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23 Cards in this Set
- Front
- Back
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In computing earnings per share for a simple capital structure, if the preferred stock is cumulative, the amount that should be deducted as an adjustment to the numerator (earnings) is the:
a. preferred dividends in arrears b. preferred dividends in arrears time (one minus the income tax rate) c. annual preferred dividend times (one minus the income tax rate) d. none of these |
d. none of these
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What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively?
a. Decrease and no effect b. Increase and no effect c. Decrease and increase d. Increase and decrease |
c. Decrease and increase
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When applying the treasury stock method for diluted earnings per share, the market price of the common stock used for repurchase is the
a. Price at the end of the year b. Average market price c. Price at the beginning of the year d. None of these |
b. Average market price
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Stone Company changed its method of pricing inventories from FIFO to LIFO. What type of accounting change does this represent?
a. A change in accounting estimate for which the financial statements for prior periods included comparative purposes should be presented as previously reported. b. A change in accounting principle for which the financial statements for prior periods included for comparative purposes should be presented as previously reported. c. A change in accounting estimate for which the financial statements for prior periods included for comparative purposes should be restated. d. A change in accounting principle for which the financial statements for prior periods included for comparative purposes should be restated. |
b. A change in accounting principle for which the financial statements for prior periods included for comparative purposes should be presented as previously reported.
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When a company decides to switch from the double-declining balance method to the straight-line method, this change should be handled as a:
a. Change in accounting principle b. Change in accounting estimate c. Prior period adjustment d. Correction of an error |
b. Change in accounting estimate
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The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to the remaining life of 10 years. Based on this information, the accountant should:
a. Continue to depreciate the building over the original 50-year life b. Depreciate the remaining book value over the remaining life of the asset c. Depreciate the remaining book value over the remaining life of the asset based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years d. Adjust accumulated depreciation to its appropriate balance through retained earnings, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years. |
b. Depreciate the remaining book value over the remaining life of the asset
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Which of the following statements is correct?
a. Changes in accounting principles are always handled in the current or prospective period. b. Prior statements should be restated for changes in accounting estimates c. A change from expensing certain costs to capitalizing these costs due to a change in the period benefited should be handled as a change in accounting estimate. d. Correction of an error related to a prior period should be considered as an adjustment to current year net income. |
c. A change from expensing certain costs to capitalizing these costs due to a change in the period benefited should be handled as a change in accounting estimate.
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Which of the following describes a change in reporting entity?
a. A company acquires a subsidiary that is to be accounted for as a purchase b. A manufacturing company expands its market from regional to nationwide c. A company divests itself of a European branch sales office d. Changing the companies included in combined financial statements |
d. Changing the companies included in combined financial statements
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Presenting consolidated financial statements this year when statements of individual companies were presented last year is
a. A correction of an error b. An accounting change that should be reported prospectively c. An accounting change that should be reported by restating the financial statements of all prior periods presented d. Not an accounting change |
c. An accounting change that should be reported by restating the financial statements of all prior periods presented
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An example of a correction of an error in previously issued financial statements is a change
a. from the FIFO method of inventory valuation to the LIFO method b. in the service life of plant assets, based on changes in the economic environment c. from the cash basis of accounting to the accrual basis d. in the tax assessment related to a prior period |
c. from the cash basis of accounting to the accrual basis
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A company using the perpetual inventory system neglected to record a purchase of merchandise on account at year end. This merchandise was omitted from the year-end physical count. How will these errors affect assets, liabilities, and stockholders' equity at year end and net income for the year?
Assets, Liabilities, SE, NI a. NE, understate, overstate, overstate b. NE, overstate, understate, understate c. Understate, understate, NE, NE d. Understate, NE, understate, understate |
Assets, Liabilities, SE, NI
c. Understate, understate, NE, NE |
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If, at the end of a period, a company erroneously excluded some goods from its ending inventory and also erroneously did not record the purchase of these goods in its accounting records, these errors would cause
a. the ending inventory and retained earnings to be understated b. the ending inventory, cost of goods sold, and retained earnings to be understated c. no effect on net income, working capital, and retained earnings d. cost of goods sold and net income to be understated |
c. no effect on net income, working capital, and retained earnings
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The primary purpose of the statement of cash flows is to provide information
a. about the operating, investing, and financing activities in an entity during a period b. that is useful in assessing cash flow prospects c. about the cash receipts and cash payments of an entity during a period d. about the entity's ability to meet its obligations, its ability to pay dividends, and its need for extra financing |
c. about the cash receipts and cash payments of an entity during a period
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A company borrows $10,000 and signs a 90-day nontrade note payable. In preparing a statement of cash flows (indirect method), this event would be reflected as a(n)
a. addition adjustment to net income in the cash flows from operating activities section b. cash outflow from investing activities c. cash inflow from investing activities d. cash inflow from financing activities |
d. cash inflow from financing activities
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A statement of cash flows typically would not disclose the effects of
a. capital stock issued at an amount greater than par value b. stock dividends declared c. cash dividends paid d. a purchase and immediate retirement of treasury stock |
b. stock dividends declared
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When preparing a statement of cash flows (indirect method), which of the following is not an adjustment to reconcile net income to net cash provided by operating activities?
a. A change in interest payable b. A change in dividends payable c. A change in income taxes payable d. All of these are adjustments |
b. A change in dividends payable
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Declaration of a cash dividend on common stock affects cash flows from operating activities under the direct and indirect methods as follows:
Direct method, indirect method a. Outflow, inflow b. Inflow, inflow c. Outflow, outflow d. NE, NE |
d. NE, NE
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Xanthe Corporation had the following transactions occur in the current year
1. Cash sale of merchandise inventory 2. Sale of delivery truck at book value 3. Sale of Xanthe common stock for cash 4. Issuance of note payable to a bank for cash 5. Sale of a security held as an available-for-sale investment 6. Collection of a loan receivable How many of the above items will appear as a cash inflow from investing activities on a statement of cash flows for the current year? a. Five items b. Four items c. Three items d. Two items |
c. Three items
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Which of the following statements is correct?
a. The indirect method starts with income before extraordinary items b. The direct method is known as the reconciliation method c. The direct method is more consistent with the primary purpose of the statement of cash flows d. All of these |
c. The direct method is more consistent with the primary purpose of the statement of cash flows
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When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities?
a. Increase in accounts receivable b. Gain on sale of land c. Amortization of patent d. All of these activities are added to net income to arrive at cash flow from operating activities |
c. Amortization of patent
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Dolan Company reports its income from investments under the equity method and recognized income of $25,000 from its investment in Moss Co. during the current year, even though no dividends were declared or paid by Moss during the year. On Dolan's statement of cash flows (indirect method), the $25,000 should
a. not be shown b. be shown as cash inflows from investing activities c. be shown as cash inflows from financing activities d. be shown as a deduction from net income in the cash flows form operating activities section |
d. be shown as a deduction from net income in the cash flows form operating activities section
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Which of the following is on a statement of cash flows?
a. A stock dividend b. A stock split c. An appropriation of retained earnings d. None of these |
d. None of these
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How should significant noncash transactions be reported in the statement of cash flows according to FASB Statement No. 95?
a. They should be incorporated in the statement of cash flows in a section labeled "Significant Noncash Transactions" b. Such transactions should be incorporated in the section (operating, financing, or investment) that is most representative of the major component of the transaction c. These noncash transactions are not to be incorporated in the statement of cash flows. They may be summarized in a separate schedule at the bottom of the statement or appear in a separate supplementary schedule to the financials. d. They should be handled in a manner consistent with the transactions that affect cash flows |
c. These noncash transactions are not to be incorporated in the statement of cash flows. They may be summarized in a separate schedule at the bottom of the statement or appear in a separate supplementary schedule to the financials.
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