Question 1

If a material accounting error was made in a prior year, that error:

Accepted Answer

A)  Should be reflected on the current year's income statement. 
B)  Should be reflected, net of taxes, on the retained earnings statement. 
C)  Should be reflected as a change in accounting principle. 
D)  Should be considered as an extraordinary item and shown, net of taxes on the income statement. 
A)  Should be reflected on the current year's income statement. 
B)  Should be reflected, net of taxes, on the retained earnings statement. 
C)  Should be reflected as a change in accounting principle. 
D)  Should be considered as an extraordinary item and shown, net of taxes on the income statement. B

Question 2

A retrospective restatement 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)  Profit 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)  Profit of the current year 
D)  Only to last years' financial statements A

Question 3

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 preference share. If all these preference shares had actually been converted into ordinary share 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. C

Question 4

An extraordinary item appears on the income statement before the section on discontinued operations.

Accepted Answer

A) True 
 B)False

Question 5

A retrospective restatement appears in:

Accepted Answer

A)  The income statement following the subtotal "Profit before Retrospective Restatements." 
B)  The statement of changes in equity as an adjustment to the ending balance of retained earnings. 
C)  Footnotes to the financial statements. 
D)  The statement of changes in equity as an adjustment to the beginning balance of retained earnings. 
A)  The income statement following the subtotal "Profit before Retrospective Restatements." 
B)  The statement of changes in equity as an adjustment to the ending balance of retained earnings. 
C)  Footnotes to the financial statements. 
D)  The statement of changes in equity as an adjustment to the beginning balance of retained earnings.

Question 6

Retained earnings
At the beginning of 2009, Falcon Corporation had 2 million shares of $2 par value ordinary share outstanding and retained earnings of $17 million. During 2009, Falcon earned $12 million, declared a 5% stock dividend when the price of the share 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 retained earnings: $21,850,000
Co

Question 7

Discontinued operations should be shown on the statement of changes in equity net of taxes.

Accepted Answer

A) True 
 B)False

Question 8

The shareholders' equity section of the balance sheet of Caesar Corporation at December 31, 2009, appears as follows: (The company engaged in no treasury share transactions prior to 2009)

-Refer to the above data. How many ordinary shares are outstanding?

Accepted Answer

A)  100,000 
B)  95,000. 
C)  75,000 
D)  70,000. 
A)  100,000 
B)  95,000. 
C)  75,000 
D)  70,000.

Question 9

The numerator in calculating earnings per share is reduced for:

Accepted Answer

A)  Preference share dividends. 
B)  Ordinary dividends. 
C)  Ordinary share dividends. 
D)  All three above. 
A)  Preference share dividends. 
B)  Ordinary dividends. 
C)  Ordinary share dividends. 
D)  All three above.

Question 10

Comprehensive income differs from profit in that it includes events that are recognized but not realized.

Accepted Answer

A) True 
 B)False

Question 11

The price earnings ratio is based on expected future earnings while the earnings per share ratio is based on historical earnings.

Accepted Answer

A) True 
 B)False

Question 12

Supervox Corporation declared a 3-for-2 ordinary share split, but this transaction was erroneously recorded as a 50% ordinary share dividend. As a result:

Accepted Answer

A)  Retained earnings is understated. 
B)  The total dollar amount of shareholders' equity is overstated. 
C)  The corporate records do not show the correct number of ordinary shares outstanding. 
D)  The ordinary share account is understated. 
A)  Retained earnings is understated. 
B)  The total dollar amount of shareholders' equity is overstated. 
C)  The corporate records do not show the correct number of ordinary shares outstanding. 
D)  The ordinary share account is understated.

Question 13

Diluted earnings per share represents a hypothetical case, showing what earnings per share would be if certain securities were converted into additional shares of ordinary share.

Accepted Answer

A) True 
 B)False

Question 14

A restriction of retained earnings:

Accepted Answer

A)  Reduces the dollar amount of retained earnings shown in the balance sheet. 
B)  Appears in the statement of retained earnings as a reduction of ending retained earnings. 
C)  Appears in the liability section of the balance sheet. 
D)  Limits the dollar amount of dividends a corporation may declare. 
A)  Reduces the dollar amount of retained earnings shown in the balance sheet. 
B)  Appears in the statement of retained earnings as a reduction of ending retained earnings. 
C)  Appears in the liability section of the balance sheet. 
D)  Limits the dollar amount of dividends a corporation may declare.

Question 15

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 16

When a company reports both diluted earnings per share and basic earnings per share:

Accepted Answer

A)  Basic EPS would be greater than fully diluted EPS. 
B)  Basic EPS would be less than fully diluted EPS. 
C)  Basic EPS may be either greater or less than fully diluted EPS. 
D)  Both should never be shown - only one would be reported. 
A)  Basic EPS would be greater than fully diluted EPS. 
B)  Basic EPS would be less than fully diluted EPS. 
C)  Basic EPS may be either greater or less than fully diluted EPS. 
D)  Both should never be shown - only one would be reported.

Question 17

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

Accepted Answer

A)  Reduction in total shareholders' 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 shareholders' equity. 
B)  Reduction in retained earnings. 
C)  Reduction in the par value per share. 
D)  Reduction in the market price per share.

Question 18

Family Fashions Corporation discontinued Kid-Choice, its entire line of children's clothing, in November of 2009. Prior to the disposal, Kid-Choice generated a loss of $600,000 (net of tax) for the period from January through the sale date. Because of the value of the real estate and machinery, there was a gain of $850,000 (net of tax) on the actual sale. How should this situation be reported in the financial statements of Family Fashions for 2009?

Accepted Answer

A)  A $250,000 should be included in the 2009 income statement as an extraordinary item. 
B)  A $600,000 loss should be included in profit from operations and a $850,000 gain reported in the "discontinued operations" section of the income statement. 
C)  A $250,000 adjustment to beginning retained earnings should be in the statement of retained earnings. 
D)  A $250,000 gain should be in the "discontinued operations" section of the income statement. 
A)  A $250,000 should be included in the 2009 income statement as an extraordinary item. 
B)  A $600,000 loss should be included in profit from operations and a $850,000 gain reported in the "discontinued operations" section of the income statement. 
C)  A $250,000 adjustment to beginning retained earnings should be in the statement of retained earnings. 
D)  A $250,000 gain should be in the "discontinued operations" section of the income statement.

Question 19

Diluted earnings per share is a hypothetical computation to warn shareholders what could happen if:

Accepted Answer

A)  Loss contingencies turn out adversely. 
B)  Convertible securities are converted into ordinary shares. 
C)  Extraordinary losses were to recur. 
D)  Consideration was given to the loss from operations discontinued during the current period. 
A)  Loss contingencies turn out adversely. 
B)  Convertible securities are converted into ordinary shares. 
C)  Extraordinary losses were to recur. 
D)  Consideration was given to the loss from operations discontinued during the current period.

Question 20

Diluted earnings per share are shown to alert investors that earnings per share could be increased by the effects of conversions of securities into ordinary share.

Accepted Answer

A) True 
 B)False

If a material accounting error was made in a prior year, that error:

A retrospective restatement is a correction made to:

An extraordinary item appears on the income statement before the section on discontinued operations.

A retrospective restatement appears in:

Discontinued operations should be shown on the statement of changes in equity net of taxes.

The shareholders' equity section of the balance sheet of Caesar Corporation at December 31, 2009, appears as follows: (The company engaged in no treasury share transactions prior to 2009) -Refer to the above data. How many ordinary shares are outstanding?

The numerator in calculating earnings per share is reduced for:

Comprehensive income differs from profit in that it includes events that are recognized but not realized.

The price earnings ratio is based on expected future earnings while the earnings per share ratio is based on historical earnings.

Supervox Corporation declared a 3-for-2 ordinary share split, but this transaction was erroneously recorded as a 50% ordinary share dividend. As a result:

Diluted earnings per share represents a hypothetical case, showing what earnings per share would be if certain securities were converted into additional shares of ordinary share.

A restriction of retained earnings:

A liquidating dividend:

When a company reports both diluted earnings per share and basic earnings per share:

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

Diluted earnings per share is a hypothetical computation to warn shareholders what could happen if:

Diluted earnings per share are shown to alert investors that earnings per share could be increased by the effects of conversions of securities into ordinary share.

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

Property, Plant, and Equipment, Intangible Assets and Natural Resources

Liabilities

Shareholders Equity: Capital

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

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Exam 12: Profit and Changes in Retained Earnings

If a material accounting error was made in a prior year, that error:

A retrospective restatement is a correction made to:

An extraordinary item appears on the income statement before the section on discontinued operations.

A retrospective restatement appears in:

Discontinued operations should be shown on the statement of changes in equity net of taxes.

The shareholders' equity section of the balance sheet of Caesar Corporation at December 31, 2009, appears as follows: (The company engaged in no treasury share transactions prior to 2009) -Refer to the above data. How many ordinary shares are outstanding?

The numerator in calculating earnings per share is reduced for:

Comprehensive income differs from profit in that it includes events that are recognized but not realized.

The price earnings ratio is based on expected future earnings while the earnings per share ratio is based on historical earnings.

Supervox Corporation declared a 3-for-2 ordinary share split, but this transaction was erroneously recorded as a 50% ordinary share dividend. As a result:

Diluted earnings per share represents a hypothetical case, showing what earnings per share would be if certain securities were converted into additional shares of ordinary share.

A restriction of retained earnings:

A liquidating dividend:

When a company reports both diluted earnings per share and basic earnings per share:

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

Diluted earnings per share is a hypothetical computation to warn shareholders what could happen if:

Diluted earnings per share are shown to alert investors that earnings per share could be increased by the effects of conversions of securities into ordinary share.

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

Property, Plant, and Equipment, Intangible Assets and Natural Resources

Liabilities

Shareholders Equity: Capital

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Filters