41. A prior period adjustment is a correction made to:
A. Retained earnings of the beginning of the period
B. Retained earnings at the end of the period
C. Net income of the current year
D. Only to last years' financial statements
42. The Price Earnings Ratio is the
A. Book value of a share of common stock divided by EPS
B. Market price of a share of common stock divided by EPS.
C. Par value of a share of common stock divided by EPS.
D. Market price divided by book value of a share of stock.
43. Which of the following would have no effect on Retained Earnings?
A. Declaration of a cash dividend
B. Declaration of a stock dividend
C. Declaration of a stock split.
D. A prior period adjustment
44. Doogle Corporation sold a segment of its operations in 2009 and suffered an extraordinary loss in 2010. Which of the following would be the most useful in attempting to predict Doogle's performance for 2011?
A. Doogle's income from continuing operations in 2009 and 2010.
B. Doogle's net income in 2009 and 2010
C. Doogle's total assets at the end of 2010.
D. Doogle's retained earnings at the end of 2010.
45. In preparing the financial statements for 2009, an accountant improperly classified a gain from discontinued operations as an extraordinary item. Which of the following amounts would be incorrect as a result of this improper classification?
A. Net income for 2009.
B. Ending retained earnings at December 31, 2009.
C. Income from continuing operations for 2009.
D. None of the above would be incorrect.
46. Execucomp Corporation's financial statements in the current year show a loss from discontinued operations, a prior period adjustment, and an extraordinary gain. If Execucomp income statement is prepared according to generally accepted accounting principles (as illustrated in your text), which of the following four items would appear second in sequence in the income statement?
A. Prior period adjustment.
B. Income from continuing operations.
C. Loss from discontinued operations.
D. Extraordinary gain.
47. Of the items listed, which would appear closest to the bottom of the income statement?
A. Extraordinary items
B. Prior period adjustment
C. Income from continuing operations
D. Discontinued operations
48. Large stock dividends tend to:
A. Increase stock prices.
B. Have no effect upon stock prices.
C. Keep stock prices down.
D. Describe total assets.
49. The purpose of developing the subtotals "Income before Extraordinary Items" and "Income from Continuing Operations" in an income statement is to:
A. Assist investors in forecasting future operating results.
B. Increase the amount of reported net income.
C. Decrease the amount of income subject to income taxes.
D. Provide investors with the information necessary to compute earnings per share.
50. To qualify as an extraordinary item, a gain or loss must:
A. Affect the income of a prior period.
B. Be larger in amount than any other item in the income statement.
C. Be material in amount, unusual in nature, and not expected to recur.
D. Be associated with a segment of the business that has been discontinued during the current period.