Accounting Final Chapter 10-12 – Flashcards

The stockholders' equity section of a corporation's balance sheet reports a.) discounts on bonds payable-yes, treasury stock-yes b.) discounts on bonds payable-no, treasury stock-yes c.) discounts on bonds payable-yes, treasury stock-no d.) discounts on bonds payable-yes, treasury stock-no

The purchase of treasury stock a.) decreases total assets and decreases stockholders' equity b.) decreases total assets and increases total stockholders' equity c.) has no effect on total assets, total liabilities, or total stockholders' equity d.) increases one asset and decreases another asset

When does a cash dividend become a legal liability? a.) on date of record b.) never, because it is paid c.) on date of payment d.) on date of declaration

When do dividends increase stockholders' equity? (Assume the dividends are distributions to corporate stockholders) a.) on date of records b.) on date of payment c.) never d.) on date of declaration

Stock dividends a.) increase the corporation's total liabilities b.) are distributions of cash to stockholders c.) reduce the total assets of the company d.) have no effect on total stockholders' equity

What is the effect of a stock dividend and a stock split on total assets? a.) stock dividend-no effect, stock split- decrease b.) stock dividend-decrease, stock split- no effect c.) stock dividend-decrease, stock split- decrease d.) stock dividend-no effect, stock split- no effect

The numerator for computing the rate of return on total assets is a.) net income minus preferred dividends b.) net income c.) net income plus depreciation expense d.) gross margin

the denominator for computing the rate of return on equity is a.) average total assets b.) net income c.) net sales d.) average common stockholders' equity

Which of the following is a characteristic of a corporation? a.) limited liability of stockholders b.) no income tax c.) mutual agency d.) both b and c

Par value a.) represents the original selling price for a share of stock b.) is an arbitrary amount that establishes the legal capital for easy share c.) may exist for common stock but not for preferred stock d.) represents what a share of stock is worth e.) is established for a share of stock after it is issued

The paid-in capital portion of stockholders' equity does not include a.) retained earnings b.) preferred stock c.) common stock d.) paid-in capital in excess of par value e.) both c and d

Preferred stock is least likely to have which of the following characteristics? a.) preference as to voting b.) the right of the holder to convert to common stock c.) preference as to dividends d.) preference as to assets on liquidation of the corporation

Which of the following classifications represents the most shares of common stock? a.) issued shares b.) treasury shares c.) outstanding shares d.) unissued shares e.) authorized shares

When treasury stock is sold for less than its cost, the entry should include a debit to a.) gain on sale of treasury stock b.) paid-in capital in excess of par c.) loss on sale of treasury stock d.) retained earnings

Stockholders are eligible for a dividend if they own the stock on the date of a.) record b.) declaration c.) issuance d.) payment

Which of the following is not true about a 10% stock dividend? a.) Total stockholders' equity remains the same b.) the market value of the stock is needed to record the stock dividend c.) par value decreases d.) retained earnings decreases e.) paid-in capital increases

A company declares a 5% stock dividend. The debit to retained earnings is an amount equal to a.) the par value of the shares to be issued b.) the excess of the market price over the original issue price of the shares to be issued c.) the market value of the shares to be issued d.) the book value of the shares to be issued

Which of the following statements is not true about a 3-for-1 stock split? a.) Par value is reduced to one-third of what it was before the split b.) Total stockholders' equity increases c.) The market price of each share of stock will decrease d.) A stockholder with 10 shares before the split owns 30 shares after the split e.) retained earnings remain the same

The quality of earnings suggests that a.) net income is the best measure of the results of operations b.) stockholders want the corporation to earn enough income to be able to pay its debts c.) income from continuing operations is a more relevant predictor of future performance d.) continuing operations and one-time transactions are of equal importance

Which statement is true? a.) Extraordinary items are part of discontinued operations b.) Extraordinary items are combined with continuing operations on the income statement c.) discontinued operations are a separate category on the income statement d.) All of the above are true

Why is it importance for companies to report their accounting changes to the public? a.) It is important for the results of the operations to be compared between periods b.) some accounting changes are more extraordinary that others c.) Most accounting changes increases net income, and investors need to know why the increase in net income occurred d.) accounting changes affect dividends, and investors want dividends

Other comprehensive income a.) includes extraordinary gains and losses b.) affects earnings per share c.) has no effect on income tax d.) includes unrealized gains and losses on available-for-sale investments

Deferred tax liability is usually a.) long term and reported on the balance sheet b.) short term and reported on the income statement c.) short term and reported on statement of stockholders' equity d.) long term and reported on the income statement

The main purpose of the statement of stockholders' equity is to report a.) financial position b.) reasons for changes in the equity accounts c.) results of operations d.) comprehensive income

An auditor report by independent accountants a.) is ultimately the responsibility of the management of the client company b.) gives investors assurance that the company's financial statements conform to GAAP c.) gives investors assurance that the company's stock is a safe investment d.) ensures that the financial statements are error-free

What is the most relevant net income figure on a corporate multi-step income statement for predicting future profits and use in investment valuation? a.) Extraordinary items b.) prior-period adjustments c.) continuing operations d.) discontinued operations

One way to hedge a foreign-currency transaction loss is to a.) pay in the foreign currency b.) pay debts as late as possible c.) collect in your own currency d.) offset foreign-currency inventory and plant assets

Foreign-currency transaction gains and losses are reported on the a.) balance sheet b.) statement of cash flows c.) income statement d.) consolidation work sheet

Earnings per share is not reported for a.) extraordinary items b.) comprehensive income c.) discontinued operations d.) continuing operations

Which of the following items is most closely related to prior-period adjustments? a.) retained earnings b.) preferred stock dividends c.) earnings per share d.) treasury stock

Segment information is reported in a company's a.) balance sheet b.) income statement c.) financial statement footnotes d.) statement of stockholders' equity

Which statement is true? a.) auditors of public companies audit financial statements as well as internal controls b.) independent audits prepare the financial statements c.) management audits the financial statements d.) GAAP requires companies to issue reports on corporate social responsibility (CSR)