Exam 12: Profit and Changes in Retained Earnings

On January 31, 2009, Village Bank had 500,000 shares of $2 par value ordinary share outstanding. On that date, the company declared a 14% stock dividend when the market price of the share was $37 per share. The immediate effect of this dividend upon Village Bank was:

"Discontinued operations" is an example of an extraordinary item.

Declaration and distribution of a stock dividend cause each of the following effects except:

Which of the following items would be included in the discontinued operations section of the income statement?

Retrospective restatements are shown in the financial statements by adjusting the beginning balance of retained earnings in the statement of changes in equity.

Earnings per share-basic and diluted Stainless Corporation had profit of $7,800,000 in 2010. The company had 500,000 shares of $4 par value ordinary share and 70,000 shares of 8%, $100 par, convertible preference share outstanding throughout the year. Each share of preference share is convertible into two shares of ordinary share. Compute the following for 2010: (a) The number of shares to be used in computing basic earnings per share (b) The number of shares to be used in computing diluted EPS (c) Basic earnings per share

Platinum Company reports profit of $520,000 for 2009 and declared a cash dividend of $1 per share on each of its 100,000 ordinary shares outstanding. What are earnings per share for 2009?

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 data above. What was the original cost of the treasury share to Caesar Corporation?

Comprehensive income is a component of profit.

Income statement and earnings per share Shown below is information relating to operations of Broadway Industries for 2009: Contiruing operations: Sales \ 6,500,000 Cost ard experses (including income taxes) \ 5,720,000 Other data: Current-year profit generated by seprnent of the business discontinued in May ( net of income taxes) \ 542,100 Gain on disposal of discontirued segment (net of income taxes) \ 185,900 Retrospective restatement (decrease in prior years profit net of tax benefit) \ 347,100 Extraordirary loss (net of incorne tax benefit) \ 325,000 Cash dividends declared ( \6 per share) \ 520,000 In the space provided, complete the income statement for Broadway Industries, including earnings per share figures. Broadway Industries has 100,000 shares of a single class of ordinary share outstanding throughout the year.

When a corporation presents both "basic" and "diluted" earnings per share, basic earnings per share will be the smaller of the two figures.

The amount transferred out of retained earnings when a 4% stock dividend is declared is equal to the prevailing market value per share times the number of dividend shares to be distributed.

Large stock dividends tend to keep share prices down.

Comprehensive income can be displayed to users of financial statements in which of the following way(s):

Which of the following would be treated as a retrospective restatement by Gold Corporation in 2010?

Corona Corporation's financial statements for the current year include the following: Profit from continuing operations (net of taxes) \ 693,000 Retrospective restatement (increase in prior year profit, net of taxes) \ 250,800 Cash dividends paid to preference shareholders \ 266,640 Gain from discontinued operations (net of taxes) \ 541,200 On the basis of this information, profit for the current year is:

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

Dividends become a liability of a corporation:

A small stock dividend is recorded at:

Shareholders' equity The shareholders' equity section of the balance sheet of Nautilus Corporation at December 31, 2010, appears as follows: Shareholders'Equity 6\% ron-cumulative preferenoe share, \1 00 par; 50,000 shares authorized, ?shares issued \1 ,400,000 Orlinary share, \1 0 par, 500,000 shares authorized, 100,000 shares issued, of which ?? are held in treasuy 1,000,000 Share preminim From issuance of plefereme share 344,000 From issuance of ordinary share 2,835,000 Total issued and filly paid capital \5 ,579,000 Retained eaming: ( \ 160,000 equal to cost of treasuy share is not available for dividends) 1,280,000 \6 ,859,000 Less: treasuy share (at cost: 4,000 ordinaryshares) (1,60,000) Total hhareholders' equity \6 ,699,000 Answer the following questions based on the shareholders' equity section given above. Each question is a separate situation, unless otherwise indicated. (a) What is the total dollar amount paid annually as dividends to preference shareholders? (b) What was the average issue price per share of preference share? (c) What was the average issue price per share of ordinary share? (d) How many shares of ordinary share are outstanding? (e) What is the book value per share of the ordinary share? (f) If all the treasury share is reissued at a price of $45 per share, what amount will be credited to the account Share Premium: Treasury Share Transactions?