acct 302 Chap 19, 20, 21

in a statement of cash flows (indirect method), an increase in available-for-sale securities should be reported as:

An investing activity. An increase in available-for-sale securities due to the purchasing of additional shares is reported as an investing activity in the statement of cash flows.

Which of the following is not disclosed regarding earnings per share?

Cash paid per share. Cash paid per share has no effect on the reported EPS.

Which of the following transactions/events commonly give rise to cash inflows for business entities? (Select all that apply.) Multiple select question. Interest expense is accrued at the end of the fiscal period. Common stock is sold to investors. Cash is collected from customers. Depreciation is accrued periodically.

Common stock is sold to investors. Cash is collected from customers.

A business is deemed to have a complex capital structure when it has outstanding:

Executive stock options. Explanation Stock options have the potential to increase the number of shares outstanding and therefore create a complex capital structure.

Glimmer Corp. miscounts and overstates its ending inventory in year 1 by $10,000. Ignoring tax effects, what are the financial statement effects of this error in year 1? (Select all that apply.) Multiple select question. Understate assets $10,000. Understate net income $10,000. Overstate assets $10,000. Understate retained earnings $10,000. Overstate net income $10,000.

Overstate assets $10,000. Overstate net income $10,000.

What is the approach used for an error correction?

Restatement of previous years' financial statements

A statement of cash flows and its related disclosure note typically do not report:

Stock dividends. Stock dividends do not affect assets or liabilities and are not considered investing or financing activities.

The effect of changes in estimated option forfeitures must be recognized

cumulatively in the year the estimate changes.

A company granted 30 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $8 per share on the grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?

$80 million. $8 fair value per share ×30million shares granted=$240million fair value of award The $240 million total compensation is expensed equally over the three-year vesting period, reducing earnings by $80 million each year.

Marten Company's records indicate that, during the current year, land costing $50,000 was sold. A gain of $45,000 was recognized on the sale. Cash inflows associated with this sale were

$95,000.

Which of the following are considered a change in accounting principle? (Select all that apply.) Multiple select question. Adopt a new FASB standard. Change the residual value of a depreciable asset. Report consolidated statements in place of individual statements. Change from the cost to equity method.

Adopt a new FASB standard. Change from the cost to equity method.

Interest paid to bondholders is reported in connection with a statement of cash flows as:

An operating activity. Since interest expense is reported in the income statement under GAAP, it is reported in the operating activities section of the statement of cash flows.

Investment revenue is reported in connection with a statement of cash flows as:

An operating activity. Since interest revenue is reported in the income statement under GAAP, it is reported in the operating activities section of the statement of cash flows.

Eastern Manufacturing Company owns 40% of the outstanding common stock of Southern Supply Company. During 2024, Eastern received a $50 million cash dividend from Southern. What effect did this dividend have on Eastern's 2024 statement of cash flows?

Cash from operating activities increased. Even though the equity method is used to account for the investment, cash dividends are received and therefore reported in the operating section of the statement of cash flows.

Which of the following is a change in accounting estimate? Change in inventory method. Change in subsidiaries included in consolidated financial statements. Change from completed contract method to percentage-of-completion method. Change in actuarial calculations pertaining to pension plan.

Change in actuarial calculations pertaining to pension plan.

Which of the following are changes in accounting estimates? (Select all that apply.) Multiple select question. Adoption of a new FASB standard. Change in inventory costing method. Change in useful life of a depreciable asset. Change in estimate of periods benefited by intangible asset.

Change in useful life of a depreciable asset. Change in estimate of periods benefited by intangible asset.

Gris Corp. purchases inventory on account and incorrectly records a debit to equipment and a credit to cash. Which entries would be used to reverse and correct this error? (Select all that apply.) Multiple select question. Debit equipment; credit inventory. Debit accounts payable; credit inventory. Debit cash; credit equipment. Debit inventory; credit accounts payable.

Debit cash; credit equipment. Debit inventory; credit accounts payable.

Which of the following must be presented in a company's financial statements (which include the financial statement notes), assuming that the related financial statement items exist for that company? (Select all that apply.) Multiple select question. EPS—operating income EPS—discontinued operations EPS—income from continuing operations EPS—net income

EPS—discontinued operations EPS—income from continuing operations EPS—net income

Which of the following transactions/events commonly give rise to cash outflows of business entities? (Select all that apply.) Multiple select question. Patent amortization is accrued periodically. Common stock is exchanged for a piece of land. Employees are paid. Fire insurance is purchased.

Employees are paid. Fire insurance is purchased.

Compensation expense must be adjusted during the service period to reflect changes in the fair value of options caused by changes in the market price of the underlying shares. T/F

F

When calculating basic earnings per share, net income is reduced by dividends on nonconvertible cumulative preferred stock:

Whether declared or not. Since cumulative preferred dividends carry over as dividends in arrears and will eventually be paid, the current year's dividends, whether paid or not, are deducted from the current year's net income when calculating basic EPS.

Restricted stock units (RSUs) are:

a grant valued in terms of a set number of shares of company stock. The compensation associated with restricted stock units (RSUs) under a stock award plan is the number of shares represented by the RSUs multiplied by the market price of an unrestricted share of the same stock.

In addition to the primary activities, what other required information must be presented in a statement of cash flows? (Select all that apply.) Multiple select question. a reconciliation of the net increase or decrease in cash with the change in the cash balance a reconciliation of operating income to net income a reconciliation of operating income to operation cash flows noncash investing and financing activities

a reconciliation of the net increase or decrease in cash with the change in the cash balance noncash investing and financing activities

Consistent with U.S GAAP, IFRS classifies cash flows as operating, investing, or financing. However, U.S GAAP designates cash outflows for interest payments and cash inflows from interest and dividends received as operating cash flows. IFRS

allows companies to report cash inflows from interest and dividends as either operating or investing cash flows. IFRS allows companies to report cash inflows from interest and dividends as operating, investing, or financing cash flows.

Which of the following are not valid categories in the statement of cash flows? (Select all that apply.) Multiple select question. cash flows from operating activities cash flows from financing activities cash flows from investing activities cash flows from continuing operations cash flows from discontinued operations

cash flows from continuing operations cash flows from discontinued operations

Which of the following are valid categories in the statement of cash flows? (Select all that apply.) Multiple select question. cash flows from operating activities cash flows from financing activities cash flows from continuing operations cash flows from investing activities cash flows from discontinued operations

cash flows from operating activities cash flows from financing activities cash flows from investing activities

Which of the following are included in the statement of cash flows? (Select all that apply.) Multiple select question. cash flows from operating activities cash flows from continuing operations cash flows from investing activities cash flows from financing activities cash flows from discontinued operations noncash investing and financing activities

cash flows from operating activities cash flows from investing activities cash flows from financing activities noncash investing and financing activities

A change in depreciation method is treated as a(n)

change in accounting estimate.

Which of the following would prevent Norbert Company from having a simple capital structure for the purpose of reporting EPS? convertible preferred stocks cash dividends nonconvertible preferred stocks stock dividends nonconvertible bonds

convertible preferred stocks

Proceeds under the treasury stock method may include (Select all that apply.) Multiple select question. total compensation from nonvested awards. tax benefits derived from nonqualified stock options. the current market value of the stocks assumed to have been acquired with the options. amounts received under the hypothetical exercising of the options.

total compensation from nonvested awards. amounts received under the hypothetical exercising of the options.

At December 31, 2024 and 2025, Frist Company had outstanding 50 million common shares and 4 million shares of 10%, $10 par cumulative preferred stock. Net income for 2025 was $20 million. No dividends were declared in 2025. EPS for 2025 was:

$0.32. [$20 − (10% × $10 par × 4)] ÷ 50 [all numbers in millions unless so indicated]

Selected information from Isadore Bell Corporation's accounting records and financial statements for 2024 is as follows ($ in millions): Cash paid to acquire equipment$ 18 Treasury stock purchased for cash 25 Proceeds from sale of land and buildings 45 Gain from the sale of land and buildings 26 Investment revenue received 33 Cash paid to acquire office equipment 40 On its statement of cash flows, Isadore Bell should report net cash outflows from investing activities of:

$13 million. $45 million (proceeds from sale of land and buildings) − $18 (cash paid to acquire equipment) − $40 million (cash paid to acquire office equipment).

Milky Company reports sales revenue of $200, an increase in deferred revenue of $2, and an increase in accounts receivable of $1. Cash collected from customers is:

$201

A company reported interest expense of $500,000 for the year. Interest payable was $31,000 and $71,000 at the beginning and the end of the year, respectively. What was the amount of interest paid?

$460,000

Common stock options that are antidilutive generally affect the calculation of:

1. Basic EPS = no 2. Diluted EPS = no Common stock options are not considered in basic EPS but are added to the number of shares if they are dilutive. Antidilutive stock options are ignored.

Place the presentation of earnings per share in the correct order.

1. EPS- income from continuing operations 2. EPS- discontinued operations 3. EPS- net income

At the beginning of the year, Solen Corp. had 100,000 shares of common stock outstanding. On April 1, the company issued an additional 60,000 shares. Weighted-average shares for the year will be

145,000 shares.

Norbert Company reports the following net cash in its statement of cash flows: net inflow from operating activities: $200; net outflow from investing activities: $220; net inflow from financing activities: $130. The current year beginning balance of cash was $80. The cash balance at the end of the year will be

190

Pfeffer Company reports net income of $360 million for the year; the company's tax rate is 40%. At the beginning of the year, 200,000 common shares were outstanding. On August 1, the company issued an additional 120,000 shares. Weighted-average shares will be

250,000.

On January 1, 2024, Albacore Company had 330,000 shares of its common stock issued and outstanding. Albacore issued a 9% stock dividend on July 1, 2024. On October 1, 2024, Albacore retired 11,000 of its common shares. When calculating basic earnings per share for 2024, what is the appropriate number of shares for Albacore to use in the denominator of the EPS fraction?

356,950 (330,000 × 1.09) − (11,000 × 3/12) = 356,950

Bonnie Inc. has 500, 6%, $1,000 face amount bonds outstanding during the entire year. The bonds were issued at face. Each bond is convertible into 14 shares of common stock. The company's tax rate is 30%. What would be the effect of the assumed conversion on the denominator of diluted EPS?

7,000 shares would be added.

Property dividends are reported in connection with a statement of cash flows as:

A noncash activity. A property dividend does not involve a cash outflow and therefore is reported as a noncash activity.

Which of the following concepts governs recognition of revenue and expense?

Accrual accounting

In a statement of cash flows (indirect method), a decrease in inventory should be reported as:

An addition to net income in determining cash flows from operating activities. Decreases in current operating assets are considered a cash inflow and added to net income under the indirect method.

Sean-McDonald Company sold a printer with a cost of $34,000 and accumulated depreciation of $21,000 for $10,000 cash. This transaction would be reported as:

An investing activity. Selling (as well as buying) fixed assets are considered investing activities.

Sale of new shares

Assets and shareholders' equity increase.

Under which method(s) will a reconciliation of net income to cash from operating activities be presented? (Select all that apply.)

Both the direct and the indirect method

Which of the following methods of preparing the statement of cash flows is (are) acceptable under U.S. GAAP?

Both the direct and the indirect method

Which of the following is a change in accounting principle?

Change the method of inventory costing.

Change in reporting entity

Consolidate a subsidiary not previously included in consolidated financial statements

On January 1, year 1, Yuri Corp. purchases equipment for $120,000. The equipment has a 6-year useful life with no residual value. Yuri uses the double-declining-balance method of depreciation, and depreciates the equipment $40,000 in year 1. In year 2, Yuri changes its depreciation method to straight-line depreciation. The journal entry in year 2 to record the depreciation expense will include which of the following journal entries? (Select all that apply.) Multiple select question. Debit depreciation expense $16,000. Debit accumulated depreciation $20,000. Credit depreciation expense $8,000. Credit accumulated depreciation $16,000.

Debit depreciation expense $16,000. Credit accumulated depreciation $16,000.

True or false: In calculating diluted EPS,convertible preferred stock is assumed converted only if the stock was issued during an earlier period.

False

A company can report interest received and dividends received as investing activities using

IFRS. IFRS allows interest and dividends received to be reported as either operating or investing. GAAP requires these to be reported as operating.

Which of the following statements regarding income statement and related cash amounts is correct? Income statement amounts typically exceed related cash amounts. Income statement amounts and the related cash amounts typically are the same. Cash amounts typically exceed the related income statement amounts. Income statement amounts and cash amounts typically are not the same.

Income statement amounts and cash amounts typically are not the same.

Which of the following is correct regarding depreciation expense?

It is a noncash expense that does not require the use of cash.

An error in which of the following accounts typically does not self-correct?

Land

Which of the following errors will self-correct?

Miscounting ending inventory at the end of the year.

Which of the following shares may be included in the calculation of basic EPS? Multiple choice question. Outstanding common shares Convertible securities Stock options Contingent issuable shares Restricted stock

Outstanding common shares

If it is impracticable to measure the period-specific effects of a change in accounting principle, what approach is used?

Prospective

Which of the following errors typically do not self-correct?

Recording equipment purchased in the land account

Which of the following are requirements for the correction of an accounting error? (Select all that apply.) Multiple select question. Report a prior period adjustment to the beginning balance in retained earnings for the earliest year affected. Treat the error on a prospective basis in the current year and future years. Prepare a journal entry to correct the error.

Report a prior period adjustment to the beginning balance in retained earnings for the earliest year affected. Prepare a journal entry to correct the error.

Change in accounting estimate

Revision of an amount due to new information or new experience

cliff vesting

Stock options vest all at once

Which of the following methods of preparing the statement of cash flows is (are) acceptable under U.S. GAAP? (Select all that apply.) Multiple select question. The direct method The working capital method The indirect method

The direct method The indirect method

Under which method of preparing a statement of cash flows will a reconciliation between net income and cash from operating activities be shown on a separate schedule?

The direct method only

Which of the following statements is untrue regarding the statement of cash flows?

The indirect method derives cash flows indirectly by starting with sales revenue and "working backwards" to convert that amount to a cash basis. The indirect method starts with net income, not sales revenue

What condition must be met to include contingent issuable shares in the calculation of diluted EPS?

The required condition already is being met.

Which of the following statements regarding the role of antidilutive securities in the calculation of EPS is correct?

They are ignored when calculating both basic and diluted EPS.

Stock splits and stock dividends

Total assets and shareholders' equity are unaffected.

Mirage Corp. miscounts and understates its ending inventory in year 1 by $5,000. Ignoring tax effects, what are the financial statement effects of this error in year 1? (Select all that apply.) Multiple select question. Understate retained earnings. Understate net income. Overstate net income. Overstate assets. Understate assets.

Understate retained earnings. Understate net income. Understate assets.

Employee share purchase plans typically allow Blank______ to purchase company shares at favorable terms.

all employees

For the purpose of calculating diluted EPS, convertible preferred stock is

assumed to have already been converted.

Short-term, highly liquid investments that can be readily converted to cash, with little risk of loss, are referred to as _______ ______

cash equivalents

In calculating EPS, preferred stock dividends are subtracted from the numerator because EPS represents earnings available to _______ shareholders

common

When restrictions are lifted on restricted stock units for par value stock, paid-in capital restricted stock is replaced by (Select all that apply.) Multiple select question. common stock compensation expense paid-in capital - excess of par

common stock paid-in capital - excess of par

If a company changes its inventory method, what financial statement accounts are affected? (Select all that apply.) Multiple select question. cost of goods sold inventory accounts payable sales interest expense

cost of goods sold inventory

Iris Company purchased equipment for cash and incorrectly recorded the entry as a debit to repair expense and a credit to cash. The entry required to correct the error is to

debit equipment; credit repair expense.

Contingent issuable shares may be included in the calculation of

diluted EPS.

Investors' desire to focus on one number that may summarize a company's performance may explain the importance of

earnings per share.

Falcon Company grants stock options to its upper and middle management employees. The options vest over a 4-year period, with 25% exercisable after 1 year, 25% after 2 years, another 25% after 3 years, and the remaining 25% after 4 years. This is an example of

graded vesting.

When estimates of options forfeitures change, the cumulative effect on compensation is recognized

in current earnings.

Vested restricted stock awards are (Select all that apply.) Multiple select question. added in the denominator for the purpose of calculating diluted EPS only. included in the denominator of basic EPS. already outstanding.

included in the denominator of basic EPS. already outstanding.

If convertible bonds are assumed to have been converted, the numerator would be assumed to Blank______ by the Blank______ effect of the interest saved.

increase; after-tax

A strategy that simplifies the determination of whether convertible securities are dilutive is to compare their ____________ effect on earnings per share.

incremental

If a company changes its inventory method, what financial statement accounts are affected? (Select all that apply.) Multiple select question. inventory interest expense cost of goods sold accounts payable sales

inventory cost of goods sold

Which of the following decision makers tend to be especially interested in cash flow information? (Select all that apply.) Multiple select question. customers competitors investors creditors

investors creditors

Diluted EPS should be the

lowest possible EPS.

Total compensation associated with restricted stock awards typically is equal to the shares'

market price at grant date of the award.

Share-based plans typically are grouped into two major categories based on the conditions that must be met by employees in order to receive the benefits of the award. These categories are Multiple select question. market-based plans. performance-based plans. executive plans. managerial plans.

market-based plans. performance-based plans.

When a new accounting standard is applied to the adoption period and an adjustment is made to the balance of retained earnings at the beginning of the adoption period, the Blank______ approach is used.

modified retrospective

If Allegan miscounts ending inventory in the current year, which of the following amounts will be incorrect on its financial statements? (Select all that apply.) Multiple select question. total liabilities total noncurrent assets net income inventory cost of goods sold

net income inventory cost of goods sold

On January 1, Year 1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. The estimated value of the options is $6 per option. During Year 4, 9,000 stock options were exercised. In Year 5, the remaining stock options expire. Utta should recognize the expiration by debiting

paid-in capital—stock options for $6,000.

When a company reacquires its own shares, and weighted-average shares are calculated for the purpose of determining EPS, the reacquired shares that are subtracted from the weighted-average calculation are weighted for the

period that they are not outstanding.

The treasury stock method takes into account the dilutive effect of stock options and assumes that the proceeds from the exercise of options are used to

purchase treasury shares.

Compensation relating to stock option grants should be

recognized over the service period for which employees receive options.

The selection of an accounting method is important because it can (Select all that apply.) Multiple select question. not be changed once selected. reduce comparability. influence financial ratios. complicate comparisons.

reduce comparability. influence financial ratios. complicate comparisons.

For the purpose of deriving EPS, securities are considered dilutive if they are capable of

reducing earnings per share.

After a recent acquisition, Joann Inc. issues consolidated financial statements for the first time. Joann should report the acquisition as a change in Blank______.

reporting entity

If a company discovers an error in previously issued financial statements, it must

restate the financial statements.

Haven Corp. purchases equipment and incorrectly debits maintenance expense. Which of the following amounts will be incorrect at year-end? (Select all that apply.) Multiple select question. retained earnings total fixed assets total liabilities depreciation expense

retained earnings total fixed assets depreciation expense

If a journal entry is used to derive the amount of cash collected from customers,

sales revenue, bad debt accruals, and changes in A/R and the allowance account need to be recognized.

An important tool that can be used to ensure that no reportable activities are inadvertently overlooked is a:

spreadsheet

Carmen Company shows salaries expense of $25,000 in its income statement. During the current year, the balance of its salaries payable account decreased by $3,000. If the company uses the indirect method of presenting the operating activities section of the statement of cash flows, the change of $3,000 should be

subtracted from net income.

Under the indirect method of deriving net cash flows from operating activities, decreases in liabilities relating to operating activities must be

subtracted from net income.

Earnings per share is reported very frequently in the financial press because it

tends to summarize the company's performance.

A prior period adjustment requires an adjustment to

the beginning balance of retained earnings.

Donald Company grants stock options to certain employees. On the date of grant, Donald should measure total compensation based on

the fair value of the options.

Which of the following statements regarding the recognition of revenues and expenses is correct? Multiple choice question. They are recognized even if cash has not been received or paid. They are recognized only if cash has been received or paid. They are recognized if it is expected that cash will be received or paid within 90 days of the balance sheet date.

they are recognized even if cash has not been received or paid.

The way we take into account the dilutive effect of stock options is referred to as the ___________ stock method

treasury

If sales revenue is $20 million and accounts receivable increased by $3 million, the amount of cash received from customers:

was $17 million. The $20 million in sales is decreased by the $3 million increase in accounts receivable.

In determining cash flows from operating activities (indirect method), adjustments to net income should not include:

An addition for a gain on sale of equipment. The gain would be deducted from net income.

In year 1, Claire miscounted ending inventory and understated ending inventory by $10,000. The error was discovered in year 2. Ignoring tax effects, the entry to record this error would include which of the following? (Select all that apply.) Multiple select question. Credit inventory $10,000. Debit cost of goods sold $10,000. Credit retained earnings $10,000. Debit inventory $10,000.

Credit retained earnings $10,000. Debit inventory $10,000.

On January 1, year 1, Weston Corp. purchases equipment for $100,000. The equipment has a 10-year useful life with no residual value. Weston uses the double-declining-balance method of depreciation, and depreciates the equipment $20,000 in year 1 and $16,000 in year 2. In year 3, Weston changes its depreciation method to straight-line depreciation. The journal entry in year 3 to record the depreciation expense will include which of the following journal entries?

Debit depreciation expense $8,000.

Which of the following errors would self-correct in the following year? (Select all that apply.) Multiple select question. Miscounting ending inventory. Failure to accrue salaries in the current year. Recording an equipment purchase in the land account. Recording the purchase of inventory as equipment.

Miscounting ending inventory. Failure to accrue salaries in the current year.

In year 2, Rogers Corp. changes its inventory method from FIFO to the weighted-average method. Under the weighted-average method, the year 2 beginning inventory is $5,000 lower than under the FIFO method. The financial statements are revised using the retrospective approach. What are the financial statement effects of the change in accounting principle? (Select all that apply.) Multiple select question. Year 1 ending inventory will decrease. Year 1 net income will decrease. Year 1 retained earnings will increase. Year 1 ending inventory does not change.

Year 1 ending inventory will decrease. Year 1 net income will decrease.

When preparing the statement of cash flows using the indirect method, depreciation expense and losses are

added to net income.

In calculating diluted EPS under the treasury stock method, one component of the proceeds from the exercise of options include

cash received at exercise

The net income for World Class Corporation was $140 million for the year ended December 31, 2024. Related information follows: Amortization of patent, $1 million. Cash dividends paid, $14 million. Decrease in accounts receivable, $9 million. Decrease in salaries payable, $1 million. Depreciation expense, $20 million. Increase in long-term notes payable, $13 million. Sale of preferred stock for cash, $17 million. Cash flows from operating activities during 2024 should be reported as:

$169 million. Cash flows from operating activities = $140 + $1 (amortization of patent) + $9 (decrease in accounts receivable) − $1 (decrease in salaries payable) + $20 (depreciation expense).

Executive stock options are outstanding all year that permit executives to buy 12 million common shares at $50. The average market price of the common stock was $60. When calculating diluted earnings per share, the assumed exercise of these options will increase the weighted average number of shares outstanding by:

2 million shares. 12 − [(12 × $50) ÷ $60].

Sun Company owns 14.5 million shares of stock of Center Company classified as available for sale. During 2024, the fair value of those shares increased by $19 million. What effect did this increase have on Sun's 2024 statement of cash flows?

No effect. There was no flow of cash.

Stock dividends are reported in connection with a statement of cash flows as:

Not reported on the statement of cash flows. Stock dividends do not involve a cash outflow and don't represent a significant operating, investing, or financing activity and therefore are not reported in the statement of cash flows or disclosure note.

An important advantage of using a spreadsheet to analyze transactions that may need to be reported in the statement of cash flows is to

make sure that no reportable activity is overlooked.

Glueck Corp. reports sales revenue of $200,000. During the year, the company's accounts receivable balance decreased by $14,000. Cash collected from customers is

$214,000.

Sales revenue for the year was $100,000; accounts receivable had a beginning balance of $10,000 and an ending balance of $18,000. Cash collected from customers was

$92,000.

Change in accounting principle

Change from one generally accepted method to another generally accepted method of accounting

Which of the following strategies will simplify the determination of whether convertible securities are dilutive or antidilutive to EPS?

Comparing the incremental effect of the conversion.

Steiner Corp. purchases a new machine for $120,000. The company makes a $20,000 downpayment and signs a promissory note for the difference. Which of the following statements is correct regarding this transaction and the classification in a statement of cash flows?

Investing cash outflow is $20,000.

graded vesting

Stock options vest over time.

Which of the following scenarios will increase stockholders' equity? Multiple choice question. The sale of new shares A 2-for-1 stock split Stock dividends

The sale of new shares

Transactions that represent noncash investing and financing activities must be reported in the statement of cash flows or in disclosure notes.

True

Modified retrospective application for a change in accounting principle requires that the new standard is applied to the adoption period and

an adjustment is made to retained earnings at the beginning of the adoption period.

Which of the following may result in potential common shares? (Select all that apply.) Multiple select question. nonconvertible bonds common stocks authorized convertible bonds nonconvertible preferred stocks convertible preferred stocks

convertible bonds convertible preferred stocks

Amounts reported in the income statement usually are Blank______ the cash effects of the items reported.

different from

The way we take into account the dilutive effect of stock options is referred to as the _____________ stock method

treasury

True or false: Stock options have become an integral part of most medium and large companies

true

Sales revenue for Marshall Matches was $240,000. The following data are from the accounting records of Marshall: Accounts receivable, January 1 $ 52,000 Accounts receivable, December 31 47,000

$245,000. Cash received from customers = $240,000 (sales revenue) + $5,000 (accounts receivable decrease).

Under its executive stock option plan, Elbanon Corporation granted options on January 1, 2024, that permit executives to purchase 27 million of the company's $1 par common shares within the next eight years, but not before December 31, 2026 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. The options are exercised on April 2, 2027, when the market price is $21 per share. By what amount will Elbanon's shareholders' equity be increased when the options are exercised?

$486 million $ 4 fair value per option × 27million options granted =$ 108 million fair value of award The $108 million total compensation is expensed equally over the three-year vesting period, increasing the balance in the Paid-in capital-stock options account. $567 million + $27 million − $108 million = $486 million Note: The market price at exercise is irrelevant.

At December 31, 2024, the balance sheet of Goode Corporation included 80 million common shares. On October 1, 2025, Goode retired 4 million shares as part of a share repurchase program. Net income for the year ended December 31, 2025, was $400 million. Goode's 2025 EPS should be:

$5.06. $400 ÷ [80 − (4 × 3/12)]

On January 1, 2024, Olympic Insurance Company granted 30,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2026, and expire on January 1, 2027. Each option can be exercised to acquire one share of $1 par common stock for $12. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. The market price of Olympic's stock was as follows: January 1, 2024 : $14 December 31, 2024 : 15 What amount should Olympic recognize as compensation expense for 2024?

$50,000 Total compensation ($5 × 30,000) ÷ vesting period (3 years).

Selected information from Jacklyn Hyde Corporation's accounting records and financial statements for 2024 is as follows ($ in millions): Cash paid to retire bonds$ 30 Treasury stock purchased for cash 50 Proceeds from issuance of common stock 70 Proceeds from issuance of mortgage bonds 90 Cash dividends paid on common stock 25 Cash interest paid to bondholders 35 On its statement of cash flows, Jacklyn Hyde should report net cash inflows from financing activities of:

$55 million. $70 (proceeds from issuance of common stock) + $90 (proceeds from issuance of mortgage bonds) − $30 (cash paid to retire bonds) − $50 (treasury stock purchased for cash) − $25 (cash dividends paid on common stock).

Convertible bonds that are dilutive generally affect the calculation of:

1. basic EPS = no 2. Diluted EPS = yes

When calculating diluted EPS, which of the following, if dilutive, would cause the weighted average number of shares to increase?

1. dividends on preferred stock = no 2. stock options = yes Any dividend adjustment (due to convertible preferred stock) would be added to the numerator of the EPS fraction.

Salt Company reports net income of $360 million for the year; the company's tax rate is 40%. At the beginning of the year, 200 million common shares were outstanding. On July 1, Salt sold an additional 80 million shares and on October 1 distributed a 10% stock dividend. On December 1, the company reacquired 24 million of its outstanding shares. The company's weighted-average shares for the purpose of calculating basic EPS will be

262 million.

Gonzalez Company is a calendar-year firm with operations in several countries. At January 1, 2024, the company had issued 10,000 executive stock options permitting executives to buy 10,000 shares of stock for $25. The vesting schedule is 30% the first year, 30% the second year, and 40% the third year (graded-vesting). The fair value of the options is estimated as follows: vesting date : amount vested : fair value per option December 31, 2024 : 30% : $2.8 December 31,2025 : 30% : $3 December 31, 2026: 40%: $3.75 What is the compensation expense related to the options to be recorded in 2025?

9,500 Explanation 1/2 of $9 (30% × 10 × $3) + 1/3 of $15 (40% × 10 × $3.75).

Which of the following are considered a change in reporting entity? (Select all that apply.) Multiple select question. Changing specific companies that are included in the consolidated statements. Presenting consolidated financial statements in place of individual statements. Changing the name of the company. Changing the size of the company by purchasing additional assets.

Changing specific companies that are included in the consolidated statements. Presenting consolidated financial statements in place of individual statements.

Which of the following must be presented in a company's financial statements (which include the financial statement notes), assuming that the related financial statement items exist for that company? (Select all that apply.) Multiple select question. EPS—income from continuing operations EPS—operating income EPS—discontinued operations EPS—net income

EPS—income from continuing operations EPS—discontinued operations EPS—net income

When calculating earnings per share, the effect of after-tax interest expense paid on convertible bonds that are dilutive is to:

Increase net income for diluted earnings per share and not for basic earnings per share. Basic EPS does not assume convertible bonds have been converted and therefore the after-tax interest expense is not added back. Diluted EPS assumes the bonds have been converted, if dilutive, and therefore add back to net income the after-tax interest expense.

Which of the following statements best describes the importance of cash flow information? Multiple select question. Investors and creditors consider the risk associated with cash flow forecasts. Investors and creditors rely heavily on cash flow information. Investors and creditors primarily focus on income and less on cash flow information.

Investors and creditors consider the risk associated with cash flow forecasts. Investors and creditors rely heavily on cash flow information.

Which of the following plans frequently specify a performance condition or a market condition that must be satisfied before employees are allowed the benefits of the reward? (Select all that apply.) Multiple select question. Other share-based plans Defined contribution pension plans Defined benefit pension plans Stock option plans

Other share-based plans Stock option plans

During the year, cash increased by $340 million. Investing and financing activities created positive cash flow totaling $570 million. What were net cash flows from operating activities in the statement of cash flows?

Outflow of $230 million

Which of the following are requirements for the correction of an accounting error? (Select all that apply.) Multiple select question. Prepare a journal entry to correct the error. Restate previous years' financial statements that are incorrect. Correct the financial statements in the current year only. Disclose the nature of the error and the impact of the error on net income.

Prepare a journal entry to correct the error. Restate previous years' financial statements that are incorrect. Disclose the nature of the error and the impact of the error on net income.

What approach is used to account for a change in depreciation method?

Prospective approach

Which of the following would result in a cash outflow from investing activities?

Purchase of a machine for cash.

Which of the following is correct regarding the nature of restricted stock? Multiple choice question. The shares can only be traded during certain time periods. The shares typically are contingent on the continued employment of the awardee. The shares can only be sold back to the issuing company and not outside investors.

The shares typically are contingent on the continued employment of the awardee

Which of the following represent typical goals of executive compensation plans? (Select all that apply.) Multiple select question. To reduce reported net income. To create performance incentives for certain employees. To significantly reduce corporate tax obligations. To provide compensation to certain employees.

To create performance incentives for certain employees. To provide compensation to certain employees.

In year 2, Sammi Corp. changes its inventory method from FIFO to the weighted-average method. Under the weighted-average method, the year 2 beginning inventory is $3,000 higher than the FIFO method. The financial statements are revised using the retrospective approach. What are the financial statement effects of the change in accounting principle? (Select all that apply.) Multiple select question. Year 1 retained earnings will increase. Year 1 net income will increase. Year 1 ending inventory will decrease.

Year 1 retained earnings will increase. Year 1 net income will increase.

Steiner Corp. purchases a new machine for $120,000. The company makes a $20,000 downpayment and signs a promissory note for the difference. This transaction consists of (Select all that apply.) Multiple select question. a cash outflow from investing activity. a noncash investing and financing activity. a cash outflow from financing activity.

a cash outflow from investing activity. a noncash investing and financing activity.

The modified retrospective approach requires:

a journal entry to adjust account balances in the beginning of the year of change. Explanation The cumulative effects of the change on prior years' net income is reported as an adjustment to the beginning balance of retained earnings in the current year with an offsetting amount to the balance sheet accounts affected by the change.

Steiner Corp. purchases a new machine for $120,000. The company makes a $20,000 downpayment and signs a promissory note for the difference. This transaction consists of (Select all that apply.) Multiple select question. a noncash investing and financing activity. a cash outflow from financing activity. a cash outflow from investing activity.

a noncash investing and financing activity. a cash outflow from investing activity.

A change in Blank______ relates to a change in method of accounting for an item, whereas a change in Blank______ arises from a new calculation due to new information or new experience.

accounting principle; accounting estimate

Depreciation represents a noncash expense because it is merely an Blank______ of a Blank______ cash expenditure.

allocation; previous

Restricted stock units (RSUs):

are reported as part of shareholders' equity if payable in shares rather than cash. Restricted stock units (RSUs) are reported as part of shareholders' equity if payable in shares rather than cash and are reported as part of liabilities if the recipient will receive cash or can elect to receive cash.

On January 1, Year 1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. On the date of grant, the estimated value of the options is $6 per option. During Year 4, when the market value of the stock is $30 per share, 9,000 stock options were exercised. Utta Corp. should recognize this event by debiting (Select all that apply.) Multiple select question. cash for $180,000. paid-in capital—stock options for $54,000. paid-in capital in excess of par for $171,000. loss on stock options for 9,000.

cash for $180,000. paid-in capital—stock options for $54,000.

Glueck Corp. reports sales revenue of $200,000. During the year, the company's accounts receivable balance decreased by $14,000. Additional information reveals that during the year accounts totaling $7,000 were written off and bad debt expense of $10,000 was recognized. A journal entry prepared to determine cash collected from customers would include debits to (Select all that apply.) Multiple select question. accounts receivable for $14,000. cash for $207,000. allowance for uncollectible accounts $7,000. bad debt expense for $10,000.

cash for $207,000. bad debt expense for $10,000.

Michal Corp.'s land account decreased by $250,000. No specific information regarding this decrease is available. In its statement of cash flows, Michael should report

cash inflows from investing activities of $250,000.

For U.S. GAAP, which of the following are considered accounting changes? (Select all that apply.) Multiple select question. change in accounting principle change in accounting estimate change in reporting period change in reporting entity

change in accounting principle change in accounting estimate change in reporting entity

Which of the following would prevent Norbert Company from having a simple capital structure for the purpose of reporting EPS? Multiple choice question. stock dividends cash dividends nonconvertible preferred stocks nonconvertible bonds convertible preferred stocks

convertible preferred stocks

Crane Corp. changes its inventory method from FIFO to the weighted-average method. Which items will be affected on the income statement? (Select all that apply.) Multiple select question. cost of goods sold accounts payable sales earnings per share net income

cost of goods sold earnings per share net income

Candy changes inventory methods in year 2, resulting in a $20,000 increase to beginning inventory in year 2. The tax rate is 40%. The journal entry required to record the change in accounting principles will require (Select all that apply.) Multiple select question. credit to taxes payable of $20,000 credit to retained earnings for $12,000 debit to retained earnings of $8,000. debit to inventory for $20,000

credit to retained earnings for $12,000 debit to inventory for $20,000

Compensation plans that are tied to the achievement of certain targets and are used to motivate key employees are referred to as __________ compensation plans.

executive, management, manager, or performance

Financing activities are inflows and outflows of cash resulting from the

external financing of a business.

Under IFRS, a deferred tax asset for stock options

is the portion of the options' intrinsic value earned to date times the tax rate. Under IFRS, a deferred tax asset is not created until the award is "in the money" (has intrinsic value). The addition to deferred tax asset is the portion of the intrinsic value earned to date times the tax rate.

A company's choice of accounting method is important because Multiple select question. it cannot be changed once selected it affects comparability with peer firms it impacts reported net income

it affects comparability with peer firms it impacts reported net income

Which of the following are required characteristics of cash equivalents? (Select all that apply.) Multiple select question. low risk no risk short-term high liquidity high interest rate

low risk short-term high liquidity

An actual conversion of dilutive convertible securities will (Select all that apply.) Multiple select question. not affect the reported amount of diluted EPS. increase the reported amount of diluted EPS. decrease the reported amount of basic EPS. decrease the reported amount of diluted EPS.

not affect the reported amount of diluted EPS. decrease the reported amount of basic EPS.

The objective in preparing the statement of cash flows is to identify all transactions and events that represent _________, ____________ and ____________ activities and to classify and list them in the proper format.

operating investing financing

Securities that may become common shares in the future are considered

potential common shares.

When it is impracticable to measure the period-specific effects of a change in accounting principle, the __________ approach should be used

prospective

Jasper's income statement reports revenue from investments that lack significant influence of $10,000, and its balance sheet reports that dividends receivable decreased by $1,500. How much will Jasper report as cash received from investments?

$11,500

Fault Company's records indicate that, during the current year, land costing $150,000 was sold. A loss of $25,000 was recognized on the sale. Cash inflows associated with this sale were

$125,000.

Aggie Company reports investment revenue of $14,000 in its income statement relating to a 5% investment in another company's common stock. During the current year, dividends receivable increased by $1,000. Thus, cash collected from investments will be

$13,000.

Falken Company awards 1,000 shares of common stock to Robert Small. The shares are restricted and require that Robert remains with the company for at least 2 more years. The current market price of the shares is $15 per share. Total compensation associated with this restricted stock award is

$15,000.

Bonnie Inc. has 500, 6%, $1,000 face amount bonds outstanding during the entire year. The bonds were issued at face. Each bond is convertible into 14 shares of common stock. The company's tax rate is 30%. What would be the effect of the assumed conversion on the numerator of diluted EPS?

$21,000

Glueck Corp. reports sales revenue of $200,000. During the year, the company's accounts receivable balance decreased by $10,000 and its deferred revenue increased by $4,000. Cash collected from customers is

$214,000.

At December 31, 2024, the balance sheet of Darwin Corporation included 8 million common shares and 4 million nonconvertible preferred shares. On July 1, 2025, Darwin issued a 5 for 4 stock split on its common shares and paid $10 million cash dividends on the preferred stock. Net income for the year ended December 31, 2025, was $40 million. Darwin's 2025 EPS should be:

$3.00. ($40 − $10) ÷ (8 × 5/4)

Vogel Corp.'s denominator for calculating diluted EPS is 57,300 weighted-average shares. Included in the denominator were 5,000 shares related to convertible preferred stocks assumed to have been converted. If the convertible preferred stock had actually been converted, the weighted-average shares for purposes of diluted EPS would have been

57,300 shares

Any dividend adjustment (due to convertible preferred stock) would be added to the numerator of the EPS fraction.

Allocated to expense over the service period which usually is the vesting period. We allocate the compensation associated with restricted stock units (RSUs) under a stock award plan to expense over the service period which usually is the vesting period.

On January 4, Childers Corporation issued $200 million of bonds for $193 million. During the same year, $500,000 of the bond discount was amortized. On a statement of cash flows prepared by the indirect method, Childers Corporation should report:

An addition to net income of $500,000 The amortization of bond discount is added back to net income in arriving at cash flow from operations under the indirect method since it does not require a cash outflow (similar to depreciation).

Lawry Corp. purchased equipment for $100,000 and incorrectly recorded the equipment as inventory. The equipment has a useful life of 10 years with no residual value. The entry to correct this error would include which of the following entries? Multiple select question. Credit inventory $100,000. Debit accumulated depreciation $100,000. Debit inventory $100,000. Debit equipment $100,000.

Credit inventory $100,000. Debit equipment $100,000.

Which of the following statements regarding the prevalence of stock option awards is correct? Multiple choice question. All public companies grant stock options. Many large and medium-size companies grant stock options. All large companies grant stock options. Stock options are unique to large multinational companies.

Many large and medium-size companies grant stock options.

Cash equivalents have each of the following characteristics except: Maturity of at least 3 months. Little risk of loss. Highly liquid. Short-term.

Maturity of at least 3 months. Cash equivalents have a maturity date no longer than three months from the date of purchase.

Which of the following would result in a cash inflow from investing activities?

Sale of a machine for cash

Which of the following are likely advantages of employee share purchase plans for employees? (Select all that apply.) Multiple select question. The absence of brokerage fees to purchase the shares. Shares that promise special privileges. A discount on the purchase price of the shares.

The absence of brokerage fees to purchase the shares. A discount on the purchase price of the shares.

What factors would affect the calculation of diluted EPS if convertible bonds are assumed to have been converted into common stock of the issuing company? (Select all that apply.) Multiple select question. The numerator would reflect the pretax savings of interest. The numerator would reflect the after-tax savings of interest. The denominator would reflect the additional common shares assumed issued. The denominator would reflect the number of bonds assumed converted.

The numerator would reflect the after-tax savings of interest. The denominator would reflect the additional common shares assumed issued.

FIFA Footballs acquired a patent in 2021 at a cost of $200 million and amortizes the patent on a straight-line basis. During 2024 management decided that the benefits from the patent would be received over a total period of 8 years rather than the 20-year legal life being used to amortize the cost. FIFA's 2024 financial statements should include:

a patent balance of $136.0 million. Accumulated amortization at the end of 2024 is $64.0 million: 3 year's amortization at $10.0 million per year ($200 ÷ 20 years) plus one year's amortization at $34.0 million [($200 − $30.0) ÷ (8 − 3) years]. $200 − $64.0 = $136.0.

Kunzen Company shows salaries expense of $15,000 in its income statement. During the current year, the balance of its salaries payable account increased by $2,000. If the company uses the indirect method of presenting the operating activities section of the statement of cash flows, the change of $2,000 should be

added to net income.

Under the indirect method of deriving net cash flows from operating activities, decreases in assets relating to operating activities must be

added to net income.

Securities that upon conversion or exercise of potential common shares would increase EPS are referred to as ______ securites

antidilutive

Which of the following represent objectives of preparing a statement of cash flows? (Select all that apply.) Multiple select question. classifying the transactions and events correctly adhering to a proper statement format identifying all operating, investing, and financing events and transactions determining the correct cash balance

classifying the transactions and events correctly adhering to a proper statement format identifying all operating, investing, and financing events and transactions

Kroft changes inventory methods in year 2, resulting in a $10,000 increase to beginning inventory in year 2. The tax rate is 30%. The journal entry required to record the change in accounting principles will require a

credit to retained earnings for $7,000.

Under the indirect method of preparing the statement of cash flows, depreciation expense and losses are added back to net income because they (Select all that apply.) Multiple select question. provide an inflow of cash. increase the cash balance. do not require an outflow of cash. were subtracted in deriving net income.

do not require an outflow of cash. were subtracted in deriving net income

A company can report interest payments and interest received as operating cash flows using

either U.S. GAAP or IFRS. GAAP requires interest payments and interest received to be reported as an operating activity. IFRS allows interest payments to be reported as either an operating activity or financing activity and interest received as either an operating activity or investing activity.

The goal of diluted EPS is to report the Blank______ potential dilution that might result from the conversion or exercise of securities and equity contracts.

highest

Norbert Company reports the following net cash flows in its statement of cash flows: net inflow from operating activities: $200; net outflow from investing activities: $220; net inflow from financing activities: $130. The current year beginning balance of cash was $80. During the current year, cash must have

increased by $110.

On January 1, Year 1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. The estimated value of the options is $6 per option. During Year 4, 9,000 stock options were exercised. In Year 5, the remaining stock options expire. When the options expire, Utta should credit

paid-in capital—expired stock options for $6,000.

Accounting changes include changes in accounting ___________ in accounting __________ and in reproting entity

principle estimate

The correction of a material error in the prior year's financial statements is considered a

prior period adjustment.

A change in accounting estimate is accounted for using the ________ approach

prospective

Wang Company is a calendar-year firm with operations in several countries. At January 1, 2024, the company had issued 40,000 executive stock options permitting executives to buy 40,000 shares of stock for $30. The vesting schedule is 20% the first year, 30% the second year, and 50% the third year (graded-vesting). The fair value of the options is estimated as follows: vesting date: amount vested: fair value per option December 31, 2024 : 20% : $7 December 31, 2025 : 30% : $8 December 31, 2026 : 50% : $12 Assuming Wang prepares its financial statements in accordance with International Financial Reporting Standards, what is the compensation expense related to the options to be recorded in 2025?

$128,000. 1/2 of $96 (30% × 40 × $8) + 1/3 of $240 (50% × 40 × $12).

When calculating the weighted average number of shares outstanding, the number of shares are not time-weighted by the fraction of the reporting period they are (are not) outstanding for:

Common shares issued during the period as a stock dividend. The existing shares are adjusted for the effects of the stock dividend and are not weighted for the time period they were outstanding.

Which of the following statements is true regarding diluted earnings per share?

Contingently issuable shares are considered outstanding in the computation of diluted EPS when any conditions for issuance are currently being met. Contingently issuable shares are considered to be outstanding in the computation of diluted EPS if the target performance level already is being met.

Which of the following potential common shares may be included in the calculation of diluted EPS, but not basic EPS? Multiple select question. Outstanding common shares Convertible securities Contingent issuable shares Restricted stock Stock options

Convertible securities Contingent issuable shares Restricted stock Stock options

What method is used to account for a change in accounting estimate?

Prospective application

What factors would affect the calculation of diluted EPS if convertible bonds are assumed to have been converted into common stock of the issuing company? (Select all that apply.) Multiple select question. The numerator would reflect the pretax savings of interest. The denominator would reflect the number of bonds assumed converted. The denominator would reflect the additional common shares assumed issued. The numerator would reflect the after-tax savings of interest.

The denominator would reflect the additional common shares assumed issued. The numerator would reflect the after-tax savings of interest.

Kester Corp.'s land account increased by $140,000. No specific information regarding this increase is available. In its statement of cash flows, Kester should report

cash outflows from investing activities of $140,000.

When a company changes accounting methods, if the effects of the change can be calculated, the cumulative effect of the change is reflected

in the beginning balance of retained earnings for the earliest year presented for the years prior to that date.

Which of the following are subtracted when determining earnings available to common shareholders?

preferred stock dividends

When a company changes its inventory method from LIFO to FIFO, what accounts are affected in the comparative financial statements? Multiple select question. Cost of goods sold Income tax payable Accounts payable Revenue Inventory Retained earnings

Cost of goods sold Income tax payable Inventory Retained earnings

In calculating diluted EPS, which of the following restricted stock awards is included in the calculation?

unvested restricted stock awards only

When a company changes accounting methods and the effects of the change can be calculated for each period, which of the following occurs? (Select all that apply.) Multiple select question. The adjusted net income for each year is shown on the retained earnings statement for that year. A cumulative effect adjustment for the change is made in the current year income statement. Retained earnings is adjusted for the earliest period presented. A total cumulative adjustment is made to retained earnings of the most recent year.

The adjusted net income for each year is shown on the retained earnings statement for that year. Retained earnings is adjusted for the earliest period presented.

We allocate the compensation associated with restricted stock units (RSUs) under a stock award plan to expense over the service period which usually is the vesting period.

zero shares. The impact of the exercise of these options would be antidilutive, since the exercise price is greater than the average market price.

On January 1, Year 1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. On the date of grant, the estimated value of the options is $6 per option. During Year 4, 9,000 stock options were exercised. Utta Corp. should recognize this event by crediting (Select all that apply.) Multiple select question. paid-in capital from stock options for $171,000. paid-in capital in excess of par for $225,000. common stock for $180,000. common stock for $9,000.

paid-in capital in excess of par for $225,000. common stock for $9,000.

If bond interest expense is $400,000, bond interest payable increased by $4,000 and bond discount decreased by $1,000, cash paid for bond interest is:

$395,000. Cash paid for bond interest = $400,000 (interest expense) − $4,000 (increase in bond interest payable) − $1,000 (decrease in bond discount).

Horst Company has 50,000 stock options outstanding. The option exercise price is $13 per share, the average market price of the stock was $12 per share during the year, and the end-of-year stock price was $14. For the purpose of calculating EPS, these stock options are

antidilutive

To incorporate the effect of outstanding stock options in the calculation of diluted EPS:

We would never increase or decrease the numerator of the EPS fraction. The only impact of stock options in the calculation of diluted EPS is on the denominator of the EPS fraction. (The denominator increases by the number of shares assumed issued, and decreases by the number of shares repurchased at the average price, using the amount received from the exercise of the options.)

Inflows and outflows of cash resulting from the external funding of a business are cash flows from _________ activities

financing

Which of the following statements is untrue regarding earnings per share? Any new shares issued during the period in a stock dividend or stock split are time-weighted by the fraction of the period they were outstanding and then added to the number of shares outstanding for the period. When shares are retired, they are time-weighted for the fraction of the period they were not outstanding, prior to being subtracted from the number of shares outstanding during the reporting period. A company has a simple capital structure if it has no outstanding securities that could potentially dilute earnings per share. Dividends paid on nonconvertible preferred stock outstanding should be subtracted from reported net income.

Any new shares issued during the period in a stock dividend or stock split are time-weighted by the fraction of the period they were outstanding and then added to the number of shares outstanding for the period.

Which of the following are common types of restricted stock plans? (Select all that apply.) Multiple select question. Restricted stock awards Restricted stock rights Restricted stock debentures Restricted stock units

Restricted stock awards Restricted stock units

Warrants, options, and rights are antidilutive if the exercise price is

higher than the stocks' average market price.

In year 2, Rossman Corp. changed its inventory method from FIFO to the weighted-average method. The change resulted in a decrease in beginning inventory for year 2 of $10,000. What were the income statement effects of this change?

Earnings per share for year 1 decreased.

Marian Company granted restricted stock units for its par value stock to its top executives. When the restriction is lifted, Marian should (Select all that apply.) Multiple select question. debit paid-in capital—restricted stock. credit paid-in capital—restricted stock. credit paid-in capital in excess of par. debit paid-in capital in excess of par. credit common stock.

debit paid-in capital—restricted stock. credit paid-in capital in excess of par. credit common stock.