Question

1.) During 2014, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez realized a gain of $2,400,000, net of taxes, on the sale of Pine's assets. Pine's operating losses, net of taxes, were $2,800,000 in 2014. How should these facts be reported in Lopez's income statement for 2014?

Total Amount to be Included in

Income from Continuing Operations Discontinued Operations

a. $2,800,000 loss $2,400,000 gain

b. 400,000 loss 0

c. 0 400,000 loss

d. 2,400,000 gain 2,800,000 loss

2.) In 2014, Esther Corporation reported net income of $600,000. It declared and paid preferred stock dividends of $150,000 and common stock dividends of $60,000. During 2014, Esther had a weighted average of 250,000 common shares outstanding. Compute Esther's 2014 earnings per share.

a. $1.56

b. $1.80

c. $2.40

d. $3.00

3.) During the fiscal year ended 2016, a company had revenues of $400,000, cost of goods sold of $280,000, and an income tax rate of 30 percent on income before income taxes. What was the company's 2016 net income?

a. $120,000

b. $36,000

c. $84,000

d. $400,000

4.) What financial statement would you look at to determine the dividends declared by a business?

a. Income statement

b. Statement of stockholders' equity

c. Statement of cash flows

d. Balance sheet

5.) Willie Company's retained earnings increased $20,000 during 2016. What was Willie's 2016 net income or loss given that Willie declared $25,000 of dividends during 2016?

a. Net income was $5,000

b. Net income was $45,000

c. Net loss was $45,000

d. Net loss was $5,000

6.) Which of the following are the components of stockholders' equity on the balance sheet?

a. Common stock and liabilities

b. Common stock and assets

c. Retained earnings and dividends

d. Common stock and retained

***Please provide answers to the multiple choice questions and explanations if possible! Thanks!

Answer 1

Answer to Q.1

Answer C:- 0, 400,000 Loss

The reported should be shown below:

Results of continuing operations = 0

Discontinued operations = $400,000 loss

Hence, the correct option is C. 0,400,0000 loss

Explanation:

Since in the given question, the value of realised gain is $2,400,000 and operating losses is $2,800,000. So , by considering these value first we have to find out the profit or gain by subtracting this amount with each other.

In mathematically,

= Realised gain - Operating losses

= $2,400,000 - $2,800,000

= -$400,000

Since, the realised gain is smaller than operating losses, the Lopez corporation has a loss of $400,000

The Lopez corporation has disposed of the Pine Division, so this loss would come under the discontinued operations.

So,

The reported should be shown below:

Results of continuing operations = 0

Discontinued operations = $400,000 loss

Hence, the correct option is C. 0,400,0000 loss.

Answer to Q2.

Answer is (b) - 1.80

Esther's 2014 Earnings per Share =(600,000-150,000)/250,000= 1.80.

Explanation

Earnings per share or basic earnings per share is calculated by subtracting preferred dividends from net income and dividing by the weighted average common shares outstanding. The earnings per share formula looks like this.

Earnings Per Share= (Net Income - Preferred Dividends)/ Weighted Average Common Shares Outstanding.

Thus, EPS= (600,000-150,000)/250,000= 1.80

Answer to Q3.

Answer is (C)- $84,000

Explanation:-

Net income (NI), also called net earnings, is calculated as sales minus cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes, and other expenses.

Thus, Net Income for fiscal year ended 2016 is :- (400,000-280,000)*(1-0.30) = $ 84,000

Answer to Q4.

Answer is (B)- Statement of Stockholders Equity

Explanation:

The dividends declared and paid by a corporation in the most recent year will be reported on these financial statements for the recent year:

• statement of cash flows as a use of cash under the heading financing activities.
• statement of stockholders' equity as a subtraction from retained earnings.

Answer to Q5.

Answer is (B)- Net income was $45,000

Explanation:-

The increase in retained earnings ($20,000) equals net income ($45,000) less dividends ($25,000).

Answer to Q6.

Answer is (C) - Retained Earnings and Dividends

Explanation:-

Components of Stockholders' Equity

The amount of stockholders' equity is reported on the balance sheet as follows:

• Paid-in capital. This is the amount that the corporation received when it issued shares of its capital stock with common stock and preferred stock (if any) reported separately.
• Retained earnings. Generally this is the cumulative earnings of the corporation minus the cumulative amount of dividends declared.
• Accumulated other comprehensive income. This is the cumulative amount of income (or loss) for a few items that are not reported on the corporation's income statement.
• Treasury stock. This is a reduction of stockholders' equity for the amount the corporation paid to purchase but not retire its own shares of capital stock.