Accounting Quiz!

Question # 00005604 Posted By: paul911 Updated on: 12/19/2013 12:14 PM Due on: 12/20/2013
Subject Accounting Topic Accounting Tutorials:
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Chapter 17 QUIZ—Earnings Per Share and Retained Earnings

MULTIPLE CHOICE

QUESTION # 1

1. Which one of the following indicators is intended to show the potential impacts of possible future events on a corporation's performance?

a.

basic earnings per share

b.

cash flow per share

c.

diluted earnings per share

d.

price/earnings ratio

QUESTION # 2

6. Basic earnings per share is computed as

a.

Net Income / Total Number of Common Shares Outstanding

b.

(Net Income- Preferred Dividends) / Total Number of Common Shares Outstanding

c.

(Net Income- Preferred Dividends) / Weighted-Average Number of Common Shares Outstanding

d.

Net Income / Weighted-Average Number of Common Shares Outstanding

QUESTION # 3

8. Which of the following items would not be included in a basic earnings per share calculation?

a.

undeclared dividends on noncumulative preferred stock

b.

declared dividends on noncumulative preferred stock

c.

undeclared dividends on cumulative preferred stock

d.

declared dividends on cumulative preferred stock

QUESTION # 4

9. On January 1, 2010, Walters Corporation had 24,000 shares of common stock outstanding. On April 1, it reacquired 2,400 shares; on July 1, it issued 10,800 shares; on October 1, it issued another 9,600 shares; and on December 1, it reacquired 600 shares. The weighted average number of common shares outstanding for 2010 was

a.

26,950

b.

28,900

c.

29,950

d.

41,400

QUESTION # 5

10. On January 1, 2010, Brennen Corporation had 20,000 shares of common shares outstanding. During the year, it sold another 2,600 shares on July 1 and reacquired 600 shares on November 1. The corporation earned $337,600 net income. The company also has 15,000 shares of $10 par value, 6%, cumulative preferred stock on which no dividends have been declared for the last two years. The basic earnings per share for the year is

a.

$15.92

b.

$15.65

c.

$15.50

d.

$15.08

QUESTION # 6

12. On January 1, a corporation had 10,380 shares of common stock outstanding. On August 1, it sold an additional 6,000 shares. During the year, dividends of $4,800 and $56,000 were declared and paid on the common and preferred stock, respectively. Net income for the year was $240,000. The basic earnings per share for the year was

a.

$10.56

b.

$11.23

c.

$14.29

d.

$18.63

QUESTION # 7

13. On January 1, 2010, a corporation had 10,380 shares of common stock outstanding, and on June 1, it reacquired 6,000 shares. Despite a net loss for the year of $180,000, the company declared and paid cash dividends of $24,000 and $28,000 on common and preferred stock, respectively. The earnings per share for 2010 was

a.

($33.72)

b.

($30.24)

c.

($22.10)

d.

($18.60)

QUESTION # 8

15. On January 1, 2010, Smith Company had 21,000 shares of common stock outstanding and issued an additional 4,500 shares on May 1. The company declared and paid a cash dividend of $30,000 and earned $330,000 net income. The earnings per share for the year was

a.

$15.00

b.

$13.75

c.

$12.94

d.

$12.50

QUESTION # 9

16. Common shares outstanding are increased as a result of a stock dividend or stock split. For purposes of calculating the earnings per share, when is the stock dividend or stock split considered to have occurred?

a.

at the beginning of the earliest comparative period for which earnings per share information is presented

b.

at the end of the earliest comparative period for which earnings per share information is presented

c.

at the beginning of the year declared

d.

as of the date of declaration

QUESTION # 10

17. On January 1, a corporation had 20,000 shares of common stock outstanding. An additional 4,000 shares were issued on July 1, and on November 1, the company declared a 3-for-1 stock split. The denominator in the earnings per share calculation would be

a.

36,000

b.

56,000

c.

66,000

d.

72,000

QUESTION # 11

18. On January 1, a corporation had 60,000 shares of common stock outstanding. On March 1, the company reacquired 12,000 shares, and it declared a 10% stock dividend on October 1. The denominator in the earnings per share calculation would be

a.

44,200

b.

40,800

c.

55,000

d.

60,000

QUESTION # 12

22. Reporting diluted earnings per share is required for which type of corporate capital structure?

a.

simple

b.

complex

c.

diluted

d.

primary

QUESTION # 13

25. The potential dilutive effect of the exercise of stock options or warrants will affect which of the following when calculating diluted earnings per share?

a.

the earnings per share numerator

b.

the earnings per share denominator

c.

both the numerator and the denominator

d.

neither the numerator nor the denominator

QUESTION # 14

27. Dual presentation of the basic and diluted earnings per share amounts is

a.

required for corporations with simple capital structures

b.

optional for corporations with simple capital structures

c.

optional for corporations of any structure

d.

required for corporations with complex capital structures

QUESTION # 15

29. Smock Corporation had 30,000 shares of common stock outstanding during the year. In addition, there were compensatory stock options to purchase 3,000 shares of common stock at $20 a share outstanding the entire year. The average market price for the common stock during the year was $36 a share. The unrecognized compensation cost (net of tax) relating to these options was $4 a share. The denominator to compute the diluted earnings per share is

a.

31,000

b.

31,333

c.

31,667

d.

33,000

QUESTION # 16

30. Under the treasury stock method, the number of shares of common stock assumed to be reacquired is determined by using the

a.

ending market price of the stock

b.

average market price of the stock

c.

beginning market price of the stock

d.

par value of the stock

QUESTION # 17

31. The assumed conversion of convertible debt and preferred stock in diluted earnings per share calculations affects

a.

the numerator only

b.

the denominator only

c.

both the numerator and denominator

d.

neither the numerator nor the denominator

QUESTION # 18

34. In the determination of the diluted earnings per share, convertible securities are

a.

included if they are dilutive

b.

included whether they are dilutive or not

c.

included if they are antidilutive

d.

not included

QUESTION # 19

35. Interest expense on convertible bonds that are dilutive is included in the numerator of the diluted earnings per share calculation at an amount equal to

a.

interest expense

b.

interest payable

c.

interest expense times the tax rate

d.

interest expense times one minus the tax rate

QUESTION # 20

36. The term deficit in financial accounting means

a.

net loss

b.

a negative retained earnings balance

c.

a negative cash balance

d.

a negative stockholders' equity total

QUESTION # 21

37. How will a company's working capital and net income be affected by the recording of a cash dividend on the declaration date? (Assume the dividend is paid on a later date.)

Working Capital

Net Income

I.

decrease

decrease

II.

decrease

no effect

III.

no effect

no effect

IV.

no effect

decrease

a.

I

b.

II

c.

III

d.

IV

QUESTION # 22

45. The Carol Company has issued 10%, fully participating, cumulative preferred stock with a total par value of $600,000 and common stock with a total par value of $900,000. No dividends are in arrears. How much cash will be paid to the preferred stockholders and the common stockholders, respectively, if cash dividends of $141,000 are distributed?

a.

$ 60,000 and $90,000

b.

$114,000 and $27,000

c.

$ 51,000 and $90,000

d.

$ 60,000 and $81,000

QUESTION # 23

46. The Farmer Company has issued 10%, fully participating, cumulative preferred stock with a total par value of $300,000 and common stock with a total par value of $900,000. Dividends for one previous year are in arrears. How much cash will be paid to the preferred stockholders and the common stockholders, respectively, if cash dividends of $222,000 are distributed at the end of the current year?

a.

$85,500 and $136,500

b.

$78,000 and $144,000

c.

$60,000 and $162,000

d.

$55,500 and $166,500

QUESTION # 24

49. On November 1, 2010, the Metal Construction Company declared a property dividend payable in the form of bonds held for long-term investment purposes. The bonds will be distributed to the common stockholders on December 15, 2010. The bonds to be distributed to the common stockholders originally cost Metal $210,000. Fair value of the bonds on various dates is as follows:

December 31, 2009

$220,000

November 1, 2010

225,000

December 15, 2010

230,000

Which one of the following amounts should be used to record the appropriate credit to Property Dividends Payable?

a.

$210,000

b.

$220,000

c.

$225,000

d.

$230,000

QUESTION # 25

51. How will a company's total current liabilities and total stockholders' equity be affected by the declaration of a stock dividend? (Assume the stock dividend is distributed at a later date.)

Total

Total

Current Liabilities

Stockholders' Equity

I.

increase

decrease

II.

increase

no effect

III.

no effect

decrease

IV.

no effect

no effect

a.

I

b.

II

c.

III

d.

IV

Exhibit 17-1

The Zoeller Corporation's stockholders' equity accounts have the following balances as of December 31, 2010:

Common stock, $10 par (30,000 shares issued

and outstanding)

$ 300,000

Additional paid-in capital

2,000,000

Retained earnings

5,700,000

Total stockholders' equity

$8,000,000

QUESTION # 26

52. Refer to Exhibit 17-1. On January 2, 2011, the board of directors of Zoeller declared a 30% stock dividend to be distributed on January 31, 2011. The market price per share of Zoeller's common stock was $30 on January 2 and $32 on January 31. As a result of this stock dividend, the retained earnings account should be decreased by

a.

$ 90,000

b.

$270,000

c.

$288,000

d.

zero; only a memorandum entry is required

QUESTION # 27

54. The Martin Company's stockholders' equity accounts have the following balances as of December 31, 2010:

Common stock, $20 par (25,000 shares issued of which

2,000 are being held as treasury stock)

$ 500,000

Additional paid-in capital

750,000

Retained earnings

2,250,000

$3,500,000

Less: Treasury stock (2,000 shares at cost)

(120,000)

Total stockholders' equity

$3,380,000

On January 2, 2011, the board of directors of Martin declared a 10% stock dividend to be distributed on February 15, 2011. The market price of Martin Company's common stock was $65 per share on January 2, 2011. On the date of declaration, the retained earnings account should be decreased by

a.

zero; only a memorandum entry is required

b.

$ 50,000

c.

$149,500

d.

$162,500

QUESTION # 28

55. A dividend that represents a return of capital rather than a distribution of retained earnings is called a

a.

property dividend

b.

stock dividend

c.

capital dividend

d.

liquidating dividend

QUESTION # 29

56. When a company is determining its dividend policy, the company must adhere to legal requirements. The legal requirements are determined by the

a.

Financial Accounting Standards Board (FASB)

b.

state in which the company was incorporated

c.

Securities and Exchange Commission (SEC)

d.

Federal Trade Commission (FTC)

QUESTION # 30

57. If a company makes a prior period adjustment, which of the following describes how it must be reported?

a.

The adjustment is recorded in retained earnings, and previous years' financial statements presented for comparative purposes are not changed.

b.

The adjustment is recorded in retained earnings, and previous years' financial statements presented for comparative purposes are adjusted.

c.

The adjustment is reported in the current period's income statement as a separate item.

d.

The adjustment is recorded as a deferred asset or deferred liability and amortized using the straight-line method.

QUESTION # 31

60. Which of the following could be a component of other comprehensive income (loss)?

a.

realized gains or losses from sale of investments in available-for-sale securities

b.

translation adjustments from converting the financial statements of a company's foreign operations into U.S. dollars

c.

gains (losses) on extraordinary items

d.

warranty liability adjustments

QUESTION # 32

61. How may a corporation report its types of comprehensive income?

a.

It may report the amount of accumulated other comprehensive income for each item as part of stockholders' equity.

b.

It may report the total amount of accumulated other comprehensive income for all the items as part of stockholders' equity.

c.

It may make footnote disclosures of totals only.

d.

It may report the amount of accumulated other comprehensive income for each item or in total as part of stockholders' equity.

QUESTION # 33

63. The following information is provided for the Columbus Company:

Deferred compensation payable-stock appreciation rights

$ 10

Bonds payable

120

Additional paid-in capital on common stock

20

Donated capital

16

Treasury stock (at cost)

8

Common stock, $1 par

100

Common stock option warrants

40

Unrealized increase in value of available for sale securities

28

Additional paid-in capital from treasury stock

3

Retained earnings

57

What is the total stockholders' equity of Columbus Company?

a.

$212

b.

$228

c.

$256

d.

$272

e.

none of these

QUESTION # 34

65. When recording the receipt of donated assets, the credit could be to

a.

Retained Earnings

b.

Donated Capital

c.

Gain on Donations

d.

a contra account to the asset

QUESTION # 35

67. Which of the following stockholders' equity disclosures are required under both GAAP and IFRS?

a.

capital not yet paid in

b.

restrictions on the repayment of capital

c.

dividend preferences

d.

shares reserved for future issuances under sales contracts

QUESTION # 36

68. The two defined sections of stockholders' equity under IFRS are

a.

contributed capital and other equity

b.

share capital and retained earnings

c.

contributed capital and retained earnings

d.

share capital and other equity

QUESTION # 37

69. Differences exist between IFRS and GAAP in the reporting of EPS. Which of the following areas is not an area of difference?

a.

adjustment in options calculations for unrecognized compensation cost

b.

treatment of unvested contingently issued shares

c.

treatment of dividends in arrears for convertible preferred stock

d.

treatment of contracts that may be settled in shares or for cash

QUESTION # 38

70. Specific EPS disclosure is regularly reported for extraordinary items under

IFRS

GAAP

I.

yes

no

II.

no

yes

III.

yes

yes

IV.

no

no

a.

I

b.

II

c.

III

d.

IV

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