Deck 6

Question 1

Cash dividends is:

Answer 1

A direct deduction of retained earnings on the date of declaration.

Question 2

Property dividends are:

Answer 2

Deducted from retained earnings at market value on the date of declaration.

Question 3

Excess proceeds from the sale of treasury stock is:

Answer 3

Considered additional paid in capital.

Question 4

Liquidating dividend is:

Answer 4

The amount in excess of retained earnings.

Question 5

Stock dividends do not

Answer 5

produce income for the recipient.

Question 6

Treasury Stock gains or losses are not:

Answer 6

reported on the income statement. Treasury stock gains or losses are reported as direct adjustments to stockholders’ equity.

Question 7

Treasury stock gains are reported:

Answer 7

By crediting APIC - Treasury Stock.

Question 8

Treasury stock losses are reported:

Answer 8

By first reducing any existing APIC and then debiting addition loss to Retained Earnings.

Question 9

Treasury stock repurchase is reported at:

Answer 9

Purchase price paid, not the average purchase price.

Question 10

Equity instruments issued for employee service are to be valued on:

Answer 10

The date of the grant.

Question 11

Compensation expense relating to stock options is:

Answer 11

Recognized regardless of whether the option is exercised. Based on the grant date and expensed over the service period.

Question 12

Intrinsic value method calculation is:

Answer 12

Number of shares x Market price on date of grant - exercise price. For call options.

Question 13

Common stock that contains an unconditional redemption feature should be reported as:

Answer 13

a liability on the date of the issuance because there is an obligation of cash outflow in the future that the company has no ability to prevent.

Question 14

When computing the weighted average of common shares outstanding for basic EPS, convertible securities are:

Answer 14

Ignored.

Question 15

If a dividend or stock split changes common stock outstanding:

Answer 15

The computation of EPS shall give retrospective recognition for all periods presented using the new number of shares because the reader’s primary interest is presumed to be related to current capitalization.

Question 16

Interest expense should be:

Answer 16

Added back to net income for dilutive EPS and ignored for basic EPS.

Question 17

When computing diluted EPS, convertible securities are:

Answer 17

Recognized only if they are dilutive.

Question 18

When calculating weighted average number of shares:

Answer 18

Stock dividends are treated as if they occurred at the beginning of the year. And shares issued, repurchased or, converted must be time-weighted for the number of months outstanding.

Question 19

Under GAAP, EPS should be reported for:

Answer 19

Discontinued operations as well as income from continuing operations.

Question 20

Income available to common shareholders is determined:

Answer 20

By deducting dividends declared in the period on non-cumulative preferred stock (regardless of whether they are paid) and dividends accumulated in the period on cumulative preferred stock (regardless of whether they have been declared).

Question 21

Financing activities include:

Answer 21

Obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed. Dividends paid, not dividend declared, should be included as an outflow of cash from financing activities.

Question 22

One of the supplemental information that should be disclosed on the statement of cash flows:

Answer 22

Is the conversion of debt to equity. The cash flow per share should not be disclosed.

Question 23

Conversion of preferred stock to common stock is:

Answer 23

A noncash financing disclosure.

Question 24

Indirect Method, adjustments to NI, to reconcile cash flow to Net Income are:

Answer 24

Net Income + Depreciation & Amortization of Bond Discounts + Losses - Gains & Amortization of Bond Premiums - Equity Earnings Affiliations + Operating Asset Outflows - Operating Asset Inflows + Operating Liability Inflows - Operating Liability Outflows

Question 25

Financing Activities are:

Answer 25

Cash effects of transactions obtaining resources from owners and providing them with a return on their investment.

Question 26

Investing Activities includes cash inflow/outflow from both:

Answer 26

Held-to-Maturity and Available for Sale Security transactions.

Question 27

Under IFRS, interest and dividends received may be reported in:

Answer 27

Either operating activities or investing activities. And interest and dividend paid may be reported in either operating or financing activities.

Question 28

Under GAAP, interest and dividends received must be reported in:

Answer 28

Operating activities. And interest paid must be reported in operating activities as well.