Question 1

Explain what the difference is between a Statement of Changes in Equity and the Equity section on the Balance Sheet.

Accepted Answer

The answer of Explain what the difference is between a...

Question 2

Which of the following is an incorrect statement with reference to the International Financial Reporting Standards (IFRS)?

Accepted Answer

The answer of Which of the following is an incorrect...

Question 3

The payment of a cash dividend to shareholders appears on which financial statement?

Accepted Answer

The payment of a cash dividend to shareholders affects the statement of retained earnings, which is a part of the shareholders' equity section of the balance sheet. It is not reported as a separate item on either the income statement or the balance sheet.

Question 4

$$\begin{array} { | l | r | l | r | } 
\hline \text { Cost of goods sold } & \$ 297,500 & \begin{array} { l } 
\text { Preferred shares, } \$ 1.00,25,000 \
\text { Shares issued \& outstanding }
\end{array} & \$ 95,80 \
\hline \text { Gain on sale of property } & 17,500 & \text { Retained earnings January 1,2017 } & 86,000 \
\hline \text { Interest expense } & 4,250 & \text { Selling expenses } & 60,750 \
\hline \text { General expenses } & 52,000 & \begin{array} { l } 
\text { Common shares, 150,000 shares } \
\text { ssued \& outstanding }
\end{array} & 275,000 \
\hline \text { Interest revenue } & 15,000 & \text { Sales Revenue } & 415,000 \
\hline & & \text { Dividends } & 50,000 \
\hline & & & \
\hline
\end{array}$$ The information above is taken from the ledger and other records of Duchlorol Inc.at December 31,2017.Prepare a combined statement of income (single-step format_and retained earnings for the year ended December 31,2017.Assume Duchlorol Inc.'s tax rate is 30%.

Accepted Answer

The answer of \[\begin{array} { | l | r |...

Question 5

Atlantic Motels Ltd.(AML),a mid-size motel chain on Canada's east coast,had Retained Earnings of $5.7 million at the beginning of 2017.During 2017 AML earned a net income of $955,000.Given the profitable year AML distributed cash dividends of $500,000 to common shareholders.Prepare the statement of retained earnings for AML for the year ended December 31,2017.

Accepted Answer

The answer of Atlantic Motels Ltd.(AML),a mid-size motel chain on...

Question 6

In 2017 Niklan Plastic Products Ltd.(NPPL_discovered an error made in the year ended December 31,2016.An inventory error caused net income of the prior period to be understated by $35,000.Retained Earnings at January 1,2017,as previously reported,stood at 567,800.Net income for the year ended December 31,2017 was $253,000 and cash dividends were $50,000.Prepare the statement of retained earnings for NPPL for the year ended December 31,2017.

Accepted Answer

The answer of In 2017 Niklan Plastic Products Ltd.(NPPL_discovered an...

Question 7

Which of the following is a correct statement with reference to the International Financial Reporting Standards (IFRS)?

Accepted Answer

IFRS allows for the correction of errors without retroactive restatement if it is impractical to determine the effects of the error.

Question 8

A) interest expense
B) deficit
C) earnings per share
D) appropriation of retained earnings
E) revenue recognition and matching
F) reverse stock split
G) statement of earnings
$ \mathrm{H} $ ) record date of dividend
I) retained earnings
J) distribution date of dividend
K) segment
L) other comprehensive income
M) declaration date of dividend
N) treasury shares
O) stock dividend
P) prior-period adjustment
Q) relevant and reliable
R) contributed surplus
S) preferred dividends
T) stock split

Accepted Answer

The answer of A) interest expense
B) deficit
C) earnings per share
D)...

Question 9

Which of the following BEST describes the appropriation of retained earnings?

Accepted Answer

Appropriation of retained earnings refers to setting aside a portion of the earnings for specific purposes, such as reinvestment in growth or expansion projects. This helps the company plan for future investments and ensure that funds are available for these purposes.

Question 10

A change in accounting policy should be:

Accepted Answer

A change in accounting policy should be applied retrospectively, meaning that prior periods should be restated to reflect the new policy. The reasons for the change should also be disclosed in the notes to the financial statements. This ensures consistency and comparability between financial statements for different periods.

Question 11

JenStar Research Inc.ended 2013 with Retained Earnings of $30,000.During 2014,the company earned net income of $135,000 and declared dividends of $15,000.The company ended 2013 with $80,000 in common shares and $10,000 in $2 preferred shares.Additional common shares were sold in 2014 for $20,000.Complete JenStar Research Inc.'s statement of shareholders' equity for the year ended December 31,2014.

Accepted Answer

The answer of JenStar Research Inc.ended 2013 with Retained Earnings...

Question 12

Which of the following would be a reason for a company to appropriate a portion of retained earnings?

Accepted Answer

Appropriating a portion of retained earnings is a strategy used by companies to retain funds within the business for growth, investment, or other strategic purposes, rather than distributing these funds as dividends to shareholders. This helps ensure that the company has sufficient capital for future projects or expansion plans.

Question 13

Which of the following is a key difference between income statements prepared under international financial reporting standards (IFRS_and accounting standards for private enterprises(ASPE)?

Accepted Answer

IFRS mandates the disclosure of Earnings Per Share (EPS) information on the income statement for companies with publicly traded shares, whereas ASPE does not have this requirement.

Question 14

Qualified Research Inc.ended 2013 with Retained Earnings of $55,000.During 2014,the company earned net income of $115,000 and declared dividends of $25,000.The company ended 2013 with $25,000 in common shares and $20,000 in $1 preferred shares.Additional common shares were sold in 2014 for $15,000.Complete Qualified Research Inc.'s statement of shareholders' equity for the year ended December 31,2014.

Accepted Answer

The answer of Qualified Research Inc.ended 2013 with Retained Earnings...

Question 15

Other comprehensive income must be reported under international financial reporting standards (IFRS).

Accepted Answer

Under IFRS, other comprehensive income must be reported and disclosed separately from net income in the financial statements. This includes items such as unrealized gains or losses on investments, gains or losses on foreign currency translation, and gains or losses on cash flow hedges. It is reported in a separate statement of comprehensive income or combined with the statement of changes in equity.

Question 16

What is the impact of IFRS on the income statement and statement of shareholders' equity?

Accepted Answer

The answer of What is the impact of IFRS on...

Question 17

An error on the 2012 income statement is discovered in 2014.The adjustment to correct the error will appear on the:

Accepted Answer

Errors discovered in financial statements of prior periods are corrected by adjusting the opening balance of retained earnings in the year the error is discovered. Therefore, the adjustment for an error found in 2014 that relates to the 2012 financial statements would appear in the 2014 statement of retained earnings.

Question 18

Restrictions on retained earnings:

Accepted Answer

Restrictions on retained earnings may take the form of a voluntary appropriation, which means a portion of the company's profits is set aside for a specific purpose, such as the payment of dividends or the funding of future projects. This is typically done by a board of directors' decision and does not necessarily need to be disclosed through a journal entry or reported in the liability section of the balance sheet. It is not solely for tax purposes, but rather a strategic decision to allocate funds within the company.

Question 19

Which of the following statements is true?

Accepted Answer

Appropriations of retained earnings involve allocating retained earnings for specific purposes and are reflected in the financial statements through journal entries. Restrictions on retained earnings, however, are often imposed by external parties (like creditors) and do not require journal entries, as they do not change the allocation of retained earnings but rather impose limitations on their use.

Question 20

The declaration of a common stock dividend will appear on which of the following financial statements?

Accepted Answer

The declaration of a common stock dividend will appear on the statement of retained earnings, which shows changes in retained earnings over a period of time. It is not recorded on the income statement, which only shows revenues and expenses, or the balance sheet, which shows the assets, liabilities, and equity at a specific point in time.

Quiz 3: Corporations: Retained Earnings and the Income Statement