Question

Intermediate Accounting II Bus 203 Stockholders' Equity & Earnings Per Share REVIEW Which of the following transactions does not result in a decrease to retained earnings? a. Declaration of a cash dividend b. Payment of a cash dividend c. Incurrence of a net loss for the period d. A prior period adjustment (correction of an error) in which revenue was overstated 2. How should a loss from the sale of Treasury Stock be reflected in the accounts when using the Cost Method of recording Treasury Stock transactions? a. As a decrease to common stock b. As a prior period adjustment c. A reduction to additional paid-in capital or charge to Retained Earnings d. As a loss on the Income Statement 3. Retained Earnings can best be described as: a. A claim to specific assets that have been contributed by the owners b. The maximum amount that can be borrowed by the corporation c. The residual interest that may be claimed by shareholders after all debts have been settled d. The cumulative amount of earnings, less any dividend distributions, retained by the business 4. Which of the following is not considered a dilutive security for purposes of determining earnings per share? a. Treasury Stock b. Convertible Bonds C. Convertible Preferred Stock d. Stock Warrants 5. Stockholders' Equity can best be described as: a. A claim to specific assets that have been contributed by the owners b. The residual interest that may be claimed by shareholders after all debts have been settled C. The maximum amount that can be borrowed by the corporation d. The cumulative earnings, less any dividends or other similar distributions, retained by the business.

Answer 1

Answer:

1.b.Payment of Cash Dividend

Declaration of Cash Dividend creates debit to Retained Earnings,Net loss to creates debit to retained Earnings,Revenue overstated too creates debit for retained earnings.

2.c.A reduction to additional paid in capital or charged to Retained Earnings

Loss on sale of Treasury stock is adjusted with retained earnings and additional paid in capital earned with previous sale of treasury stock.

3.d.The cumulative amount of earnings, less any dividend distributions,retained by the business.

Retained earnings comprises of previous undistributed profit + Net income of current year - Dividends

4.a.Treasury Stock

Dilutive security comprises of convertible bonds,convertible preferred shares and stock options or warrants .

5.b.The residual interest that may be claimed by shareholders after all debts have been settled.