concept questions exam 2

Question 1

what is reported net of tax in the income statement (4)

Answer 1

Discontinued operations
extraordinary items
changes in realizability of receivables
prior period adjustments

Question 2

how to find earnings per share.

Answer 2

net income - preferred dividends/ weighted average shares outstanding

Question 3

how to find weighted shares outstanding

Answer 3

multiple the amount of months (x/12) times the number of shares outstanding then add results together

Question 4

What is the correct order to prepare financial statements? (left to right chronologically)

Answer 4

Income statement
Retained earnings
balance sheet

Question 5

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to ..

Answer 5

Beginning retained earnings of the earliest period presented

Question 6

What is true about accounting for changes in estimates

Answer 6

Changes in estimates are not carried back to adjust prior years

Question 7

comprehensive income

Answer 7

All changes in equity during a period except those resulting from investments by owners and distributions to owners.

Question 8

Intraperiod tax allocation

Answer 8

Relating tax expense to specific items on the income statement

Question 9

T/F Companies can only restrict retained earnings to comply with contractual requirements or current necessity.

Answer 9

False

Question 10

T/F Earnings management generally makes income statement information more useful for predicting future earnings and cash flows.

Answer 10

False

Question 11

What are the components of other comprehensive income

Answer 11

Unrealized G/Ls on Available for sale debt investments
Unrealized G/Ls on cash flow hedges
Translation G/Ls on foreign currency
Certain adjustments to pension plans

Question 12

paying dividends is a ______ activity but receiving dividends is a _______ activity

Answer 12

financing, operating

Question 13

Available for sale securities is ______ activities

Answer 13

Investing

Question 14

purchase/selling treasury stock is a ________ activity

Answer 14

financing

Question 15

issuing/selling our stock is a _______ activity

Answer 15

Financing

Question 16

selling other company stock is a _______ activity

Answer 16

investing

Question 17

getting a loan from a bank is a _______ activity and an _____ flow

Answer 17

financing, In

Question 18

free cash flow equation

Answer 18

net cash from op activities – capital expenditures – cash dividends

Question 19

CURRENT cash debt coverage

Answer 19

Net cash from op activities/average CURRENT liabilities

Question 20

Cash debt coverage

Answer 20

Net cash from op activities/average TOTAL liabilities

Question 21

find average liability

Answer 21

(beg + end)/2

Question 22

a change in accounting principle requires that the cumulative effect of the change for prior periods be shows as an adjustment to what?

Answer 22

Beg retained earnings of the earliest period presented

Question 23

COGS equation

Answer 23

Beg inventory
+purchases
+frieght in
-Purchase returns

Question 24

Where does treasury stock go on the balance sheet?

Answer 24

Stock holders equity (negative)