• The expectations gap is due to the difference between what the public thinks
accountants should do and what accountants think they can do.
True False
• 2
In 2014, Linz Corporation reported an extraordinary loss of $1,000,000, net of tax. It
declared and paid preferred stock dividends of $100,000 and common stock dividends
of $300,000. During 2014, Linz had a weighted average of 500,000 common shares
outstanding. As a result of the extraordinary loss, net of tax, the earnings per share
would decrease by
•
$1.40
•
$1.80
•
$1.20
•
$2.00
• 3
Crabbe Company reported $80,000 of selling and administrative expenses on its income
statement for the past year. The company had depreciation expense and an increase in
prepaid expenses associated with the selling and administrative expenses for the year.
Assuming use of the direct method, how would these items be handled in converting
the accrual based selling and administrative expenses to the cash basis?
•
A.
•
B.
•
C.
•
D.
• 4
Which of the following is an example of managing earnings up?
•
Accruing a contingent liability for an ongoing lawsuit.
•
Writing off obsolete inventory.
•
Underestimating warranty claims.
•
Decreasing estimated salvage value of equipment.
• 5
Logan Corp.’s trial balance of income statement accounts for the year ended December
31, 2014 included the following.
On Logan’s multiple-step income statement for 2014, cost of goods manufactured is
•
$130,000
•
$136,000.
•
$170,000.
•
$176,000.
