Exam 18: Additional Reporting Issues

On January 1, 2008, Dingler Corporation had 125,000 shares of its $2 par value common stock outstanding. On March 1, Dingler sold an additional 250,000 shares on the open market at $20 per share. Dingler issued a 20% stock dividend on May 1. On August 1, Dingler purchased 140,000 shares and immediately retired the stock. On November 1, 200,000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2008?

Colaw Company had 300,000 shares of common stock issued and outstanding at December 31, 2007. During 2008, no additional common stock was issued. On January 1, 2008, Colaw issued 400,000 shares of nonconvertible preferred stock. During 2008, Colaw declared and paid $180,000 cash dividends on the common stock and $150,000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2008, was $960,000. What should be Colaw's 2008 earnings per common share, rounded to the nearest penny?

On January 1, 2007, Gregg Corp. acquired a machine at a cost of $500,000. It is to be depreciated on the straight-line method over a five-year period with no residual value. Because of a bookkeeping error, no depreciation was recognized in Gregg's 2007 financial statements. The oversight was discovered during the preparation of Gregg's 2008 financial statements. Depreciation expense on this machine for 2008 should be

On January 2, 2008, Dino Co. issued at par $300,000 of 9% convertible bonds. Each $1,000 bond is convertible into 30 shares. No bonds were converted during 2008. Dino had 50,000 shares of common stock outstanding during 2008. Dino's 2008 net income was $160,000 and the income tax rate was 30%. Dino's diluted earnings per share for 2008 would be (rounded to the nearest penny)

Ferry Corporation had 300,000 shares of common stock outstanding at December 31, 2008. In addition, it had 90,000 stock options outstanding, which had been granted to certain executives, and which gave them the right to purchase shares of Ferry's stock at an option price of $37 per share. The average market price of Ferry's common stock for 2008 was $50. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2008?

On January 1, 2006, Lynn Corporation acquired equipment at a cost of $600,000. Lynn adopted the double-declining balance method of depreciation for this equipment and had been recording depreciation over an estimated life of eight years, with no residual value. At the beginning of 2009, a decision was made to change to the straight-line method of depreciation for this equipment. Assuming a 30% tax rate, the cumulative effect of this accounting change on beginning retained earnings, net of tax, is

When a company changes an accounting principle under the retrospective approach, it adjusts its financial statements for each prior period presented.

Hannah Company began operations on January 1, 2008, and uses the FIFO method in costing its raw materials inventory. Management is contemplating a change to the LIFO method and is interested in determining what effect such a change will have on net income. Accordingly, the following information has been developed: Based upon the above information, a change to the LIFO method in 2009 would result in net income for 2009 of

The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to a remaining life of 10 years. Based on this information, the accountant should

At December 31, 2007, Kegan Co. had 1,200,000 shares of common stock outstanding. In addition, Kegan had 450,000 shares of preferred stock which were convertible into 750,000 shares of common stock. During 2008, Kegan paid $600,000 cash dividends on the common stock and $400,000 cash dividends on the preferred stock. Net income for 2008 was $3,400,000 and the income tax rate was 40%. The diluted earnings per share for 2008 is (rounded to the nearest penny)

Stone Company changed its method of pricing inventories from FIFO to LIFO. What type of accounting change does this represent?

Which of the following is not a part of applying the current and prospective approach in accounting for a change in an estimate?

Weaver Company changes from the LIFO method to the FIFO method in 2009. The increase in pre-tax income as a result of the difference in the two methods prior to 2007 is $100,000, for the year 2007 is $40,000, and for the year 2008 is $30,000. The estimated tax effect is 40%. The entry to record the change at the beginning of 2008 should include

A company that reports changes retrospectively would

When stock dividends or stock splits occur, computation of the weighted-average number of shares requires restatement of the shares outstanding before the stock dividend or split.

Caruso Company had 500,000 shares of common stock issued and outstanding at December 31, 2007. On July 1, 2008, an additional 500,000 shares were issued for cash. Caruso also had stock options outstanding at the beginning and end of 2008 which allow the holders to purchase 150,000 shares of common stock at $20 per share. The average market price of Caruso's common stock was $25 during 2008. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2008?

In computing earnings per share, the equivalent number of shares of convertible preferred stock are added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is cumulative, which amount should then be added as an adjustment to the numerator (net earnings)?

In 2008, Flynn Company has changed from the percentage-of-completion method to the completed-contract method for long-term construction contracts. The difference in pre-tax income prior to 2008 is a decrease of $60,000 and for 2008 is a decrease of $20,000. The estimated tax effect is 40%. The journal entry made by Flynn Company should include a

Which of the following statements is correct?

Companies should use retrospective application if the company cannot determine the effects of the retrospective application.