Question 1

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

Accepted Answer

A) A lower-of-cost-or-market write-down of inventory. 
B) A material loss due to natural disaster. 
C) An unrealized gain on the portfolio of available-for-sale marketable securities. 
D) A gain on the sale of a segment of the business. 
A) A lower-of-cost-or-market write-down of inventory. 
B) A material loss due to natural disaster. 
C) An unrealized gain on the portfolio of available-for-sale marketable securities. 
D) A gain on the sale of a segment of the business.

Question 2

Baron Corporation was authorized by its charter to issue 80,000 shares of 12%,$100 par cumulative preferred stock and 200,000 shares of $1 par value common stock.In its first year of operations,Baron had the following transactions.
(1)Sold 50,000 shares of common stock for $300,000 on January 1.
(2)Sold 3,000 shares of preferred stock for $360,000 on January 1.
(3)Earned $185,000 for the sale of their merchandise of which $135,000 was on credit.
(4)Had expenses of $122,500 in connection with selling the merchandise.All expenses were paid in cash.
(5)Purchased 5,000 shares of outstanding common stock for $8.00 per share for the treasury.
(6)Declared a dividend of $.20 per share of common stock and for the amount due the preferred stock.
(7)Paid the required dividends.
Required:
(a)Prepare the necessary journal entries.
(b)Prepare the stockholders' equity section of the balance sheet.

Accepted Answer

The answer of Baron Corporation was authorized by its charter...

Question 3

Accounting terminology
Listed below are nine technical accounting terms introduced in this chapter:   Each of the following statements may (or may not)describe one of these technical terms.In the space provided beside each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms.
________ (a)A financial statement showing the revenue,expenses,and net earnings of a corporation during the current accounting period.
________ (b)A distribution of cash to stockholders.
________ (c)A distribution to stockholders of additional shares of stock,accompanied by a proportionate reduction in the par value per share.
________ (d)The market price of a share of preferred stock,divided by the net income of the corporation.
________ (e)A correction in the amount of net income reported in an earlier accounting period.
________ (f)An event that is material in dollar amount,unusual in nature,and not expected to recur in the foreseeable future.
________ (g)A subtotal sometimes included in an income statement to assist investors in forecasting the income of future accounting periods.

Accepted Answer

(a)None (The statement describes an inco

Question 4

According to the Sarbanes-Oxley Act,lying to an external auditor can create a criminal penalty as well as a civil penalty.

Accepted Answer

A) True 
 B)False

Question 5

Earnings per share figures are shown in the income statement:

Accepted Answer

A) For income before non-recurring items and for income from continuing operations,as well as for net income. 
B) For common stock as well as for preferred stock. 
C) For all publicly owned,as well as for all privately held,corporations. 
D) As an optional disclosure for all corporations,and may be omitted completely or disclosed in a footnote at the option of the issuing corporation. 
A) For income before non-recurring items and for income from continuing operations,as well as for net income. 
B) For common stock as well as for preferred stock. 
C) For all publicly owned,as well as for all privately held,corporations. 
D) As an optional disclosure for all corporations,and may be omitted completely or disclosed in a footnote at the option of the issuing corporation.

Question 6

Retained earnings
At the beginning of 2018,Falcon Corporation had 2 million shares of $2 par value common stock outstanding and retained earnings of $17 million.During 2018,Falcon earned $12 million,declared a 5% stock dividend when the price of the stock was $19 per share,and paid a year-end cash dividend of $2.50 per share.(The cash dividend was declared after the stock dividend had been distributed. )At the end of 2018,what are the company's retained earnings?

Accepted Answer

Ending ret

Question 7

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

Accepted Answer

A) The year-end number of shares outstanding. 
B) The beginning of the year number of shares outstanding. 
C) The average of the beginning and the year-end number of shares outstanding. 
D) The weighted average of shares outstanding for the year. 
A) The year-end number of shares outstanding. 
B) The beginning of the year number of shares outstanding. 
C) The average of the beginning and the year-end number of shares outstanding. 
D) The weighted average of shares outstanding for the year.

Question 8

The statement of stockholders' equity discloses the amount of cash dividends as well as stock dividends declared during the current year.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

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 12

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 13

Which of the following would be treated as a prior period adjustment by Gold Corporation in 2018?

Accepted Answer

A) In 2018,it was discovered that Gold Corporation recorded the purchase of a warehouse in 2015 as a debit to Repairs Expense. 
B) In 2018,Gold Corporation switched from the straight-line method of depreciation to another method of computing depreciation. 
C) In 2018,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 2018,Gold Corporation sold a segment of the business that it has operated since 2009. 
A) In 2018,it was discovered that Gold Corporation recorded the purchase of a warehouse in 2015 as a debit to Repairs Expense. 
B) In 2018,Gold Corporation switched from the straight-line method of depreciation to another method of computing depreciation. 
C) In 2018,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 2018,Gold Corporation sold a segment of the business that it has operated since 2009.

Question 14

Earnings per share is equal to net income applicable to common stock,divided by the weighted number of common shares outstanding.

Accepted Answer

A) True 
 B)False

Question 15

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)

Accepted Answer

A) Sovereign Foods reports a net loss of $1,425,000 for the current year. 
B) Sovereign Foods reports income before non-recurring items of $75,000. 
C) Sovereign Foods combines the $1,500,000 loss with its other costs and expenses of $6,505,000,since this item does not qualify for any special disclosure. 
D) Sovereign Foods shows the $1,500,000 loss in a separate section of the income statement as an nonrecurring item. 
A) Sovereign Foods reports a net loss of $1,425,000 for the current year. 
B) Sovereign Foods reports income before non-recurring items of $75,000. 
C) Sovereign Foods combines the $1,500,000 loss with its other costs and expenses of $6,505,000,since this item does not qualify for any special disclosure. 
D) Sovereign Foods shows the $1,500,000 loss in a separate section of the income statement as an nonrecurring item.

Question 16

When a small (under 10%)stock dividend is declared,the market value of the stock is transferred from Retained Earnings into other stockholder equity accounts.

Accepted Answer

A) True 
 B)False

Question 17

Comprehensive income may be presented in a statement with net income,in a separate statement,or as part of the notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 18

A 2-for-1 stock split:

Accepted Answer

A) Is accounted for in the same way as a 100% stock dividend. 
B) Increases the number of outstanding shares of common stock,but par value per share remains the same as before the split. 
C) Is recorded by transferring the par value of additional shares from retained earnings to the common stock account. 
D) Should logically cause the market price per share to drop by approximately 50%. 
A) Is accounted for in the same way as a 100% stock dividend. 
B) Increases the number of outstanding shares of common stock,but par value per share remains the same as before the split. 
C) Is recorded by transferring the par value of additional shares from retained earnings to the common stock account. 
D) Should logically cause the market price per share to drop by approximately 50%.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

National Corporation was organized on January 1 and issued 600,000 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 $3,675,000.Net earnings per share amounted to:

Accepted Answer

A) $5.25. 
B) $6.13. 
C) $4.59. 
D) $9.19. 
A) $5.25. 
B) $6.13. 
C) $4.59. 
D) $9.19.

Exam 12: Income and Changes in Retained Earnings

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

According to the Sarbanes-Oxley Act,lying to an external auditor can create a criminal penalty as well as a civil penalty.

Earnings per share figures are shown in the income statement:

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

The statement of stockholders' equity discloses the amount of cash dividends as well as stock dividends declared during the current year.

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

As a result of a 5% stock dividend:

A liquidating dividend:

Which of the following would be treated as a prior period adjustment by Gold Corporation in 2018?

Earnings per share is equal to net income applicable to common stock,divided by the weighted number of common shares outstanding.

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)

When a small (under 10%)stock dividend is declared,the market value of the stock is transferred from Retained Earnings into other stockholder equity accounts.

Comprehensive income may be presented in a statement with net income,in a separate statement,or as part of the notes to the financial statements.

A 2-for-1 stock split:

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

National Corporation was organized on January 1 and issued 600,000 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 $3,675,000.Net earnings per share amounted to:

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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