1- Which one of the following items normally requires a direct adjustment to retained earnings? a. Corrections of accounting errors. b. Extraordinary gains and losses. c. Gains or losses from discontinued operations. d. Changes in accounting estimates. 2-A transaction that should be classified as an extraordinary item is: a. Expropriation of company assets by a foreign government. b. Write-off of goodwill. c. Losses from transactions involving foreign currencies. d. Losses from relocating a facility to another state. 3-The repurchase of shares of a company’s stock for cash is reflected in the financial statements as: a. A short-term asset on the balance sheet. b. A negative (contra) equity account, which reduces total shareholders’ equity on the balance sheet. c. An increase in both common stock and total shareholders equity on the balance sheet. d. A use of cash in the investing activities section of the statement of cash flows. 4-For long-term construction projects, which of the following financial ratios will generally be lower in the early years of a project under the percentage-of-completion method than under the completed contract method? a. Debt/Equity. b. Return on Equity. c. Asset Turnover. d. Net Profit Margin. 5-Equity income from an affiliate (undistributed earnings from an affiliate) would be presented in the statement of cash flows as a(n): a. Investing activity cash inflow. b. Addition to net income in determining cash flows from operations. c. Deduction from net income in determining cash flow from operations. d. Investing activity cash outflow.
1 a? 2. a 3. b 4. a 5 a
1- D 2- A 3- A 4- A 5- B
supersharpshooter Wrote: ------------------------------------------------------- > 1- Which one of the following items normally > requires a direct adjustment to retained > earnings? > > a. Corrections of accounting errors. > b. Extraordinary gains and losses. > c. Gains or losses from discontinued operations. > d. Changes in accounting estimates. ***** a. > > > 2-A transaction that should be classified as an > extraordinary item is: > > a. Expropriation of company assets by a foreign > government. > b. Write-off of goodwill. > c. Losses from transactions involving foreign > currencies. > d. Losses from relocating a facility to another > state. ***** a. > > 3-The repurchase of shares of a company’s stock > for cash is reflected in the financial statements > as: > > a. A short-term asset on the balance sheet. > b. A negative (contra) equity account, which > reduces total shareholders’ equity on the balance > sheet. > c. An increase in both common stock and total > shareholders equity on the balance sheet. > d. A use of cash in the investing activities > section of the statement of cash flows. ***** b > > 4-For long-term construction projects, which of > the following financial ratios will generally be > lower in the early years of a project under the > percentage-of-completion method than under the > completed contract method? > > a. Debt/Equity. > b. Return on Equity. > c. Asset Turnover. > d. Net Profit Margin. ***** a. > > 5-Equity income from an affiliate (undistributed > earnings from an affiliate) would be presented in > the statement of cash flows as a(n): > a. Investing activity cash inflow. > b. Addition to net income in determining cash > flows from operations. > c. Deduction from net income in determining cash > flow from operations. > d. Investing activity cash outflow. ***** c
1.A 2.A 3.B 4.A 5A
could someone explain undistributed earnings again?
supersharpshooter Wrote: ------------------------------------------------------- > 1- Which one of the following items normally > requires a direct adjustment to retained > earnings? > > a. Corrections of accounting errors. > b. Extraordinary gains and losses. > c. Gains or losses from discontinued operations. > d. Changes in accounting estimates. > > B or A > 2-A transaction that should be classified as an > extraordinary item is: > > a. Expropriation of company assets by a foreign > government. > b. Write-off of goodwill. > c. Losses from transactions involving foreign > currencies. > d. Losses from relocating a facility to another > state. > A > 3-The repurchase of shares of a company’s stock > for cash is reflected in the financial statements > as: > > a. A short-term asset on the balance sheet. > b. A negative (contra) equity account, which > reduces total shareholders’ equity on the balance > sheet. > c. An increase in both common stock and total > shareholders equity on the balance sheet. > d. A use of cash in the investing activities > section of the statement of cash flows. > B > 4-For long-term construction projects, which of > the following financial ratios will generally be > lower in the early years of a project under the > percentage-of-completion method than under the > completed contract method? > > a. Debt/Equity. > b. Return on Equity. > c. Asset Turnover. > d. Net Profit Margin. not sure, A ? guessing > > 5-Equity income from an affiliate (undistributed > earnings from an affiliate) would be presented in > the statement of cash flows as a(n): > a. Investing activity cash inflow. > b. Addition to net income in determining cash > flows from operations. > c. Deduction from net income in determining cash > flow from operations. > d. Investing activity cash outflow. A, wild guess
congrats Dreary, you nailed it 1- A) Corrections of accounting errors made in prior periods are accounted for in the equity section of the balance sheet as a direct adjustment to retained earnings. The actual correction is reflected as an adjustment to beginning retained earnings in the statement of stockholders’ equity. 2- A) The net-of-tax loss due to the expropriation of company assets should be classified as an extraordinary item on the income statement. 3- B) The repurchase of shares of stock is represented as treasury stock on the balance sheet. Treasury stock is a negative (contra) equity account. 4- A) The Debt/Equity ratio would actually be higher under the completed contract method because liabilities are higher and net worth is lower (no income will be recognized until project completion) versus the percentage-of-completion method. 5- C) Equity income from an affiliate increases net earnings, but must be deducted from net income in the operating cash flow section of the statement of cash flows since it represents noncash income.
For the first question, I choose a by eliminating others because all the others go through IS. Now I am wondering how Corrections of accounting errors are made in the BS. Could anybody share your thoughts please? 1- Which one of the following items normally requires a direct adjustment to retained earnings? a. Corrections of accounting errors. b. Extraordinary gains and losses. c. Gains or losses from discontinued operations. d. Changes in accounting estimates.
supersharpshooter Wrote: ------------------------------------------------------- > congrats Dreary, you nailed it > > 1- i did well on my guesses, too : ) - sometimes you can just look at them ans say, okay, those 2 are way off, then it is down to 2.
correction of accounting error = direct adjustment to equity changing in accounting estimates = go on the income statement
supersharpshooter Wrote: ------------------------------------------------------- > correction of accounting error = direct adjustment > to equity > > changing in accounting estimates = go on the > income statement exactly, estimates change today and future, change ur methods/principle, you have to change past stmtms.
is lifo to fifo a change in estimates? if you change lifo to fifo you make a direct adjustment to retained earnings (equity) by (lifo reserve) * (1-t)