Question 1

The disclosures for stockholders' equity must include the pertinent rights and privileges of the various securities outstanding.

Accepted Answer

The disclosures for stockholders' equity must include the rights and privileges of the various securities outstanding to provide transparency and inform investors about their investments.

Question 2

Price Co. reported net income of $18,000 for the current year. It had unrealized losses on available-for-sale debt securities of $1,700 after tax, and a foreign currency translation loss of $1,000 after tax. What is comprehensive income for the current year?

Accepted Answer

Comprehensive income includes net income and other comprehensive income (OCI) items. Here, OCI includes unrealized losses on available-for-sale securities ($1,700) and foreign currency translation loss ($1,000). Thus, comprehensive income = $18,000 - $1,700 - $1,000 = $15,300.

Question 3

Comprehensive income includes all changes in equity during a period from all sources.

Accepted Answer

The answer of Comprehensive income includes all changes in equity...

Question 4

Rouge Corp. has 75,000 shares of $2 par common stock and 30,000 shares of $14 par 8% cumulative preferred stock. The company declares cash dividends of $60,000 during the current year and there are $8,000 dividends in arrears. What will be the total dividend payment to common and preferred shareholders?

Accepted Answer

The answer of Rouge Corp. has 75,000 shares of $2...

Question 5

Syd's Co. reported comprehensive income of $8,700 for the current year. It had unrealized losses on available-for-sale debt securities of $1,700 after tax, and a foreign currency translation gain of $1,900 after tax. What is net income for the current year?

Accepted Answer

Net income is comprehensive income less unrealized losses on available-for-sale debt securities and plus foreign currency translation gains. So, net income = $8,700 - $1,700 + $1,900 = $8,900.

Question 6

When earnings are volatile, the ________ ratio can be useful in evaluating a company because ________ value is generally more stable than net income.

Accepted Answer

The Price to Book ratio is useful when earnings are volatile because the book value is generally more stable than net income.

Question 7

Molly's Brewery declared a cash dividend of $2,400 on July 1, 2018. It sets the record date as July 17, 2018, the ex-dividend date as July 15, 2018, and the payment date as August 5, 2018. Prepare all necessary journal entries to record this dividend.

Accepted Answer

The answer of Molly's Brewery declared a cash dividend of...

Question 8

Explain the reasons for reporting other comprehensive income separately from net income.

Accepted Answer

The answer of Explain the reasons for reporting other comprehensive...

Question 9

Investors' perceptions of a firm's expected future profitability and prospects is reflected in the ________.

Accepted Answer

The market value of a firm's common stock reflects investors' perceptions of the firm's expected future profitability and prospects, as it is determined by the stock price in the market, which is influenced by investor sentiment and expectations.

Question 10

Archer, Inc. declared a stock dividend of 100,000 shares. Prior to the declaration, the company has 450,000 shares, $1 par value common stock issued and outstanding. At the date of the declaration, the company's common stock was selling for $15 per share.
Prepare the required journal entries to account for the declaration as if the 100,000 shares were considered:
a. a small stock dividend
b. a large stock dividend

Accepted Answer

The answer of Archer, Inc. declared a stock dividend of...

Question 11

On December 15, Caesar & Company's accountant found a mistake that was made in the previous year's depreciation expense computation. The mistake resulted in depreciation expense that was reported too high last year. Based on the following information (and ignoring taxes), what will the correct ending balance in Retained Earnings be this year?
Retained Earnings balance at the end of last year was $45,000.
Depreciation Expense last year overstated by $5,000.
Net income current year is $15,000.
Cash dividends declared and paid this year $4,000.

Accepted Answer

The answer of On December 15, Caesar & Company's accountant...

Question 12

Price Co. reported net income of $18,000 for the current year. It had unrealized losses on available-for-sale debt securities of $1,700 after tax, and a foreign currency translation loss of $700 after tax. What is comprehensive income for the current year?

Accepted Answer

Comprehensive income includes net income and other comprehensive income items such as unrealized losses on available-for-sale securities and foreign currency translation losses. Thus, $18,000 - $1,700 - $700 = $15,600.

Question 13

Unrealized gains and losses on trading debt securities are included in other comprehensive income.

Accepted Answer

Unrealized gains and losses on trading debt securities are included in net income, not other comprehensive income.

Question 14

Fancy Flights has 200,000 common shares outstanding, and they are currently trading at $47 per share. Net income is $235,000. What is the Price-to-Earnings Ratio? (Round your answers to two decimal places, X.XX.)

Accepted Answer

The Price-to-Earnings (P/E) Ratio is calculated as the market price per share divided by the earnings per share (EPS). EPS is calculated as net income divided by the number of shares outstanding. EPS = $235,000 / 200,000 = $1.175. P/E Ratio = $47 / $1.175 = 40.00.

Question 15

Which of the following is not a part of Other Comprehensive Income?

Accepted Answer

Gains on the sale of equipment are included in net income, not in Other Comprehensive Income. Other Comprehensive Income includes items like unrealized gains on available-for-sale securities, foreign currency translation adjustments, and unrecognized pension costs.

Question 16

When a company has unusually high or low net income, the ________ is not the most useful valuation ratio.

Accepted Answer

Price to Earnings Ratio is not the most useful valuation ratio when a company has unusually high or low net income because net income can be volatile and can distort the ratio.

Question 17

IFRS requires a company to disclose information that enables users to assess its objectives, policies, and processes for managing capital.

Accepted Answer

IFRS requires companies to disclose qualitative and quantitative information about their capital management to help users understand the company's objectives, policies, and processes for managing capital.

Question 18

The two major components of comprehensive income are ________ and ________.

Accepted Answer

Net income and other comprehensive income are the two major components of comprehensive income.

Question 19

Other comprehensive income includes income items that bypass the income statement.

Accepted Answer

Other comprehensive income includes items such as unrealized gains or losses on certain investments, which are reported directly in equity and bypass the income statement.

Question 20

The total amount of stockholders' equity reported on the balance sheet is often ________.

Accepted Answer

Stockholders' equity on the balance sheet is based on historical costs and accounting principles, which may not reflect the current market value or fair value of the company.

Quiz 15: Accounting for Stockholders Equity