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Exam 12: Corporations: Effects on Retained Earnings and the Income Statement

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Question 41

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How would a gain on the sale of machinery be reported on an income statement?

A) A gain on the sale of machinery would be reported as an extraordinary gain.
B) A gain on the sale of machinery would be reported as a component of net sales.
C) A gain on the sale of machinery would be reported as a component of income from discontinued operations.
D) A gain on the sale of machinery would be reported as a component of income from continuing operations.

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Question 42

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A corporation suffers a loss from a discontinued operation of $60,000. The company is subject to a tax rate of 40%. Which of the following describes the tax effect of the loss?

A) The loss results in a tax liability of $36,000.
B) The loss results in a tax liability of $24,000.
C) The loss results in a tax savings of $36,000.
D) The loss results in a tax savings of $24,000.

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Question 43

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Which of the following items is NOT found on a statement of comprehensive income?

Do Total retained earnings increase, decrease or remain the same when an appropriation to retained earnings is made?

Which of the following is the correct order of the sections of a multiple step income statement?

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. $\begin{array} { | l | r | } \hline \begin{array} { l } \text { Common stock, \$5 par, } 100,000 \text { shares } \\\text { authorized, } 40,000 \text { shares issued }\end{array} & \$ 200,000 \\\hline \text { Paid in capital in excess of par - common } & 120,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total stockholders' equity } & \$ \underline { 610,000 } \\\hline\end{array}$ What would be the amount of the common stock account after the declaration of a 2-for-1 stock split?

A company originally issued 40,000 shares of $5 common stock at $8. The company has now issued a 5% stock dividend when the market price of the stock is $10 a share. What is the amount to be credited to the Common stock account when the shares are distributed?

A corporation must recognize a gain on the sale of treasury stock for an amount greater than its purchase price.

Which of the following represents earnings per share?

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. $\begin{array} { | l | r | } \hline \begin{array} { l } \text { Common stock, \$5 par, } 100,000 \text { shares } \\\text { authorized, } 40,000 \text { shares issued }\end{array} & \$ 200,000 \\\hline \text { Paid in capital in excess of par - common } & 120,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total stockholders' equity } & \$ \underline { 610,000 } \\\hline\end{array}$ What would be the total paid-in capital after a 2-for-1 stock split?

Which of the following items are included in comprehensive income?

Ross Corporation reported the following equity section on its current balance sheet. $\begin{array} { | l | r | } \hline \begin{array} { l } \text { Common stock, \$5 par, 140,000 shares } \\\text { authorized, 50,000 shares issued }\end{array} & \$ 250,000 \\\hline \text { Paid in capital in excess of par - common } & 200,000 \\\hline \text { Retained earnings } & \underline { 207,000 } \\\hline \text { Total stockholders' equity } & \$ \underline { 657,000 } \\\hline\end{array}$ The corporation has acquired treasury stock for $9.50 per share. No treasury stock has been reissued by the corporation. Which of the following would be included in the entry to record the reissue of 8,000 shares of the treasury stock for $8 per share?