31. Comprehensive income may be presented in a statement with net income, in a separate statement, or as part of stockholders' equity.
32. In an attempt to appeal to investors, a company may be tempted to overstate net income.
33. According to the Sarbanes-Oxley Act lying to an external auditor can create a criminal penalty as well as a civil penalty.
Multiple Choice Questions
34. Stock splits
A. Allow management to conserve cash.
B. Give stockholders more shares.
C. Cause no change in total assets, liabilities, or stockholders' equity.
D. All of the above.
35. It would be reasonable to assume that
A. Basic earnings per share should exceed diluted earnings per share
B. Diluted earnings per share should exceed basic earnings per share
C. Basic earnings per share should be equal to diluted earnings per share.
D. Basic earnings per share would not be presented with diluted earnings per share.
36. A small stock dividend is recorded at:
A. Market value
B. Book value
C. Par value
D. None of the above, just a memorandum entry is required.
37. Treasury stock appears as:
A. An asset account
B. A liability account
C. An expense account
D. An equity account
38. Extraordinary items are found on the income statement:
A. Before discontinued operations
B. After discontinued operations
C. Before income from continuing operations
D. After prior period adjustments
39. A company had 125,000 shares of common stock outstanding on January 1 and then sold 35,000 additional shares on March 30. Net income for the year was $594,750. What are earnings per share?
A. $4.73
B. $4.58
C. $3.93
D. $6.61
40. A company failed to make an adjusting entry in the prior year to accrue earned revenue. To correct this they should:
A. Correct last year's statement by increasing net income
B. Correct this year's statements with a prior period adjustment increasing beginning retained earnings
C. Correct this year's statements with a prior period adjustment decreasing beginning retained earnings.
D. Correct this year's statements with a prior period adjustment increasing ending retained earnings.