F7

Question 1

Cash dividends

Answer 1

DR Retained earnings $900
CR Cash $900

Question 2

issued 2% stock dividend , when the count of outstanding shares was 30 million and the share price was $10.50 per share.

Answer 2

30 million shares × 2% = 600,000 shares × $10.50 = $6,300,000 charged to retained earnings. $1,200,000 is for common stock (par value of $2) and the remainder is additional paid in capital (APIC). The journal entry ($ in thousands) is as follows:

DR Retained earnings $6,300
CR Common stock $1,200
CR APIC $5,100

Question 3

Rule: Changes in estimates affect only the current and subsequent periods (not prior periods and not retained earnings).

Answer 3

Choice “2” is correct. The effect of the new estimate of warranty costs (from $100 to $110) is a change in estimate and will be reported in Year 2 income from continuing operations.

Rule: Changes in estimates affect only the current and subsequent periods (not prior periods and not retained earnings).

Question 4

The cumulative effect of a change in accounting principle is shown as an adjustment to beginning retained earnings.

Answer 4

Fifo to Weighted Average

Question 5

Comprehensive income represents all changes in stockholders’ equity that come from nonowner sources. Therefore, comprehensive income includes all net income plus any and all components of other comprehensive income, the “PUFI” items. Comprehensive income would not include investments by stockholders (owners) nor would it include distributions or dividends to stockholders (owners).

Answer 5

puff

Question 6

If comparative financial statements are presented, the cumulative effect of a change in accounting principle is presented net of tax as an adjustment to beginning retained earnings in the statement of stockholders’ equity.

Answer 6

Retro