Question 1

A prior period adjustment appears in the financial statements of the current year when:

Accepted Answer

A)   An error was made in computing the net income of the current period.
B)   An error was made in measuring the net income of a previous year or years.
C)   An extraordinary loss in a prior year was included among normal results of operations in the prior year.
D)   Earnings per share figures from prior years are restated to reflect the increased number of shares outstanding due to a stock split or a stock dividend.

Question 2

Refer to the information above. What was the average issue price per share of preferred stock?

Accepted Answer

A)   $100.
B)   $110.
C)   $115.
D)   $5.

Question 3

Recent rulings by the SEC now require all corporations to prepare an expanded version of the Statement of Retained Earnings showing all equity accounts and their changes for the last three years.

Accepted Answer

A) True 
 B)False

Question 4

How many shares of common stock are outstanding?

Accepted Answer

Answer
420,000 shares of commo...

Question 5

Which of the following items would not reduce retained earnings?

Accepted Answer

A)   A common stock dividend.
B)   A preferred stock dividend.
C)   A cash dividend.
D)   Cash payment of a previously declared dividend.

Question 6

Assume that all remaining treasury stock is reissued at a price of $18 per share in January of 2010. What amount should be credited to the account Additional Paid-in Capital: Treasury Stock Transactions in the journal entry to record this transaction?

Accepted Answer

A)   $96,000.
B)   $140,000.
C)   $112,000.
D)   $288,000.

Question 7

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.

Question 8

Extraordinary items and the results of discontinued operations are shown in the income statement net of any related income tax effects.

Accepted Answer

A) True 
 B)False

Question 9

Retained earnings
At the beginning of 2009, Falcon Corporation had 2 million shares of $2 par value common stock outstanding and retained earnings of $17 million. During 2009, 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 2009, what are the company's retained earnings?

Accepted Answer

Ending ret...

Question 10

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.

Question 11

A stock split changes the par value of a stock, whereas a stock dividend does not.

Accepted Answer

A) True 
 B)False

Question 12

After preparing the financial statements for 2011, the accountant for the Dawson Corporation discovered that a prior period adjustment had been omitted from the 2009 financial statements. Which of the following is most likely to require correction as a result of this oversight?

Accepted Answer

A)   Earnings per share as originally computed.
B)   Net income for 2011 as originally reported.
C)   Ending retained earnings at December 31, 2011.
D)   Extraordinary items as originally reported.

Question 13

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 14

A small stock dividend of 20,000 shares was declared and distributed during 2010. What was the market price per share on the date of declaration?

Accepted Answer

Market price per share on stoc...

Question 15

To qualify as an extraordinary item, a gain or loss must:

Accepted Answer

A)   Affect the income of a prior period.
B)   Be larger in amount than any other item in the income statement.
C)   Be material in amount, unusual in nature, and not expected to recur.
D)   Be associated with a segment of the business that has been discontinued during the current period.

Question 16

Which of the following is (are)  not true about a stock dividend?

Accepted Answer

A)   Total stockholders' equity does not change when a stock dividend is declared or when it is distributed.
B)   Between the time a stock dividend is declared and when it is distributed, the company's commitment is presented in the balance sheet as a current liability.
C)   Stock dividends do not change the relative portion of the company owned by individual stockholders.
D)   Stock dividends have no impact on the amount of the company's assets.

Question 17

Assume all remaining treasury stock is reissued at a price of $24 per share in January of 2011. Prepare the journal entry to record this transaction:

Accepted Answer

Cash (30,000 shares x $24 per ...

Question 18

In order for a loss on the disposal of a discontinued operation to be classified on the income statement as a discontinued operation, it must be unusual in nature.

Accepted Answer

A) True 
 B)False

Question 19

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.

Question 20

Which of the following would be classified as an extraordinary item?

Accepted Answer

A)   A large gift given to the company.
B)   A loss from obsolete inventory.
C)   A loss from a natural disaster that affects the company at infrequent intervals.
D)   A loss from an enacted law that made inventory unsalable.

Exam 12: Income and Changes in Retained Earnings

Assume all remaining treasury stock is reissued at a price of $24 per share in January of 2011. Prepare the journal entry to record this transaction:

Correct Answer
verified
Cash (30,000 shares x $24 per ...
View Answer

To qualify as an extraordinary item, a gain or loss must:

Correct Answer
verified

Recent rulings by the SEC now require all corporations to prepare an expanded version of the Statement of Retained Earnings showing all equity accounts and their changes for the last three years.

Correct Answer
verified

Assume that all remaining treasury stock is reissued at a price of $18 per share in January of 2010. What amount should be credited to the account Additional Paid-in Capital: Treasury Stock Transactions in the journal entry to record this transaction?

Correct Answer
verified

Which of the following would be classified as an extraordinary item?

Correct Answer
verified

Dividends become a liability of a corporation:

Correct Answer
verified

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.

Correct Answer
verified

A small stock dividend of 20,000 shares was declared and distributed during 2010. What was the market price per share on the date of declaration?

Correct Answer
verified
Market price per share on stoc...
View Answer

How many shares of common stock are outstanding?

Correct Answer
verified
Answer
420,000 shares of commo...
View Answer

Which of the following is (are) not true about a stock dividend?

Correct Answer
verified

Extraordinary items and the results of discontinued operations are shown in the income statement net of any related income tax effects.

Correct Answer
verified

Stock splits:

Correct Answer
verified

After preparing the financial statements for 2011, the accountant for the Dawson Corporation discovered that a prior period adjustment had been omitted from the 2009 financial statements. Which of the following is most likely to require correction as a result of this oversight?

Correct Answer
verified

In order for a loss on the disposal of a discontinued operation to be classified on the income statement as a discontinued operation, it must be unusual in nature.

Correct Answer
verified

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

Correct Answer
verified

Refer to the information above. What was the average issue price per share of preferred stock?

Correct Answer
verified

Which of the following items would not reduce retained earnings?

Correct Answer
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A prior period adjustment appears in the financial statements of the current year when:

Correct Answer
verified

Correct Answer
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Ending ret...
View Answer

A stock split changes the par value of a stock, whereas a stock dividend does not.

Correct Answer
verified

Exam 12: Income and Changes in Retained Earnings

Assume all remaining treasury stock is reissued at a price of $24 per share in January of 2011. Prepare the journal entry to record this transaction:

Correct AnswerverifiedCash (30,000 shares x $24 per ...View AnswerShow Answer

To qualify as an extraordinary item, a gain or loss must:

Correct AnswerverifiedShow Answer

Recent rulings by the SEC now require all corporations to prepare an expanded version of the Statement of Retained Earnings showing all equity accounts and their changes for the last three years.

Correct AnswerverifiedShow Answer

Assume that all remaining treasury stock is reissued at a price of $18 per share in January of 2010. What amount should be credited to the account Additional Paid-in Capital: Treasury Stock Transactions in the journal entry to record this transaction?

Correct AnswerverifiedShow Answer

Which of the following would be classified as an extraordinary item?

Correct AnswerverifiedShow Answer

Dividends become a liability of a corporation:

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

A small stock dividend of 20,000 shares was declared and distributed during 2010. What was the market price per share on the date of declaration?

Correct AnswerverifiedMarket price per share on stoc...View AnswerShow Answer

How many shares of common stock are outstanding?

Correct AnswerverifiedAnswer420,000 shares of commo...View AnswerShow Answer

Which of the following is (are) not true about a stock dividend?

Correct AnswerverifiedShow Answer

Extraordinary items and the results of discontinued operations are shown in the income statement net of any related income tax effects.

Correct AnswerverifiedShow Answer

Stock splits:

Correct AnswerverifiedShow Answer

After preparing the financial statements for 2011, the accountant for the Dawson Corporation discovered that a prior period adjustment had been omitted from the 2009 financial statements. Which of the following is most likely to require correction as a result of this oversight?

Correct AnswerverifiedShow Answer

In order for a loss on the disposal of a discontinued operation to be classified on the income statement as a discontinued operation, it must be unusual in nature.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the information above. What was the average issue price per share of preferred stock?

Correct AnswerverifiedShow Answer

Which of the following items would not reduce retained earnings?

Correct AnswerverifiedShow Answer

A prior period adjustment appears in the financial statements of the current year when:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedEnding ret...View AnswerShow Answer

A stock split changes the par value of a stock, whereas a stock dividend does not.

Correct AnswerverifiedShow Answer

Correct Answer
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Cash (30,000 shares x $24 per ...
View Answer

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Market price per share on stoc...
View Answer

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Answer
420,000 shares of commo...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Ending ret...
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Correct Answer
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