for with a cumulative "catch-up" adjustment. 
A)  on the 2011 statement of changes in equity. 
B)  on the 2011 income statement. 
C)  on the 2012 statement of changes in equity. 
D)  on the 2012 income statement. 
E)  accounted for with a cumulative "catch-up" adjustment.

Question 3

A corporation paid a cash dividend of $0.07 per share during the current year. It had 550,000 ordinary shares outstanding at year-end, its current year's earnings per share was $3.85, and the share's year-end market price was $17.50 per share. Calculate the company's dividend yield.

Accepted Answer

$0.07 / $1

Question 4

Unpaid and undeclared preference dividends are called dividends in arrears.

Accepted Answer

A) True 
 B)False

Question 5

Buying shares in a corporation is attractive to investors because:

Accepted Answer

A)  Shareholders are not liable for the corporate acts or debts. 
B)  Shares are easily transferred. 
C)  A corporation has unlimited life. 
D)  Shareholders are not mutual agents of the corporation. 
E)  All of these. 
A)  Shareholders are not liable for the corporate acts or debts. 
B)  Shares are easily transferred. 
C)  A corporation has unlimited life. 
D)  Shareholders are not mutual agents of the corporation. 
E)  All of these.

Question 6

A corporation reported net income of $3,730,000 and paid preference cash dividends of $100,000 during the current year. There were 600,000 weighted-average ordinary shares outstanding and the market price per ordinary share was $88.33 at year-end. Calculate the company's price-earnings ratio.

Accepted Answer

$88.33/ [($3,730,000

Question 7

A company reported net income of $478,000 and paid $5,500 in preference cash dividends during the current year. The company had 100,000 ordinary shares issued, and 10,000 ordinary shares in treasury during the year. The year-end market price per ordinary share was $43.05. Calculate the company's price-earnings ratio.

Accepted Answer

$43.05 / [($478,000

Question 8

Corporations issue preference shares to raise capital without sacrificing control of the corporation and/or to boost the return earned by ordinary shareholders.

Accepted Answer

A) True 
 B)False

Question 9

Book value per share is often used as a starting point for:

Accepted Answer

A)  Share valuation models. 
B)  Merger negotiations. 
C)  Price setting for public utilities. 
D)  Loan contracts. 
E)  All of these. 
A)  Share valuation models. 
B)  Merger negotiations. 
C)  Price setting for public utilities. 
D)  Loan contracts. 
E)  All of these.

Question 10

is/are responsible for and have final authority for managing a corporation's activities.

Accepted Answer

The board

Question 11

A bonus issue or share dividend:

Accepted Answer

A)  Is not a liability on the balance sheet. 
B)  Does not reduce a corporation's assets and shareholders' equity. 
C)  Transfers a portion of equity from retained earnings to contributed capital. 
D)  Does not affect total equity, but does affect the components of equity. 
E)  All of these. 
A)  Is not a liability on the balance sheet. 
B)  Does not reduce a corporation's assets and shareholders' equity. 
C)  Transfers a portion of equity from retained earnings to contributed capital. 
D)  Does not affect total equity, but does affect the components of equity. 
E)  All of these.

Question 12

Owners of preference shares often do not have:

Accepted Answer

A)  Ownership rights to assets of the corporation. 
B)  Voting rights. 
C)  Preference to dividends. 
D)  The right to sell their shares on the open market. 
E)  Preference to assets at liquidation. 
A)  Ownership rights to assets of the corporation. 
B)  Voting rights. 
C)  Preference to dividends. 
D)  The right to sell their shares on the open market. 
E)  Preference to assets at liquidation.

Question 13

Par value of a share refers to the:

Accepted Answer

A)  Issue price of the share. 
B)  Value assigned per share. 
C)  Market value of the share on the date of the financial statements. 
D)  Maximum selling price of the share. 
E)  Dividend value of the share. 
A)  Issue price of the share. 
B)  Value assigned per share. 
C)  Market value of the share on the date of the financial statements. 
D)  Maximum selling price of the share. 
E)  Dividend value of the share.

Question 14

Dividend yield is defined as the market price per share of a company's shares divided by its earnings per share.

Accepted Answer

A) True 
 B)False

Question 15

A preemptive right means shareholders can purchase their proportional share of ordinary shares issued later by the corporation.

Accepted Answer

A) True 
 B)False

Question 16

How is the retirement of shares recorded?

Accepted Answer

When a company's own shares are retired,

Question 17

Shareholders' equity consists of paid-in capital and retained earnings.

Accepted Answer

A) True 
 B)False

Question 18

A corporation was formed on January 1. The corporate charter authorized 100,000 $10 par value ordinary shares. During the first month of operation, the corporation issued 300 shares to its attorneys in payment of a $5,000 charge for helping the incorporation. The entry to record this transaction would include:

Accepted Answer

A)  A debit to Organization Expenses for $3,000. 
B)  A debit to Organization Expenses for $5,000. 
C)  A credit to Share Capital-Ordinary for $5,000. 
D)  A credit to Share Premium-Ordinary for $5,000. 
E)  A debit to Share Premium-Ordinary for $2,000. 
A)  A debit to Organization Expenses for $3,000. 
B)  A debit to Organization Expenses for $5,000. 
C)  A credit to Share Capital-Ordinary for $5,000. 
D)  A credit to Share Premium-Ordinary for $5,000. 
E)  A debit to Share Premium-Ordinary for $2,000.

Question 19

Shamrock Company had net income of $30,000. The weighted-average ordinary shares outstanding were 8,000. The company sold 3,000 shares before the end of the year. There were no other share transactions. The company's earnings per share is:

Accepted Answer

A)  $3.75. 
B)  $3.00. 
C)  $3.33. 
D)  $10.00. 
E)  $3.16. 
A)  $3.75. 
B)  $3.00. 
C)  $3.33. 
D)  $10.00. 
E)  $3.16.

Question 20

Shareholders who are not officers or managers of a corporation do not have the power to bind the corporation to contracts. This is called .

Accepted Answer

Lack of mu

Exam 13: Accounting for Corporations

The statement of comprehensive income shows:

A company made an error in calculating and reporting depreciation expense in 2011. The error was discovered in 2012. The item should be reported as a prior period adjustment:

A corporation paid a cash dividend of $0.07 per share during the current year. It had 550,000 ordinary shares outstanding at year-end, its current year's earnings per share was $3.85, and the share's year-end market price was $17.50 per share. Calculate the company's dividend yield.

Unpaid and undeclared preference dividends are called dividends in arrears.

Buying shares in a corporation is attractive to investors because:

A corporation reported net income of $3,730,000 and paid preference cash dividends of $100,000 during the current year. There were 600,000 weighted-average ordinary shares outstanding and the market price per ordinary share was $88.33 at year-end. Calculate the company's price-earnings ratio.

Corporations issue preference shares to raise capital without sacrificing control of the corporation and/or to boost the return earned by ordinary shareholders.

Book value per share is often used as a starting point for:

is/are responsible for and have final authority for managing a corporation's activities.

A bonus issue or share dividend:

Owners of preference shares often do not have:

Par value of a share refers to the:

Dividend yield is defined as the market price per share of a company's shares divided by its earnings per share.

A preemptive right means shareholders can purchase their proportional share of ordinary shares issued later by the corporation.

How is the retirement of shares recorded?

Shareholders' equity consists of paid-in capital and retained earnings.

Shamrock Company had net income of $30,000. The weighted-average ordinary shares outstanding were 8,000. The company sold 3,000 shares before the end of the year. There were no other share transactions. The company's earnings per share is:

Shareholders who are not officers or managers of a corporation do not have the power to bind the corporation to contracts. This is called .

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Long-Term Liabilities

Investments and International Operations

Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

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