Analyze the following: I – When a component of an entity was discontinued during the current year, the loss on discontinued operation should exclude operating loss during the period. II – Dilution of EPS is defined as decrease in earnings per share when convertible instruments are assumed "converted" to ordinary shares. III – Failure to record depreciation at year-end results in understated income. Given these, we can conclude that: Group of answer choices Only statements I and III are true. Only statement II is false. Statement III is false. Only statements I and II are true.

Analyze the following: I – When a component of an entity was discontinued during the current year, the loss on discontinued operation should exclude operating loss during the period. II – Dilution of EPS is defined as decrease in earnings per share when convertible instruments are assumed "converted" to ordinary shares. III – Failure to record depreciation at year-end results in understated income. Given these, we can conclude that: Group of answer choices Only statements I and III are true. Only statement II is false. Statement III is false. Only statements I and II are true.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter6: Accounting Quality

Section: Chapter Questions

Problem 23PC

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50. Analyze the following: I – When a component of an entity was discontinued during the year, the component's operating loss of the current period should be included in income statement as part of revenue and expenses. II – If the fair value less cost of disposal is lower than the carrying amount of a non-current asset classified as held for sale, the difference is accounted for as an impairment loss. III – The effect of recording a 100% share dividend would be to leave working capital unaffected, decrease earnings per share and increase book value per share. Given these, we can conclude that: Group of answer choices Only statement II is false. Only statements I and III are true. Only statements I and II are true. Statement III is false.
58. Analyze the following: I – If a new issue of shares for cash is made between the year-end and the date that the financial statements are authorized for issue, no adjustment is made to EPS. II – In preparing the required disclosure under PAS 24 for related party transactions, only the type of relationship and amount of transaction should be disclosed. III – Conforming with the depreciation method prevalent in a particular industry can be a justification for a change in depreciation method. Given these, we can conclude that: Group of answer choices Only statement I is not false. Only statement II is not false. All statements are not true. Only statement III is not true.
1. Which of the following would never affect retained earnings? a. Correction of a prior period errorsb. Payment of long-term indebtednessc. Stock dividendd. Reissue of treasury shares 2. Appropriation for accumulated profits, if reflected in separate account, shall be shown as a. Component of equity as part of share premiumb. Component of total liabilities as current liabilityc. Component of total assets as noncurrent assetsd. Component of equity as part of reserves 3. An appropriation of accumulated profits for possible contingencies should be a. Charged with all losses related to that contingencyb. Transferred to income as losses are realizedc. Shown within shareholders’ equity in the statement of financial positiond. Classified in the liability section of the statement of financial position4. When preference share is cumulative, preferred dividends not declared in a period are a. called dividends in arrearsb. Distribution of earningsc. never paidd. considered a liability 5.…
1. A company declared a cash dividend on its ordinary shares in December 2020 payable in January 2021. Retained earnings would A. increase on the date of declaration. B. not be affected on the date of payment C. not be affected on the date of declaration D. decrease on the date payment 2. Which of the following should be presented in the statement of changes in equity? A. Distributions to owners B. Investments by owners C. Change in ownership interest in subsidiary that does not result in a loss of control D. All of these are presented in the statement of changes in equity
4. The weighted-average number of shares outstanding during the period for all periods (other than conversion of potential ordinary shares) shall be adjusted for a. Any convertible instrument settled in cash b. Any prior period adjustment c. Any change in the number of ordinary shares without a change in resources d. Any new issue of shares for cash 5. Understating purchase discounts, returns and allowances has the effect of: a. Overstating goods available for sale b. No effect c. Overstating net income d. Understating cost of sales 6. What is the inherent justification underlying the concept of potential ordinary shares or diluters in computing diluted earnings per share? a. Timeliness b. Materiality c. Completeness d. Substance over form
2. All of the following will affect the retained earnings account, except a. Declaration of 10% bonus issue b. Quasi-reorganization thru recapitalization c. Adjustment due to overstatement of depreciation expense from previous reporting period and was known only this current year d. Issuance of treasury shares at P 29 per share when its cost is P 25 per share 3. Which of the following changes the total shareholder's equity balance? a. Declaration of large bonus issue b. Declaration of cash dividends c. Issuance of share certificates due to subscription receivable fully paid d. Issuance of share rights
3. Discuss the accounting treatment, if any, that should be given to each of the following items in computing earnings per share of ordinary shares for financial statement reporting.a) Outstanding preference shares issued at a premium with a par value liquidation right. b) The exercise at a price below market value but above book value of an ordinary share option issued during the current fiscal year to officers of the corporation.c) The replacement of a machine immediately prior to the close of the current fiscal year at a cost 20% above the original cost of the replaced machine. The new machine will perform the same function as the old machine that was sold for its book value. d) The declaration of current dividends on cumulative preference shares.e) The acquisition of some of the corporation's outstanding ordinary shares during the current fiscal year. The shares were classified as treasury shares.f) A 2-for-1 share split of ordinary shares during the current fiscal year.g) A…
The following are 10 technical accounting terms introduced or emphasized in Chapters 11 and 12:P/e ratio Treasury stock Discontinued operationsStock dividend Extraordinary item Prior period adjustmentBasic earnings per share Additional paid-in capital Diluted earnings per shareComprehensive incomeEach of the following statements may (or may not) describe one of these technical terms. Foreach statement, indicate the term described, or answer “None” if the statement does not correctlydescribe any of the terms.a. A gain or loss that is unusual in nature and not expected to recur in the foreseeable future.b. The asset represented by shares of capital stock that have not yet been issued.c. A distribution of additional shares of stock that reduces retained earnings but causes no changein total stockholders’ equity.d. The amount received when stock is sold in excess of par value.e. An adjustment to the beginning balance of retained earnings to correct an error previouslymade in the…
17. If an SME declares dividends to holders of its equity instruments after the end of the reporting period, the SME a. shall not recognize those dividends as a liability at the end of the reporting period. b. may recognize those dividends as a liability at the end of the reporting period. c. may present the dividends declared as a segregated component of retained earnings at the end of the reporting period. d. a and b
23 Analyze the following: I – The cumulative feature of preference shares requires that dividends not paid in any year must be made up in a later years before dividends are distributed to ordinary shareholders. II – Business combination transaction entered by the entity after reporting period but before date of authorization of FS issuance may not be considered as a subsequent event. III – Under interim financial reporting, in cases that the entity operates in an environment where there is a change in effective tax rate during the year, income tax declared on each interim period should be computed based on weighted average income tax rate. Given these, we can conclude that: Group of answer choices Only statement II is false. Only statement III is false. Only statements II and III are false. Only statement I is true.
Which of the following statements about EPS is true? Question 25 options: a) Both publicly and non-publicly accountable enterprises must disclose EPS on their financial statements. b) EPS is an indicator of liquidity of an entity. c) Two types of EPS are reported: basic and complex. d) Diluted EPS looks at earnings on a per-share basis for shares that were outstanding and also for shares that had the potential to be outstanding during the year.
Choose the incorrect statement below: A. Retained earnings are the funds contributed by shareholders in excess of par or stated value.B. Equity is defined as the residual interest in the assets of an entity after deducting all of the liabilities.C. Conversion of preference shares into ordinary shares directly affects retained earnings.D. The statement of changes in equity is a formal statement that shows the movements in the elements or components of the shareholders' equity.