Question 1

Which of the following has no effect on the computation of earnings per share for the current period?

Accepted Answer

A)  The amount of cash dividends declared or paid to preference shareholders. 
B)  The amount of cash dividends declared or paid to ordinary shareholders. 
C)  Profit. 
D)  The number of shares of ordinary share authorized. 
A)  The amount of cash dividends declared or paid to preference shareholders. 
B)  The amount of cash dividends declared or paid to ordinary shareholders. 
C)  Profit. 
D)  The number of shares of ordinary share authorized.

Question 2

A statement of shareholders' equity is not a required financial statement and need not be prepared along with a statement of changes in equity.

Accepted Answer

A) True 
 B)False

Question 3

Sovereign Foods suffered a $1,500,000 loss (net of tax) when the FDA prohibited the sale of food products containing red dye no. 3. On its other products, Sovereign Foods had net sales of $6,580,000 and costs and other expenses of $6,505,000. Which of the following statements is not true? (Ignore taxes)

Accepted Answer

A)  Sovereign Foods reports a loss of $1,425,000 for the current year. 
B)  Sovereign Foods reports profit before extraordinary items of $75,000. 
C)  Sovereign Foods combines the $1,500,000 loss with its other costs and expenses of $6,505,000, since this item does not qualify for any special disclosure. 
D)  Sovereign Foods shows the $1,500,000 loss in a separate section of the income statement as an extraordinary item. 
A)  Sovereign Foods reports a loss of $1,425,000 for the current year. 
B)  Sovereign Foods reports profit before extraordinary items of $75,000. 
C)  Sovereign Foods combines the $1,500,000 loss with its other costs and expenses of $6,505,000, since this item does not qualify for any special disclosure. 
D)  Sovereign Foods shows the $1,500,000 loss in a separate section of the income statement as an extraordinary item.

Question 4

To receive the next cash dividend, an investor must purchase the share before the:

Accepted Answer

A)  Dividend declaration date. 
B)  Ex-dividend date. 
C)  Date of record. 
D)  Payment date announced by the board of directors. 
A)  Dividend declaration date. 
B)  Ex-dividend date. 
C)  Date of record. 
D)  Payment date announced by the board of directors.

Question 5

Which of the following statistics is generally computed for both ordinary and preference share?

Accepted Answer

A)  Earnings per share. 
B)  Price-earnings ratio (p/e ratio). 
C)  Annual dividend per share. 
D)  Retained earnings per share. 
A)  Earnings per share. 
B)  Price-earnings ratio (p/e ratio). 
C)  Annual dividend per share. 
D)  Retained earnings per share.

Question 6

A liquidating dividend:

Accepted Answer

A)  Occurs when a corporation distributes its own shares as a dividend, rather than cash. 
B)  Occurs whenever a corporation distributes non-cash assets as a dividend to its shareholders. 
C)  Represents a distribution of a corporation's profits to the shareholders. 
D)  Represents a return of invested capital to a corporation's owners, the shareholders. 
A)  Occurs when a corporation distributes its own shares as a dividend, rather than cash. 
B)  Occurs whenever a corporation distributes non-cash assets as a dividend to its shareholders. 
C)  Represents a distribution of a corporation's profits to the shareholders. 
D)  Represents a return of invested capital to a corporation's owners, the shareholders.

Question 7

Unique Corp. had 50,000 shares of $5 preference share, $100 par, and 100,000 shares of $1 par ordinary share outstanding throughout the year. Profit for the year was $780,000, and Unique declared and distributed a cash dividend of $1 per share on its ordinary share. Earnings per share amounted to:

Accepted Answer

A)  $7.80. 
B)  $1.00. 
C)  $5.30 
D)  $2.30. 
A)  $7.80. 
B)  $1.00. 
C)  $5.30 
D)  $2.30.

Question 8

At the beginning of the current year, Elite Corporation had 200,000 shares of $1 par ordinary share outstanding and had retained earnings of $4,800,000. During the year, the company earned $1,675,000, declared a 10% stock dividend when the price of share was $28 per share, and paid a year-end cash dividend of $3 per share. (The cash dividend was paid after the stock dividend had been distributed.) What was Elite Corporation's retained earnings at the end of the year?

Accepted Answer

A)  $5,915,000. 
B)  $5,255,000. 
C)  $5,311,000. 
D)  $3,580,000. 
A)  $5,915,000. 
B)  $5,255,000. 
C)  $5,311,000. 
D)  $3,580,000.

Question 9

Earnings per share figures are shown in the income statement:

Accepted Answer

A)  For profit before extraordinary items and for profit from continuing operations, as well as for profit. 
B)  For ordinary share as well as for preference share. 
C)  For all publicly owned, as well as for all privately held, corporations. 
D)  As an optional disclosure for all corporations, and may be omitted completely or disclosed in a footnote at the option of the issuing corporation. 
A)  For profit before extraordinary items and for profit from continuing operations, as well as for profit. 
B)  For ordinary share as well as for preference share. 
C)  For all publicly owned, as well as for all privately held, corporations. 
D)  As an optional disclosure for all corporations, and may be omitted completely or disclosed in a footnote at the option of the issuing corporation.

Question 10

It would be reasonable to assume that

Accepted Answer

A)  Basic earnings per share should exceed diluted earnings per share 
B)  Diluted earnings per share should exceed basic earnings per share 
C)  Basic earnings per share should be equal to diluted earnings per share. 
D)  Basic earnings per share would not be presented with diluted earnings per share. 
A)  Basic earnings per share should exceed diluted earnings per share 
B)  Diluted earnings per share should exceed basic earnings per share 
C)  Basic earnings per share should be equal to diluted earnings per share. 
D)  Basic earnings per share would not be presented with diluted earnings per share.

Question 11

Stock dividend and treasury share
At the beginning of the current year, King Cole, Inc. had 300,000 shares outstanding and total shareholders' equity of $1,200,000. During the year, the company earned profit of $325,000, declared cash dividends of $150,000, distributed a 5% stock dividend of 15,000 shares when the market price of the share was $16 per share, and purchased 3,000 shares of treasury share at a cost of $13 per share. Compute the following at the end of the current year:
(a) Total shareholders' equity:
(b) Number of shares outstanding:
(c) Book value per share:

Accepted Answer

(a) Total shareholders' equity:
$1,200,0

Question 12

In preparing the financial statements for 2009, an accountant improperly classified a gain from discontinued operations as an extraordinary item. Which of the following amounts would be incorrect as a result of this improper classification?

Accepted Answer

A)  Profit for 2009. 
B)  Ending retained earnings at December 31, 2009. 
C)  Profit from continuing operations for 2009. 
D)  None of the above would be incorrect. 
A)  Profit for 2009. 
B)  Ending retained earnings at December 31, 2009. 
C)  Profit from continuing operations for 2009. 
D)  None of the above would be incorrect.

Question 13

The expropriation (seizure of) of a multinational company's assets by a government is an example of a discontinued operation item.

Accepted Answer

A) True 
 B)False

Question 14

On January 1, 2009, Carleton Corporation had 55,000 shares of $6 par value ordinary share outstanding. On March 31, 2009, Carleton issued an additional 10,000 shares in exchange for a building. What number of shares will be used in the computation of basic earnings per share for the year 2009?

Accepted Answer

A)  55,000. 
B)  65,000. 
C)  62,500. 
D)  62,000. 
A)  55,000. 
B)  65,000. 
C)  62,500. 
D)  62,000.

Question 15

Accounting changes and retrospective restatement
Retrospective restatements affect the profit of past accounting periods. Explain how retrospective restatements are shown in the financial statements.

Accepted Answer

A retrospective restatement represents a

Question 16

Stock dividends and share splits do not cause a change in the total amount of shareholders' equity.

Accepted Answer

A) True 
 B)False

Question 17

A company failed to make an adjusting entry in the prior year to accrue earned revenue. To correct this they should:

Accepted Answer

A)  Correct last year's statement by increasing Profit 
B)  Correct this year's statements with a retrospective restatement increasing beginning retained earnings 
C)  Correct this year's statements with a retrospective restatement decreasing beginning retained earnings. 
D)  Correct this year's statements with a retrospective restatement increasing ending retained earnings. 
A)  Correct last year's statement by increasing Profit 
B)  Correct this year's statements with a retrospective restatement increasing beginning retained earnings 
C)  Correct this year's statements with a retrospective restatement decreasing beginning retained earnings. 
D)  Correct this year's statements with a retrospective restatement increasing ending retained earnings.

Question 18

Which of the following would have no effect on Retained Earnings?

Accepted Answer

A)  Declaration of a cash dividend 
B)  Declaration of a stock dividend 
C)  Declaration of a share split. 
D)  A retrospective restatement 
A)  Declaration of a cash dividend 
B)  Declaration of a stock dividend 
C)  Declaration of a share split. 
D)  A retrospective restatement

Question 19

Share splits

Accepted Answer

A)  Allow management to conserve cash. 
B)  Give shareholders more shares. 
C)  Cause no change in total assets, liabilities, or shareholders' equity. 
D)  All of the above. 
A)  Allow management to conserve cash. 
B)  Give shareholders more shares. 
C)  Cause no change in total assets, liabilities, or shareholders' equity. 
D)  All of the above.

Question 20

All things being equal, if investors expect earnings to increase substantially from current levels, the price/earnings ratio will:

Accepted Answer

A)  Be quite low. 
B)  Be quite high. 
C)  Not change. 
D)  Not be affected by income expectations. 
A)  Be quite low. 
B)  Be quite high. 
C)  Not change. 
D)  Not be affected by income expectations.

Which of the following has no effect on the computation of earnings per share for the current period?

A statement of shareholders' equity is not a required financial statement and need not be prepared along with a statement of changes in equity.

To receive the next cash dividend, an investor must purchase the share before the:

Which of the following statistics is generally computed for both ordinary and preference share?

A liquidating dividend:

Unique Corp. had 50,000 shares of $5 preference share, $100 par, and 100,000 shares of $1 par ordinary share outstanding throughout the year. Profit for the year was $780,000, and Unique declared and distributed a cash dividend of $1 per share on its ordinary share. Earnings per share amounted to:

Earnings per share figures are shown in the income statement:

It would be reasonable to assume that

In preparing the financial statements for 2009, an accountant improperly classified a gain from discontinued operations as an extraordinary item. Which of the following amounts would be incorrect as a result of this improper classification?

The expropriation (seizure of) of a multinational company's assets by a government is an example of a discontinued operation item.

On January 1, 2009, Carleton Corporation had 55,000 shares of $6 par value ordinary share outstanding. On March 31, 2009, Carleton issued an additional 10,000 shares in exchange for a building. What number of shares will be used in the computation of basic earnings per share for the year 2009?

Accounting changes and retrospective restatement Retrospective restatements affect the profit of past accounting periods. Explain how retrospective restatements are shown in the financial statements.

Stock dividends and share splits do not cause a change in the total amount of shareholders' equity.

A company failed to make an adjusting entry in the prior year to accrue earned revenue. To correct this they should:

Which of the following would have no effect on Retained Earnings?

Share splits

All things being equal, if investors expect earnings to increase substantially from current levels, the price/earnings ratio will:

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

Exam 12: Profit and Changes in Retained Earnings

Which of the following has no effect on the computation of earnings per share for the current period?

A statement of shareholders' equity is not a required financial statement and need not be prepared along with a statement of changes in equity.

To receive the next cash dividend, an investor must purchase the share before the:

Which of the following statistics is generally computed for both ordinary and preference share?

A liquidating dividend:

Unique Corp. had 50,000 shares of $5 preference share, $100 par, and 100,000 shares of $1 par ordinary share outstanding throughout the year. Profit for the year was $780,000, and Unique declared and distributed a cash dividend of $1 per share on its ordinary share. Earnings per share amounted to:

Earnings per share figures are shown in the income statement:

It would be reasonable to assume that

In preparing the financial statements for 2009, an accountant improperly classified a gain from discontinued operations as an extraordinary item. Which of the following amounts would be incorrect as a result of this improper classification?

The expropriation (seizure of) of a multinational company's assets by a government is an example of a discontinued operation item.

On January 1, 2009, Carleton Corporation had 55,000 shares of $6 par value ordinary share outstanding. On March 31, 2009, Carleton issued an additional 10,000 shares in exchange for a building. What number of shares will be used in the computation of basic earnings per share for the year 2009?

Accounting changes and retrospective restatement Retrospective restatements affect the profit of past accounting periods. Explain how retrospective restatements are shown in the financial statements.

Stock dividends and share splits do not cause a change in the total amount of shareholders' equity.

A company failed to make an adjusting entry in the prior year to accrue earned revenue. To correct this they should:

Which of the following would have no effect on Retained Earnings?

Share splits

All things being equal, if investors expect earnings to increase substantially from current levels, the price/earnings ratio will:

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