Question 1

When all of the authorized shares have the same rights and characteristics,the stock is referred to as:
A) Preferred shares under both IFRS and GAAP.
B) Common shares under both IFRS and GAAP.
C) Plain shares under IFRS and common shares under GAAP.
D) Simple shares under IFRS and pure shares under GAAP.
E) Share capital under IFRS and common shares under GAAP.

Accepted Answer

The answer of When all of the authorized shares have...

Question 2

Owners of preferred stock often do not have:
A) Ownership rights to assets of the corporation.
B) Voting rights.
C) Preference to dividends.
D) The right to sell their stock on the open market.
E) Preference to assets at liquidation.

Accepted Answer

The answer of Owners of preferred stock often do not...

Question 3

A company has 5,000 shares of $1 par value common stock and 6,000 shares of 2%,$98 par,noncumulative preferred stock outstanding.The balance in Retained Earnings at the beginning of the year was $750,000.Net income for the current year was $400,000.If the company paid a dividend of $3 per share on its common stock,what is the balance in Retained Earnings at the end of the year?
A) $1,123,240
B) $1,135,000
C) $1,150,000
D) $735,000
E) $723,240

Accepted Answer

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Question 4

Prior period adjustments are reported in the:
A) Income statement.
B) Balance sheet.
C) Statement of retained earnings.
D) Statement of cash flows.
E) Notes to the financial statements.

Accepted Answer

Prior period adjustments are adjustments made to the beginning retained earnings balance of the current period due to errors or changes in accounting principles in previous periods. Therefore, they are reported in the statement of retained earnings, which shows changes in the retained earnings balance from the beginning to the end of the period.

Question 5

Prior period adjustments to financial statements can result from:
A) Changes in estimates.
B) Using unacceptable accounting principles.
C) Discontinued operations.
D) Changes in tax law.
E) Extraordinary items.

Accepted Answer

Prior period adjustments result from errors or omissions in previously issued financial statements. These errors can result from using unacceptable accounting principles, misapplication of accounting principles, math errors, or fraud. Changes in estimates, discontinued operations, changes in tax law, and extraordinary items are not examples of prior period adjustments.

Question 6

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as:
A) Participating preferred stock
B) Callable preferred stock
C) Cumulative preferred stock
D) Convertible preferred stock
E) Noncumulative preferred stock

Accepted Answer

Noncumulative preferred stock is a type of preferred stock that does not accumulate unpaid dividends. If the company does not declare a dividend in a given year, the right to receive that dividend is forfeited and cannot be claimed in the future. This is in contrast to cumulative preferred stock, where any dividends not paid in a given year are accumulated and must be paid before any dividends can be paid to common stockholders. Therefore, the correct answer is E.

Question 7

A dividend preference for preferred stock means that:
A) Preferred stockholders receive their dividends before common shareholders.
B) Preferred shareholders are guaranteed dividends.
C) Dividends are paid quarterly.
D) Preferred stockholders prefer dividends more than common stockholders.
E) Dividends must be declared on preferred stock.

Accepted Answer

A dividend preference for preferred stock means that preferred stockholders receive their dividends before common shareholders.

Question 8

A company issued 7% preferred stock with a $100 par value.This means that:
A) Preferred shareholders have a guaranteed dividend.
B) The amount of the potential dividend is $7 per year per preferred share.
C) Preferred shareholders are entitled to 7% of the annual income.
D) The market price per share will approximate $100 per share.
E) Only 7% of the total contributed capital can be preferred stock.

Accepted Answer

The 7% in the description of the preferred stock refers to the annual dividend rate that the preferred shareholders are entitled to receive. Therefore, each preferred share will receive a $7 dividend per year.

Question 9

The amount of income earned per share of a company's common stock is known as:
A) Restricted retained earnings per share.
B) Earnings per share.
C) Continuing operations per share.
D) Dividends per share.
E) Book value per share.

Accepted Answer

Earnings per share (EPS) is calculated by dividing net income by the number of common shares outstanding. It represents the amount of income earned per share of common stock.

Question 10

Stated value of no-par stock is:
A) Another name for redemption value.
B) An amount assigned to par value stock by the state of incorporation.
C) The market value of the stock on the date of issuance.
D) The difference between the par value of stock and the amount below or above par value contributed by the stockholder.
E) An amount assigned to no-par stock by the corporation's board of directors.

Accepted Answer

The answer of Stated value of no-par stock is:
A) Another...

Question 11

A corporation's minimum legal capital is often defined to be the total par value of the shares:
A) Issued
B) Authorized
C) Subscribed
D) Outstanding
E) In treasury

Accepted Answer

The answer of A corporation's minimum legal capital is often...

Question 12

Shamrock Company had net income of $30,000.On January 1,there were 8,000 shares of common stock outstanding.On April 1,the company issued an additional 2,000 shares of common stock.The company declared a $2,700 dividend on its noncumulative,nonparticipating preferred stock.There were no other stock transactions.The company has an earnings per share of:
A) $2.87
B) $2.73
C) $3.41
D) $3.16
E) $3.75

Accepted Answer

{$30,000 - $2,700/[(8,000 x 3/12) + (10,000 x 9/12)]} = $2.87

Question 13

Stockholders' equity consists of:
A) Long-term assets.
B) Contributed capital and retained earnings.
C) Contributed capital and par value.
D) Retained earnings and cash.
E) Premiums and discounts.

Accepted Answer

Stockholders' equity mainly consists of two components, namely contributed capital and retained earnings. Contributed capital is the amount of money or other assets that investors have contributed to the company in exchange for ownership shares. Retained earnings, on the other hand, represent the portion of a company's profits that have been kept in the business rather than distributed to shareholders as dividends. Thus, option B correctly identifies the components of stockholders' equity.

Question 14

A company has 2,000 shares of $1 par value common stock and 200 shares of 5%,$110 par,noncumulative preferred stock outstanding.The balance in Retained Earnings at the beginning of the year was $500,000.Net income for the current year was $300,000.If the company paid a dividend of $2 per share on its common stock,what is the balance in Retained Earnings at the end of the year?
A) $800,000
B) $805,100
C) $794,900
D) $494,900
E) $194,900

Accepted Answer

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Question 15

Shamrock Company had net income of $30,000.On January 1,there were 8,000 shares of common stock outstanding.On April 1,the company issued an additional 2,000 shares of common stock.There were no other stock transactions.The company has earnings per share of:
A) $3.75
B) $3.00
C) $3.33
D) $15.00
E) $3.16

Accepted Answer

{$30,000/[(8,000 x 3/12) + (10,000 x 9/12)]} = $3.16

Question 16

A company had a beginning balance in retained earnings of $43,000.It had net income of $6,000 and paid out cash dividends of $5,625 in the current period.The ending balance in retained earnings account is equal to:
A) $108,625
B) $(12,625)
C) $11,375
D) $43,375
E) $(11,375)

Accepted Answer

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Question 17

A company has 3,000 shares of $2 par value common stock and 1,500 shares of 8%,$150 par,noncumulative preferred stock outstanding.The balance in Retained Earnings at the beginning of the year was $400,000.The net loss for the current year was $30,000.If the company paid a dividend of $1 per share on its common stock,what is the balance in Retained Earnings at the end of the year?
A) $349,000
B) $365,800
C) $451,000
D) $400,000
E) $409,000

Accepted Answer

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Question 18

The statement of changes in stockholders' equity:
A) Is part of the statement of retained earnings.
B) Shows only the ending balances in stockholders' equity.
C) Describes changes in contributed capital and retained earnings subcategories
D) Does not include changes in treasury stock.
E) Is reported by very few companies.

Accepted Answer

The statement of changes in stockholders' equity describes changes in both the contributed capital and retained earnings subcategories, and may include changes in treasury stock depending on the company. It is a separate statement from the statement of retained earnings, and is required for public companies under US GAAP.

Question 19

The total amount of cash and other assets received by a corporation from its stockholders in exchange for common stock is:
A) Always equal to its par value.
B) Always equal to its stated value.
C) Referred to as contributed capital.
D) Referred to as retained earnings.
E) Always below its stated value.

Accepted Answer

When a corporation issues common stock, the total amount of cash and other assets received from its stockholders is referred to as contributed capital. It may be equal to or greater than the par value or stated value of the stock. Retained earnings, on the other hand, are the profits that are earned by the corporation and not distributed as dividends to the stockholders. Therefore, the correct answer is C.

Question 20

Changes in accounting estimates are:
A) Considered accounting errors.
B) Reported as prior period adjustments.
C) Accounted for with a cumulative "catch-up" adjustment.
D) Extraordinary items.
E) Accounted for in current and future periods.

Accepted Answer

Changes in accounting estimates are not considered errors or extraordinary items. They are accounted for in the current period and future periods by adjusting the carrying amounts of assets and liabilities affected by the change in estimate. The adjustment is not a cumulative catch-up adjustment, and it is not reported as a prior period adjustment.

Quiz 11: Corporate Reporting and Analysis

When all of the authorized shares have the same rights and characteristics,the stock is referred to as:

Owners of preferred stock often do not have:

Prior period adjustments are reported in the:

Prior period adjustments to financial statements can result from:

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as:

A dividend preference for preferred stock means that:

A company issued 7% preferred stock with a $100 par value.This means that:

The amount of income earned per share of a company's common stock is known as:

Stated value of no-par stock is:

A corporation's minimum legal capital is often defined to be the total par value of the shares:

Stockholders' equity consists of:

Shamrock Company had net income of $30,000.On January 1,there were 8,000 shares of common stock outstanding.On April 1,the company issued an additional 2,000 shares of common stock.There were no other stock transactions.The company has earnings per share of:

A company had a beginning balance in retained earnings of $43,000.It had net income of $6,000 and paid out cash dividends of $5,625 in the current period.The ending balance in retained earnings account is equal to:

The statement of changes in stockholders' equity:

The total amount of cash and other assets received by a corporation from its stockholders in exchange for common stock is:

Changes in accounting estimates are: