31. 11-43. Book value per share of common stock is derived by which of the following A.

Stockholders e uity divided by the number of shares authori!ed. B. Stockholders equity divided by the number of shares outstanding. ". #et income divided by the number of shares outstanding $. #et income divided by the number of shares authori!ed. 3%. 11-44. &he net assets of a corporation are e ual to' A. Total assets - total liabilities. B. &otal assets - retained earnings. ". &otal assets ( total liabilities. $. &otal assets ( retained earnings. 33. 11-4). *hen shares of stock are sold from one investor to another they will trade at' A. +ar value. B. Book value. ". Market value. $. Stated ,alue. 34. 11-4-. *hich of the following is not a characteristic of the corporate form of organi!ation. A. &he owners of a corporation cannot lose more than the amount of their investment. B. Shares of stock in a corporation are more readily transferable than is an interest in a partnership. ". Stockholders have authority to decide by majority vote the amount of dividends to be paid. $. &he corporation is a very efficient vehicle for obtaining large amounts of capital re uired for large-scale production. 3/. 11-/%. A primary disadvantage of the corporate form of organi!ation is' A. 0nlimited personal liability for business debts. B. 1wnership is difficult to transfer. ". Corporate earnings are subject to double taxation. $. 2anagement is separated from ownership. 3). 11-/3. +ublic corporations are re uired by law or regulation to perform all of the following e3cept' A. Submit much of their financial information to the S4" for review. B. Make regularly scheduled dividend payments to all stockholders. ". 5ave their annual financial statements audited by an independent "+A. $. $isclose their financial information to the public. 36. 11-/4. *hich of the following is not a right of stockholders. A. &o vote for directors and on key issues. B. &o participate in dividends declared. ". &o share in the distribution of assets if the corporation is li uidated. $. ll three of the above are rights of the stockholders. 37. 11-)%. *hich of the following would usually be the greatest amount. A. The number of shares authori!ed. +age 1 of 11

B. &he number of shares issued. ". &he number of shares outstanding. $. &hey must all be the same amount. 3-. 11-)/. &he overall effect of declaring and distributing a cash dividend includes each of the following e3cept' A. 8educing total assets. B. 8educing stockholders9 e uity. ". 8educing the balance of the 8etained 4arnings account. $. "educing net income for the period. 4:. 11-61. *hen a corporation issues capital stock at a price higher than the par value' A. &he amount received over par value increases retained earnings. B. &he entire issue price is credited to the "apital Stock account. ". &he amount received in e3cess of par value constitutes profit to the issuing corporation. $. The amount received in excess of par value becomes part of paid-in capital. 41. 11-66. &reasury stock' A. ;s an asset. B. ;ncreases total stockholders9 e uity. ". #ecreases total stockholders$ equity. $. $oes not change total stockholders9 e uity. 4%. 11-73. Stock that had been issued by a corporation and later reac uired is classified as' A. Treasury stock. B. #on-participating preferred stock. ". 8estricted stock. $. ;ssued shares. 43. 11-77. <igma "orporation is authori!ed to issue %=:::=::: shares of >4 par value capital stock. &he corporation issued half the stock for cash at >7 per share= earned >33)=::: during the first three months of operation= and declared a cash dividend of >):=:::. &he total paid-in capital of <igma "orporation after three months of operation is' A. >6=-4:=:::. B. %&'((('(((. ". >7=%6)=:::. $. >7=33)=:::.
)'((('((( x %& * %&'((('(((

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44. 11-7-. &hurman "orporation issued 4/:=::: shares of >./: par value capital stock at its date of incorporation for cash at a price of >4 per share. $uring the first year of operations= the company earned >1::=::: and declared a dividend of >4:=:::. At the end of this first year of operations= the balance of the "ommon Stock account is' A. >1=7::=:::. B. >1=7):=:::. ". %++,'(((. $. >1=7%:=:::.
-,('((( x %(., * %++,'(((

4/. 11--:. "entury "orporation issued 4::=::: shares of >4 par value common stock at the time of its incorporation. &he stock was issued for cash at a price of >1) per share. $uring the first year of operations= the company sustained a net loss of >1::=:::. &he year-end balance sheet would show the balance of the "ommon Stock account to be' A. %)'.(('(((. B. >1=/::=:::. ". >)=3::=:::. $. >)=4::=:::.
-(('((( x - * )'.(('(((

4). 11--/. "oronet "orp. has total stockholders9 e uity of >6=4::=:::. &he company9s outstanding capital stock includes 1::=::: shares of >1: par value common stock and %:=::: shares of )?= >1:: par value preferred stock. @#o dividends are in arrears.A &he book value per share of common stock is' A. >3-. B. >4-. ". %,-. $. >64.
/'-(('((( 0 1+('((( x )((2 * ,'-(('(((3 ,'-(('(((4)(('((( * ,-

Shown below is information relating to the stockholders9 e uity of Brant "orporation at $ecember 31= %::-'

$ividends have been declared and paid for %::-.

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46. 11-1:6. 8efer to the above data. &he average issue price per share of Brant9s preferred stock was' A. >11%. B. >1::. ". %))(. $. >)).
1.(('((( 5 .('(((24.'((( * %))(

47. 1%-1. An e3traordinary item appears on the income statement before the section on discontinued operations. &rue 6alse 4-. 1%-3. ;n determining earnings per share when a preferred stock has dividends in arrears= only the current year9s dividend is deducted to arrive at earnings per share. True Calse /:.1%-/. ;n order to receive a dividend= a stockholder must have owned the stock as of the declaration date. &rue 6alse /1. 1%-). A stock dividend provides a stockholder with more shares of stock but his or her percentage of ownership in the company= is no larger than before. True Calse /%. 1%-14. ;n order for a loss on the disposal of a discontinued operation to be classified on the income statement as a discontinued operation= it must be unusual in nature. &rue 6alse /3. 1%-1/. 43traordinary items and the results of discontinued operations are shown in the income statement net of any related income ta3 effects. True Calse /4. 1%-1). &he CASB has not compiled a comprehensive list of what is considered to be an e3traordinary item= thus the determination is a matter of Dudgment. True Calse //. 1%-%6. +rior period adDustments appear in the statement of retained earnings and in the income statement for the current year. &rue 6alse /). 1%-%7. $iscontinued operations should be shown on the statement of retained earnings net of ta3es. &rue 6alse /6. 1%-34. Stock splits A. Allow management to conserve cash. B. Bive stockholders more shares. ". "ause no change in total assets= liabilities= or stockholders9 e uity. $. ll of the above. +age 4 of 11

/7. 1%-36. &reasury stock appears as' A. An asset account B. A liability account ". An e3pense account $. n equity account /-. 1%-37. 43traordinary items are found on the income statement' A. Before discontinued operations B. fter discontinued operations ". Before income from continuing operations $. After prior period adDustments ):. 1%-3-. A company had 1%/=::: shares of common stock outstanding on Eanuary 1 and then sold 3/=::: additional shares on 2arch 3:. #et income for the year was >/-4=6/:. *hat are earnings per share. A. >4.63 B. >4./7 ". %7.87 $. >).)1
1)+,'((( x 74)+2 5 1).('((( x 84)+2 * ),)'+,(3 ,8-'/,(4),)'+,( * 7.87

)1. 1%-41. A prior period adDustment is a correction made to' A. "etained earnings of the beginning of the period B. 8etained earnings at the end of the period ". #et income of the current year $. 1nly to last years9 financial statements )%. 1%-43. *hich of the following would have no effect on 8etained 4arnings. A. $eclaration of a cash dividend B. $eclaration of a stock dividend ". #eclaration of a stock split. $. A prior period adDustment )3. 1%-4). 43ecucomp "orporation9s financial statements in the current year show a loss from discontinued operations= a prior period adDustment= and an e3traordinary gain. ;f 43ecucomp income statement is prepared according to generally accepted accounting principles @as illustrated in your te3tA= which of the following four items would appear second in se uence in the income statement. A. +rior period adDustment. B. ;ncome from continuing operations. ". 9oss from discontinued operations. $. 43traordinary gain.

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)4. 1%-4-. &he purpose of developing the subtotals F;ncome before 43traordinary ;temsF and F;ncome from "ontinuing 1perationsF in an income statement is to' A. ssist investors in forecasting future operating results. B. ;ncrease the amount of reported net income. ". $ecrease the amount of income subDect to income ta3es. $. +rovide investors with the information necessary to compute earnings per share. )/. 1%-/%. An e3ample of an e3traordinary gain or loss is' A. A large loss arising from inability to collect an account receivable from a bankrupt customer. B. A large gain from disposal of a segment of the business. ". A gain or loss from sale of an e3pensive machine no longer needed in the business. $. :one of these ans;ers. )). 1%-/3. ;n computing earnings per share= the number of shares used is' A. &he year-end number of shares outstanding. B. &he beginning of the year number of shares outstanding. ". &he average of the beginning and the year-end number of shares outstanding. $. The ;eighted average of shares outstanding for the year. )6. )-4/. Bross profit is the difference between' A. :et sales and the cost of goods sold. B. &he cost of merchandise purchased and the cost of merchandise sold. ". #et sales and net income. $. #et sales and all e3penses )7. 1%-):. *hich of the following has no effect on the computation of earnings per share for the current period. A. &he amount of cash dividends declared or paid to preferred stockholders. B. The amount of cash dividends declared or paid to common stockholders. ". #et income. $. &he number of shares of common stock authori!ed. )-. 1%-)%. &o receive the ne3t cash dividend= an investor must purchase the stock before the' A. $ividend declaration date. B. <x-dividend date. ". $ate of record. $. +ayment date announced by the board of directors. 6:. 1%-)3. $ividends become a liability of a corporation' A. =n the date the board of directors declares the dividend. B. 1n the date of record. ". 1n the date payment is to be made. $. *hen cumulative preferred stock dividends are in arrears. 61. 1%-)). $ividends are first recorded and retained earnings are reduced on' A. &he e3-dividend date. B. &he date of record. ". The date of declaration. $. &he date of payment.

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6%. 1%-7%. A li uidating dividend' A. 1ccurs only when a company is going out of business. B. =ccurs ;hen a corporation pays a dividend that exceeds the balance in the retained earnings account. ". ;s an e3pense to the corporation. $. 1ccurs only when the corporation has a loss for the year. 63. 1%-76. Camily Cashions "orporation discontinued Gid-"hoice= its entire line of children9s clothing= in #ovember of %::-. +rior to the disposal= Gid-"hoice generated a loss of >)::=::: @net of ta3A for the period from Eanuary through the sale date. Because of the value of the real estate and machinery= there was a gain of >7/:=::: @net of ta3A on the actual sale. 5ow should this situation be reported in the financial statements of Camily Cashions for %::-. A. A >%/:=::: should be included in the %::- income statement as an e3traordinary item. B. A >)::=::: loss should be included in income from operations and a >7/:=::: gain reported in the Fdiscontinued operationsF section of the income statement. ". A >%/:=::: adDustment to beginning retained earnings should be in the statement of retained earnings. $. %+,('((( gain should be in the >discontinued operations> section of the income statement. 64. 1%--1. Beneral "orporation was organi!ed on Eanuary 1 and issued /::=::: shares of common stock on that date. 1n Euly 1= an additional %::=::: shares were issued for cash. #et income for the year was >/=174=:::. #et earnings per share amounted to' A. >6.41. B. >6.-7. ". >7.41. $. %&..-.
1,(('((( x .4)+2 5 1/(('((( x .4)+2 * .(('(((3 ,')&-'(((4 .(('((( * &..-

6/. 1%--%. 1n Eanuary 1= %::-= "arleton "orporation had //=::: shares of >) par value common stock outstanding. 1n 2arch 31= %::-= "arleton issued an additional 1:=::: shares in e3change for a building. *hat number of shares will be used in the computation of basic earnings per share for the year %::-. A. //=:::. B. )/=:::. ". .+',((. $. )%=:::.
1,,'((( x 74)+2 5 1.,'((( x 84)+2 * .+',((

6). 1%--3. +latinum "ompany reports net income of >/%:=::: for %::- and declared a cash dividend of >1 per share on each of its 1::=::: shares of common stock outstanding. *hat are earnings per share for %::-. A. %,.+( per share. B. >1.:: per share. ". >1.%: per share. $. >4.7: per share
,+('(((4)(('((( * ,.+(

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66. 1%--4. $esigns= ;nc. had 4=::: shares of >6= >1:: par preferred stock and /:=::: shares of common stock outstanding throughout %::-. $uring %::-= $esigns declared a dividend of >6 per share on its common stock. "ompute earnings per share for %::- if $esigns9 income statement showed net income of >)3:=:::. A. >6.:: per share. B. >).:: per share. ". %)+.(- per share. $. >1%.): per share.
11.7('((( 0 1-'((( x /22 4 ,('((( * )+.(-

67. 13-1. &he principal purpose of a statement of cash flows is to measure the profitability of a business that maintains its accounting records on the cash basis. &rue 6alse 6-. 13-%. All cash receipts and cash payments not classified as investing or financing activities are classified as indirect activities. &rue 6alse 7:. 13-3. ;nterest paid belongs in the operating section of the statement of cash flows. True Calse 71. 13-7. &he purchase of e uipment for the manufacturing of inventory belongs in the operations section of the statement of cash flows. &rue 6alse 7%. 13--. ;n the long run= it is more important for a business to generate positive cash flows from investing activities than from operating activities. &rue 6alse 73. 13-1:. $epreciation is a non-cash e3pense. True Calse 74. 13-11. ;f accounts receivable decrease during the period= cash received from customers probably e3ceeds net sales. True Calse 7/. 13-1/. &he CASB permits a company to use the direct method for the statement of cash flows or the indirect method. True Calse 7). 13-%4. &he purchase or sale of marketable securities is reported in the statement of cash flows as a financing activity. &rue 6alse 76. 13-%). ;f accounts receivable increased during the year= deducting the increase from net sales determines the amount of cash received. True Calse 77. 13-33. *hen applying the direct method in a statement of cash flows= the amount of depreciation is added to net income &rue 6alse +age 7 of 11

7-. 13-4%. "ash flows from investing activities include all of the following e3cept' A. "ash proceeds from selling investments B. "ash proceeds from collections on loans ". "ash advanced to borrowers $. Cash proceeds from borro;ing

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-:. 13-4/. All of the following are financing activities e3cept' A. Borrowing money B. 9ending money ". Selling capital stock $. +aying dividends -1. 13-46. A statement of cash flows is not intended to assist investors in evaluating' A. 8easons for differences between the amount of net income and net cash flow from operations. B. &he company9s ability to meet its obligations and to pay dividends. ". #on-cash aspects of investing and financing activities. $. The profitability of business operations. -%. 13-/:. ;n a statement of cash flows= cash transactions are classified into three maDor categories. *hich of the following is not one of these three categories. A. Managing activities. B. 1perating activities. ". Cinancing activities. $. ;nvesting activities. -3. 13-/3. *hich of the following would indicate a cash disbursement. A. Selling e uipment at a loss. B. A decrease in accounts receivable. ". n increase in prepaid expenses. $. A decrease in inventory. -4. 13-/7. *hich of the following is an investing activity. A. ?urchase of equipment. B. +ayment of interest. ". ;ssuing common stock. $. ;ssuing long-term debt. -/. 13-):. *hich of the following is a financing activity. A. +ayment of interest. B. ?ayment of dividends. ". 2aking sales on account. $. +aying off accounts payable. -). 13-)3. *hich method will yield higher cash flows from operating activities. A. &he indirect method. B. &he direct method. ". @oth direct and indirect methods ;ill yield the same amount. $. $epends upon the situation. -6. 13-)-. *hen using the indirect method= depreciation e3pense' A. Ancreases net cash flo; from operations. B. $ecreases net cash flow from operations. ". $oes not affect net income. $. $oes not affect net cash flow from operations. +age 1: of 11

-7. 13-7%. *hich statement is true as to the CASB9s position on the presentation of the statement of cash flows. A. &he CASB recommends the use of the indirect method= but most companies use the direct method. B. The 6 S@ recommends the use of the direct method' but most companies use the indirect method. ". &he CASB recommends the use of the direct method= and most companies use the direct method. $. &he CASB recommends the use of the indirect method= and most companies use the indirect method. --. 13-7/. 5amilton "ompany reported an increase of >36:=::: in its accounts receivable during the year %::-. &he company9s statement of cash flows for %::- reported >1 million of cash received from customers. *hat amount of net sales must 5amilton have recorded in %::-. A. >)3:=:::. B. %)'7/('(((. ". >1=:::=:::. $. >36:=:::
)'((('((( 5 7/('((( * )'7/('(((

1::. BAA+ stands for which of the following' A. B. ". $.

Benerally acknowledged accounting principle.

Benerally accepted accounting practice. Benerous accepted accounting principle. Benerally accepted accounting principle.

+age 11 of 11