Quiz Chapter 15 Answer
1. On the declaration date, the board of directors formally declares the cash dividend and announces it to the shareholders.
2. Prior period adjustments are added to the ending retained earnings balance.
3. Disposal of a significant segment of the business is an example of an extraordinary item.
4. A change in an accounting principle occurs when the principle used in the current year is different from the one used in the preceding year.
5. Earnings per share is reported only for common shares.
6. For a cash dividend to occur, a corporation must have all of the following except:
A. adequate cash.
B. declared dividends.
C. net income.
D. retained earnings.
7. The date a cash dividend becomes a binding legal obligation to a corporation is the:
A. declaration date.
B. earnings date.
C. payment date.
D. record date.
8. A stock dividend results in a decrease in retained earnings and an increase in contributed capital of:
A. the par value of shares issued.
B. the fair market value of shares issued.
C. the stated value of the shares issued.
9. Both a stock dividend and a stock split will:
A. decrease total retained earnings.
B. increase total contributed capital.
C. increase the number of shares outstanding.
D. decrease total retained earnings and increase total contributed capital.
10. Retained Earnings can be decreased by all of the following except:
A. prior period adjustments.
B. stock dividends.
C. cash dividends.
D. stock splits.
11. Prior period adjustments:
A. may only increase retained earnings.
B. may only decrease retained earnings.
C. may either increase or decrease retained earnings.
D. do not affect retained earnings.
12. Intraperiod Tax Allocation refers to:
A. the procedure of associating income taxes in a specified period with their related item of income.
B. the act of dividing taxes between the amount currently due and the amount due in the future.
C. recording transactions in one period for accounting purposes and another period for income tax purposes.
D. recording income tax expense in a separate section of the corporate income statement.
13. The non-typical items reported on corporation income statements include:
A. corporate income taxes.
B. retained earnings.
C. discontinued operations and extraordinary items.
D. other expenses and losses.
14. The disposal of a significant segment of a business is reported as:
A. a change in accounting principle.
B. discontinued operations.
C. an extraordinary item.
D. a prior period adjustment.
15. An example of an extraordinary item is:
A. expropriation of property by a government.
B. gains from sale of property or equipment.
C. losses due to labour strikes.
D. write-down of inventories.
16. Extraordinary items are events and transactions that:
A. occur frequently, are not typical of normal business activities, and are subject to management discretion.
B. occur frequently, are not typical of normal business activities and, are not subject to management discretion.
C. are not expected to occur frequently, are typical of normal business activities and are subject to management discretion.
D. are not expected to occur frequently, are not typical of normal business activities, and are not subject to management's discretion.
17. A change in accounting principle is permitted:
A. if the shareholders vote for the change.
B. whenever management wishes, as long as the effects of the change are clearly disclosed.
C. if the new principle results in a more appropriate presentation of events or transactions.
D. whenever management needs to improve the company's net income.
18. Which of the following is disclosed net of taxes, as an adjustment to the opening balance of retained earnings?
A. A change in accounting principle.
B. Discontinued operations.
C. An extraordinary item.
D. Dividends in arrears.
19. The price-earnings (PE) ratio is calculated by dividing:
A. net income by ending common shares outstanding.
B. market price by net income.
C. net income less preferred dividends by ending common shares outstanding.
D. market price per share by earnings per share.
20. Generally, the most useful earnings per share amount is EPS for:
A. net income.
B. discontinued operations.
C. income from continuing operations.
D. income before extraordinary items.