Question 1

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 2

When a stock dividend is declared,total stockholders' equity will:

Accepted Answer

A) Decrease. 
B) Increase. 
C) Not change. 
D) Increase or decrease,depending upon whether it's a small or large stock dividend. 
A) Decrease. 
B) Increase. 
C) Not change. 
D) Increase or decrease,depending upon whether it's a small or large stock dividend.

Question 3

A prior period adjustment is a correction made to:

Accepted Answer

A) Retained earnings of the beginning of the period. 
B) Retained earnings at the end of the period. 
C) Net income of the current year. 
D) Only to last years' financial statements. 
A) Retained earnings of the beginning of the period. 
B) Retained earnings at the end of the period. 
C) Net income of the current year. 
D) Only to last years' financial statements.

Question 4

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

Accepted Answer

A) Only 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 a footnote disclosure to the financial statements. 
D) Either as a second income statement or as a single income statement that includes both the components of net income and the components of other comprehensive income. 
A) Only 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 a footnote disclosure to the financial statements. 
D) Either as a second income statement or as a single income statement that includes both the components of net income and the components of other comprehensive income.

Question 5

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 6

Declaration and distribution of a stock dividend cause each of the following effects except:

Accepted Answer

A) An increase in the number of shares of stock outstanding. 
B) A decrease in retained earnings. 
C) A decrease in total assets of the issuing corporation. 
D) An increase in legal capital of the issuing corporation. 
A) An increase in the number of shares of stock outstanding. 
B) A decrease in retained earnings. 
C) A decrease in total assets of the issuing corporation. 
D) An increase in legal capital of the issuing corporation.

Question 7

An unusual and infrequent item (a non-recurring item)appears on the income statement before the section on discontinued operations.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

At the beginning of the current year,Elite 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,declared a 10% stock dividend when the price of stock was $28 per share,and paid a year-end cash dividend of $3 per share.(The cash dividend was paid after the stock dividend had been distributed. )What was Elite Corporation's retained earnings at the end of the year?

Accepted Answer

A) $5,915,000 
B) $5,255,000 
C) $5,311,000 
D) $3,580,000 
A) $5,915,000 
B) $5,255,000 
C) $5,311,000 
D) $3,580,000

Question 11

The amount transferred out of retained earnings when a 4% stock dividend is declared is equal to the prevailing market value per share times the number of dividend shares to be distributed.

Accepted Answer

A) True 
 B)False

Question 12

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 13

For the current year,Voque Company reported basic earnings per share of $8 and diluted earnings per share of $3.The difference between these figures is attributable to outstanding shares of convertible preferred stock.If all this preferred stock had actually been converted into common stock at the beginning of the current year,Voque Company would have reported only one earnings per share amount,which would have been:

Accepted Answer

A) $8. 
B) $5. 
C) $3. 
D) Cannot be determined. 
A) $8. 
B) $5. 
C) $3. 
D) Cannot be determined.

Question 14

Large stock dividends tend to:

Accepted Answer

A) Increase stock prices. 
B) Have no effect upon stock prices. 
C) Keep stock prices down. 
D) Decrease total assets. 
A) Increase stock prices. 
B) Have no effect upon stock prices. 
C) Keep stock prices down. 
D) Decrease total assets.

Question 15

Stock dividend-effect on book value
Olympic Corporation has 75,000 shares of $1 par value stock outstanding.The largest single stockholder is Lou Cheng,who owns 6,000 shares.On December 31,the total assets of the company amount to $4,360,000 and total liabilities to $2,230,000.On that date,the board of directors declared a stock dividend of one new share for each five shares outstanding.Compute the following:

Accepted Answer

(a)$28.40 per share

Question 16

In determining earnings per share when a preferred stock has dividends in arrears,only the current year's dividend is deducted to arrive at earnings per share.

Accepted Answer

A) True 
 B)False

Question 17

[The following information applies to the questions displayed below.]
The stockholders' equity section of the balance sheet of Crammond Corporation at December 31,appears as follows:
  
-What was the average issue price per share of preferred stock?

Accepted Answer

A) $100.00 
B) $125.71 
C) $175.50 
D) $300.00 
A) $100.00 
B) $125.71 
C) $175.50 
D) $300.00

Question 18

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 19

The amount of earnings per share is usually computed:

Accepted Answer

A) For both preferred and common stock. 
B) For common stock by deducting the dividends on preferred stock from net income and dividing the remaining amount by the weighted average number of common shares outstanding. 
C) By dividing net income by the combined number of preferred and common shares. 
D) On the basis of the number of shares outstanding at year-end,regardless of changes in the number of shares during the year. 
A) For both preferred and common stock. 
B) For common stock by deducting the dividends on preferred stock from net income and dividing the remaining amount by the weighted average number of common shares outstanding. 
C) By dividing net income by the combined number of preferred and common shares. 
D) On the basis of the number of shares outstanding at year-end,regardless of changes in the number of shares during the year.

Question 20

Accounting changes and prior period adjustment
Prior period adjustments affect the income of past accounting periods.Explain how prior period adjustments are shown in the financial statements.

Accepted Answer

A prior period adjustment represents a c

Exam 12: Income and Changes in Retained Earnings

Dividends become a liability of a corporation:

When a stock dividend is declared,total stockholders' equity will:

A prior period adjustment is a correction made to:

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

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

Declaration and distribution of a stock dividend cause each of the following effects except:

An unusual and infrequent item (a non-recurring item)appears on the income statement before the section on discontinued operations.

It would be reasonable to assume that:

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

The amount transferred out of retained earnings when a 4% stock dividend is declared is equal to the prevailing market value per share times the number of dividend shares to be distributed.

Stock splits:

Large stock dividends tend to:

In determining earnings per share when a preferred stock has dividends in arrears,only the current year's dividend is deducted to arrive at earnings per share.

[The following information applies to the questions displayed below.] The stockholders' equity section of the balance sheet of Crammond Corporation at December 31,appears as follows: -What was the average issue price per share of preferred stock?

Treasury stock appears as:

The amount of earnings per share is usually computed:

Accounting changes and prior period adjustment Prior period adjustments affect the income of past accounting periods.Explain how prior period adjustments are shown in the financial statements.

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

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

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

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