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Exam 13: The Corporate Income Statement and the Statement of Stockholders Equity

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Question 61

Multiple Choice

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Book value per share refers to the

A) net assets represented by one share of a company's stock.
B) highest price that investors will pay for a share of stock.
C) issue price of the stock, less any market decline since issuance.
D) par or stated value of a share of stock.

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Question 62

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A stock dividend does not affect the total amount of stockholders' equity.

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Question 63

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For an item to be reported as extraordinary,

For an item to be treated as extraordinary,it must be unusual in nature and occur infrequently.

On July 1,20xx,Tobias Corporation had 20,000 shares of its $100 par value common stock outstanding.On July 2,20xx,Tobias declared a 15 percent stock dividend to be distributed on August 6,20xx,to shareholders of record on July 16,20xx.What amount of retained earnings should be transferred to contributed capital because of this dividend?

The balance of the Retained Earnings account represents

An excess of income taxes expense over income taxes payable for a period is associated with a(n)

Malzone Enterprises is preparing a statement of cash flows using the indirect method. Indicate on the blanks below whether each item is an operating activity (O), an investing activity (I), a financing activity (F), a noncash transaction (N), or an item that would not appear on or with Malzone's statement (NA).

The existence of which of the following income statement items will reduce the quality of the bottom-line figure?

How is it possible for a company to show a net income for a given year yet be in a deficit position at year end?

Indicate on the blanks below the letter of the type of activity (O = operating activity, F = financing activity, I = investing activity, N = noncash transaction) each of the following transactions represents.

On May 1,20xx,Bryson Corporation had 200,000 shares of $100 par value common stock outstanding with a market value of $160 per share.On May 2,20xx,Bryson announced a 4-for-1 stock split.After the split,the par value of the stock

A corporate income statement does not contain

A business with 100,000 shares of stock outstanding for three months would use a weighted-average 25,000 shares in its earnings per share calculation.

The quality of a company's earnings is affected by the accounting estimates chosen by the company's management.

Non-operating items will generally reduce a company's quality of earnings.

Kappa Corporation had a taxable income of $69,000 for 20xx.Calculate the income taxes expense of Kappa Corporation on the basis of the following tax schedule: $\begin{array}{l}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Tax Rate Schedule }\\\begin{array} { | c c | r c | } \hline{ \text { Traxable Income } } & & { \text { Tar Lability } } \\\hline \text { Over } & \text { But Nat Over } && { \text { Of the Amount Over } } \\\hline - & \$ 50,000 & 0 + 15 \% & - \\50,000 & 75,000 & \$ , 500 + 25 \% & 50,000 \\75,000 & 100,000 & 13,750 + 34 \% & 75,000 \\100,000 & 335,000 & 22,250 + 39 \% & 100,000 \\\hline\end{array}\end{array}$

Heywood Enterprises is a famous entertainment company that produces films and operates theme parks,among other things.The company is also well known as a profitable and well-managed business.On November 15,2010,the following article appeared in the financial section of the local newspaper: "Heywood Reports Fiscal 4th-Period Loss after Taking $166 Million Write-Down." Heywood Enterprises reported a $64 million net loss for its fiscal fourth quarter ended Sept.30,after writing down a record $166 million in movies and other properties. In the year-earlier quarter,Heywood had net income of $24.5 million,or 70 cents a share.Fourth-quarter revenue this year rose 28% to $463.2 million from $363 million. In the fiscal year,the entertainment company's earnings rose 5% to $97.8 million,or $2.73 a share,from $93.2 million,or $2.70 a share,a year earlier.Revenue rose 27% to $1.66 billion from $1.31 billion. The company said it wrote down $112 million in motion picture and television properties. The write-down involves productions that already have been released as well as ones still under development,but Heywood declined to identify the productions or projects involved. "This just reflects the judgment of new management about the ultimate value of projects we had under way," said Marcia Fennel,Heywood's executive vice president for finance. The company also said it charged off $40 million to reflect the "abandonment" of a number of planned projects at its various theme parks.An additional $14 million was charged off as a reserve to cover possible legal obligations resulting from the company's fight to ward off a pair of successive takeover attempts last summer,Ms.Fennel said. Heywood said its full-year net income included a $76 million extraordinary gain.The change will boost that quarter's reported net income to $85 million,from $9 million. a. What two categories of issues does the user of financial statements want to consider when evaluating the quality of a company's reported earnings? Did Heywood have one or both types of items in fiscal 2010? a. Which comparisons do you believe give the best picture of Heywood's performance? b. Compare the fourth-period earnings or losses for 2009 and 2010 and full fiscal 2009 and 2010 earnings or losses before and after adjusting for the item or items described in

On June 1,20xx,Sterling Corporation had 40,000 shares of $10 par value common stock outstanding.On June 2,20xx,Sterling declared a 40 percent stock dividend to be distributed on July 5,20xx,to shareholders of record on June 15,20xx.What amount of retained earnings should be transferred to contributed capital because of this dividend?

Kagel Corporation computed its actual income taxes payable for 20xx to be $92,000.Because of differences in accounting procedures and income tax rules,the income taxes expense to be reported for 20xx is $107,000.Prepare the entry in journal form without explanation to record the income taxes expense and income taxes payable for 20xx.