Homework Answers
| 23 | The reduction of retained earnings as a result of the declaration will be: | |
| Ans: | Option a . $10,000,000 | |
| Explanation:- | Number of shares outstanding | 6,250,000 |
| Stock dividend (10% of 6250000) | 625,000 | |
| Market value per share | $ 16 | |
| The reduction of retained earnings as a result of the declaration will be (625000*$16) | $ 10,000,000 | |
| 24 | All of the following statements are correct except: | |
| Ans: | option a. Adjusting entries are necessary when cash flow and economic transaction occur in the same accounting period. | |
| Explanation:- | option a. Adjusting entries are necessary when cash flow and economic transaction occur in the same accounting period is incorrect because Adjusting entries are necessary when cash flow and economic transaction occur in the different accounting period. For example amount paid for insurance in advance for 1 year out of which 6 months belong to current accounting period and 6 months related to next accounting period. So cash paid for expired period is to be recognized as insurance expense of current accounting period and balance amount is retained in prepaid insurance. All other options are correct. | |
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