FAR

Question 1

When the preferred stock dividends are cumulative

Answer 1

if they are declared or paid is not relevant.

Question 2

Common Stock and Preferred stock are recorded at the

Answer 2

number of shares issued times stated or par value

Question 3

Retained earnings is not used to

Answer 3

recognize the gain on the reissued treasury stock using the cost method

Question 4

An investor accounts for an investment in securities using the cost method if

Answer 4

the investor does not have the ability to exercise significant influence over the investee (ownership of less than 20 percent is presumed to be a lack of significant influence).

Question 5

The term reissued means

Answer 5

sold when calculating for stocks

Question 6

In a reverse stock split

Answer 6

the number of shares is reduced

Question 7

For the purposes of calculating weighted average common shares outstanding for both the basic and diluted EPS calculations

Answer 7

stock splits and reverse stock splits are treated as if they happened at the very beginning of the year.

Question 8

The numerator in a diluted EPS is equal to the

Answer 8

income available to common shareholders plus the after tax interest expense that would not have been incurred if bonds were converted

Question 9

All potentially dilutive convertible bonds and preferred stock are used i

Answer 9

n computing diluted EPS.

Question 10

When the exercise price is greater than the market price then

Answer 10

It’s is antidilutive: it’s irrelevant info to calculate diluted earnings per share

Question 11

What is the maximum number of days after the company’s fiscal year end that the company has to file Form 10-K with the SEC?

Answer 11

75 days

Question 12

what is the latest date that the 10-Q should be filed with the U.S. SEC?

Answer 12

May 10th: For large accelerated and accelerated filers, the 10-Q is due within 40 days of the period end. From March 31, that means 30 days in April + 10 days in May = May 10.

Question 13

A dilutive security will produce an earnings per share number

Answer 13

below basic earnings per share

Question 14

The possible exercise of common stock options would increase

Answer 14

EPS so they are not used because of the antidilution rule.

Question 15

Diluted earnings per share is the (income available to the common stock shareholder + interest on dilutive securities) divided by

Answer 15

the weighted average number of common shares outstanding assuming all dilutive securities are converted to common stock.

Question 16

When a stock splits (or reverse splits),

Answer 16

there is no change to equity as a result of the transaction.

Question 17

Preferred stock is the ownership interest in a corporation that is entitled to a

Answer 17

distribution (e.g., of dividends or assets) before the common stockholders can receive a distribution

Question 18

Common and preferred stock are recorded

Answer 18

at the number of shares issued times stated or par value.

Question 19

Stock issued by a company that is subsequently reacquired from shareholders,

Answer 19

so that it is no longer considered “outstanding.”

Question 20

Additional paid-in capital from treasury stock is credited for gains and debited for losses

Answer 20

when treasury stock is reissued at prices that differ from the original selling price.

Question 21

Under the cost method of treasury stock accounting,

Answer 21

treasury shares are recorded and carried at their reacquisition cost

Question 22

In a reverse stock split,

Answer 22

the number of shares outstanding is reduced

Question 23

Net income or retained earnings will never be

Answer 23

increased through treasury stock transactions.

Question 24

Treasury stock is a contra-equity account

Answer 24

that reduces reported stockholders’ equity on a firm’s balance sheet.

Question 25

Net income is not affected by

Answer 25

gains or losses from treasury stock transactions

Question 26

The cost method is used

Answer 26

approximately 95 percent of the time by firms accounting for treasury stock transactions.

Question 27

Dividends are not reported as a liability

Answer 27

until the dividends are declared.

Question 28

Gains and losses on treasury stock transactions are never recorded

Answer 28

on the income statement.

Question 29

The sale of treasury stock at less than cost will result in a

Answer 29

net increase in stockholders’ equity

Question 30

The original cost of the treasury stock is

Answer 30

credited

Question 31

any additional paid-in-capital- treasury stock is

Answer 31

debited

Question 32

any excess over the additional paid-in-capital would reduce

Answer 32

retained earnings.

Question 33

Allocate “issue proceeds” of a basket purchase or sale of convertible preferred stock based on

Answer 33

relative fair market values

Question 34

Repurchase of shares will decrease the

Answer 34

cash account

Question 35

Equity journal entries in order:

Answer 35

1. Treasury stocks
2. Add’l Paid in capial
3. retain earnings (usually the plug)