216.Which of the following items would increase the retained earnings balance?
a.Prior period adjustment for understatement of net income.
b.Sale of treasury shares at more than cost.
c.Share dividends.
d.Net losses.
217.Bellingham Inc. discovered in early 2014 that it had overstated depreciation expense reported on its 2013 income statement. How would this correction of an error be handled?
a.Adjust depreciation expense for the error in 2014.
b.No adjustment needed.
c.Deduct the amount from 2014 net income.
d.Adjust the beginning of the year balance in the December 31, 2014 retained earnings statement.
218.The following selected amounts are available for Sanders Company.
Retained earnings (beginning)$950
Net loss100
Cash dividends declared100
Share dividends declared50
What is its ending retained earnings balance?
a.$800
b.$850
c.$700
d.$750
219.Turquoise and Topaz Sisters had retained earnings of $20,000 on the statement of financial position but disclosed in the footnotes that $2,000 of retained earnings was restricted for plant expansion and $1,000 was restricted for bond repayments. Cash of $2,000 had been set aside for the plant expansion. How much of retained earnings is available for dividends?
a.$17,000
b.$18,000
c.$20,000
d.$15,000
220.Irwin, Inc. had 200,000 ordinary shares outstanding before a share split occurred, and 400,000 shares outstanding after the share split. The share split was
a.2-for-4.
b.1-for-2.
c.1-for-4.
d.2-for-1.
221.Restricting retained earnings for the cost of treasury shares purchased is a
a.contractual restriction.
b.legal restriction.
c.share restriction.
d.voluntary restriction.
222.A prior period adjustment that corrects income of a prior period requires that an entry be made to
a.an income statement account.
b.a current year revenue or expense account.
c.the retained earnings account.
d.an asset account.
223.If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to
a.decrease total assets and total equity.
b.increase equity and decrease total liabilities.
c.decrease total retained earnings and increase total liabilities.
d.reduce the amount of retained earnings available for dividend declarations.
224.A credit balance in retained earnings represents
a.the amount of cash retained in the business.
b.a claim on specific assets of the corporation.
c.a claim on the aggregate assets of the corporation.
d.the amount of equity exempted from the shareholders' claim on total assets.
225.A net loss
a.occurs if operating expenses exceed cost of goods sold.
b.is not closed to Retained Earnings if it would result in a debit balance.
c.is closed to Retained Earnings even if it would result in a debit balance.
d.is closed to the share premium account of the equity section of the statement of financial position.