Deck 13: Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings

Question 1

If a company's activities include operations that are being discontinued, the income or loss effects of the discontinued operations are included on the income statement inincome from continuing operations.

Answer 1

False

Question 2

A share dividend increases the number of previously outstanding shares.

Answer 2

True

Question 3

A share split decreases the market price of the company shares.

Answer 3

True

Question 4

A reverse share split reduces the market value of shares and the par value per share.

Question 5

A share dividend reduces the number of previously outstanding shares.

Question 6

A cash dividend does not reduce a corporation's assets or equity, while a share dividend reduces both.

Question 7

Share dividends are recorded at market value.

Question 8

Earnings per share is the amount of income earned by each share of a company's outstanding common shares.

Question 9

A share split is the distribution of additional shares to shareholders according to their percent of ownership.

Question 10

A 10% share dividend increases the number of outstanding shares.

Question 11

A share dividend reduces a corporation's assets and equity.

Question 12

A share dividend is a distribution of corporate assets as a dividend that returns part of the original investment to shareholders.

Question 13

A share split affects total equity as reported on the balance sheet.

Question 14

The journal entry to record $10,000 in a share dividend on the declaration date can include a debit to cash dividends declared and a credit to dividends payable.

Question 15

The statement of comprehensive income is a detailed statement of net income plus or minus any other comprehensive income items.

Question 16

A share dividend is not a liability on the balance sheet because it does not require a distribution of assets.

Question 17

Earnings per share is calculated by dividing the number of common shares outstanding by net income.

Question 18

A share dividend is a corporation's distribution of its own shares to its shareholders without receiving any payment in return.

Question 19

A share dividend capitalizes retained earnings because it decreases a company's contributed capital.

Question 20

The journal entry to record $25,000 market value in share dividends on the date of declaration can be a debit to share dividends and a credit to common share dividends distributable.

Question 21

Reporting for discontinued operations includes:

A) Income or loss from operating the discontinued segment net of tax).
B) Tax benefits of the discontinued segment.
C) Gain or loss from disposal of the segment's net assets net of tax).
D) Income or loss from operating the discontinued operations net of tax) and gain or loss from disposal of the operation's net assets net of tax).
E) All of these answers are correct.

Question 22

Changes in accounting estimates are applied in determining expenses for the current and future periods.

Question 23

The cumulative effect of changing accounting principles is only reported for the year of the change.

Question 24

After using an expected useful life of seven years and no residual value to depreciate its machine over the preceding two years, a company decided early this year that themachine would last only three more years. The change in accounting estimate results in an adjustment to ending retained earnings for the prior period with no impact on anyfuture periods.

Question 25

Changes in accounting estimates are treated as accounting errors.

Question 26

A change in accounting policy will be presented on the:

A) Cash Flow Statement.
B) Balance Sheet.
C) Statement of Changes in Equity.
D) Income Statement.
E) All of these answers are correct.

Question 27

Retained earnings are part of the shareholders' claim on the company's net assets.

Question 28

Restricted retained earnings must be disclosed on the balance sheet or the statement of changes in equity, or in the notes to the financial statements.

Question 29

Retirement of shares:

A) Is accounted for like SPLIT shares.
B) Reduces the number of issued shares and is permissible under law if the interest of the shareholders is not jeopardized.
C) Is not permissible under law if the interest of the shareholders is not jeopardized.
D) Reduces the number of issued shares.
E) All of these answers are correct.

Question 30

When a corporation calls in its outstanding shares and issues more than one new share in exchange for each old share, this is a:

A) Reverse share split.
B) Cash dividend.
C) Liquidating dividend.
D) Share dividend.
E) Share split.

Question 31

Changes in accounting estimates are:

A) Accounted for in the period of the change and future periods.
B) Considered to be a change in accounting policy.
C) Considered to be accounting errors.
D) Accounted for with a cumulative "catch-up" adjustment.
E) Reported by retrospective restatement of financial statements.

Question 32

Retrospective restatement of financial statements can result from:

A) Changes in accounting policies.
B) Errors in the current income statements.
C) Changes in estimates.
D) Changes in tax law.
E) Contributed capital.

Question 33

Failure to record the declaration and distribution of a share dividend would:

A) Cause an understatement of equity.
B) Cause the outstanding shares to exceed the equity.
C) Have no effect on total equity.
D) Cause an overstatement of equity.
E) Cause the balance sheet to be out of balance.

Question 34

An expanded income statement for a corporation with discontinued operations includes information on:

A) Net income.
B) Earnings per share.
C) Discontinued operations.
D) Continuing operations.
E) All of these answers are correct.

Question 35

A share dividend:

A) Is a distribution of additional shares to its shareholders without receiving any payment.
B) Transfers a portion of equity from retained earnings to contributed capital.
C) Does not reduce a corporation's assets and equity.
D) Is often referred to as a stock dividend.
E) All of these answers are correct.

Question 36

Restrictions on retained earnings can be:

A) Limits that identify how much of the retained earnings balance is not available for dividends or the repurchase of shares.
B) Set by a corporation's directors in order to limit dividends and maintain cash.
C) Statutory limits set by government.
D) Due to loan agreements.
E) All of these answers are correct.

Question 37

Just before Amigone Funeral Homes Inc. issued a 10% share dividend on November 1, the following data were collected:

A) $-0-.
B) $9,000).
C) $22,500.
D) $27,000).
E) $7,500.

Question 38

The amount of income earned by each outstanding common share of a corporation is known as:

A) Earnings per share.
B) Income from continuing operations.
C) Dividends payable.
D) A share dividend.
E) Restricted retained earnings.

Question 39

McJunkin Ltd. declares a 10% share dividend on December 31, 2015. CurrentlyMcJunkin has 30,000 shares outstanding. The market value of the shares on the date of declaration is $3 per share. The value to be assigned to this share dividend is:

A) $5,000.
B) $2,000.
C) $9,000.
D) $8,000.
E) $6,000.

Question 40

A company can change from one acceptable accounting principle to another as long as the change improves the usefulness of information in its financial statements or it isrequired by IFRS.

Question 41

The financial statement impact for a company that desires to make a change in accounting policy includes):

A) The effect of the change on current year net income.
B) The nature and justification for the change.
C) Financial impact charged or credited net of tax) to the opening balance of retained earnings.
D) Retrospective restatement of prior period financial statements.
E) All of these answers are correct.

Question 42

Shares that are reacquired and are not cancelled by the issuing corporation are called:

A) Callable shares.
B) Redeemed shares.
C) Treasury shares.
D) Capital shares.
E) Preferred shares.

Question 43

Companies use share dividends:

A) To increase contributed capital.
B) To increase the market value of shares.
C) To raise capital for the company for future expansion.
D) To keep the market price of the shares affordable.
E) All of these answers are correct.

Question 44

Explain how to calculate earnings per share and how it is used for analysis of a company's financial status.

Question 45

Explain the form and content of an expanded income statement for a corporation with discontinued operations.

Question 46

The act of a corporation to call in its shares and issue one new share in the place of more than one share previously outstanding is a:

A) Liquidating dividend.
B) Share dividend.
C) Share split.
D) Reverse share split.
E) Cash dividend.

Question 47

Items) that would be included in other comprehensive income include:

A) Net income.
B) Unrealized gains losses) on available-for-sale investments.
C) Unrealized gains losses) on held to maturity investments.
D) Unrealized gains losses) on held for trading investments.
E) Unrealized gains losses) on discontinued operation.

Question 48

A change from moving weighted average to FIFO reporting is:

A) A change in accounting principle and is allowed if it improves the usefulness of information in the financial statements.
B) Allowed if it improves the usefulness of information in the financial statements.
C) Not allowed once an inventory costing method has been chosen.
D) A change in accounting principle and is not allowed even if it improves the usefulness of information in the financial statements.
E) A change that results in a discontinued operation.

Question 49

A corporation's distribution of its own shares to its shareholders without receiving any payment in return is a:

A) Premium on shares.
B) Preferred share.
C) Discount on shares.
D) Share subscription.
E) Share dividend.

Question 50

North American Construction Corp. has three lines of business including surveying, excavating and planning. These product lines are considered to be:

A) Other comprehensive income.
B) Operating segments.
C) Contributed capital.
D) Discontinued operations.
E) All of these answers are correct.

Question 51

A share dividend transfers:

A) Retained earnings to contributed capital.
B) Contributed capital to retained earnings.
C) Assets to contributed capital.
D) Retained earnings to assets.
E) Contributed capital to assets.

Question 52

Describe share dividends and share splits.

Question 53

Retained earnings:

A) Represent an amount of cash available to pay shareholders.
B) Are part of the income statement.
C) Are the cumulative net profits or losses minus dividends paid since the date of incorporation.
D) Are the cumulative net profits or losses minus dividends paid since the date of incorporation, and are part of shareholders' equity.
E) All of these answers are correct.