82) On July 31, 2018, Baldwin, Inc. reported the following information in the equity section of their
balance sheet:
Stockholders’ Equity:
Common Stock, $1.00 par, 500,000 shares authorized, 20,000 shares issued
and outstanding
$20,000
Paid-In Capital in Excess of Par—Common
1,180,000
Retained Earnings
3,200,000
Total Stockholders’ Equity
$4,400,000
Assume that Baldwin splits its common stock 3-for-1. Prepare an equity section of the balance sheet that
shows the effects of the stock split. (Please round all numbers to the nearest cent.)
83) A small stock dividend, a large stock dividend and a stock split have no effect on total assets.
84) Small and large stock dividends have no effect on the Common Stock account.
85) Cash dividends and stock splits decrease the Retained Earnings account.
86) Small stock dividends increase the Paid-In Capital in Excess of Par account.
87) Which of the following statements is true?
A) Both a stock dividend and a stock split increase the balance in the common stock account.
B) Both a stock dividend and a stock split reduce retained earnings.
C) Neither a stock dividend nor a stock split will result in net gains or losses.
D) A stock split increases the par value per share of the stock.
88) Which of the following is true of a stock split and a stock dividend?
A) A stock split will increase total stockholders’ equity, but a stock dividend will not.
B) Neither a stock split nor a stock dividend will increase total stockholders’ equity.
C) A stock dividend will increase total stockholders’ equity, but a stock split will not.
D) A stock split will decrease retained earnings, but a stock dividend will not.
89) Which of the following occurs when a 2-for-1 stock split is declared?
A) The balance in Common Stock remains the same.
B) The balance in Common Stock is reduced to half the original amount.
C) The balance in Common Stock doubles.
D) The balance in Paid-in Capital in Excess of Par—Common doubles.
90) Which of the following is a true statement regarding the effect of a stock split and stock dividend on
total assets or liabilities?
A) Both a stock split and a stock dividend will decrease total assets.
B) Both a stock split and a stock dividend will increase total liabilities.
C) A stock split will increase total assets, but a stock dividend will not.
D) Neither a stock split nor a stock dividend will affect total assets or total liabilities.
91) Which of the following actions will increase the Common Stock account?
A) cash dividend
B) stock split
C) stock dividend declared and distributed
D) purchase of treasury stock
92) Which of the following actions could increase the balance in the Paid-In Capital in Excess of Par—
Common account?
A) cash dividend declared
B) stock split
C) 10% stock dividend declared
D) purchase of treasury stock
93) Which of the following actions will decrease Retained Earnings?
A) repayment of bond principal
B) stock split
C) stock dividend declared
D) purchase of treasury stock
94) Which of the following actions will decrease the amount of Total Stockholders’ Equity?
A) cash dividend declared
B) stock split
C) stock dividend declared
D) repayment of bond principal
1) A corporation‘s income statement includes some unique items that do not often apply to smaller
businesses.
2) A corporation‘s income statement includes some unique items that do not often apply to smaller
businesses. These items include gross profit and income from continuing operations.
3) Special items and earnings per share are reported on the income statement after income from
continuing operations.
4) On the income statement, earnings per share is shown for income from continuing operations.
5) Which of the following items are NOT reported after income from continuing operations?
A) earnings per share
B) gross profit
C) discontinued operations
D) net income
6) Which of the following items are NOT reported as part of income from continuing operations?
A) discontinued operations
B) gross profit
C) other income and (expenses)
D) gain on sale of equipment
7) The income from continuing operations helps investors make predictions about the company‘s past
performance.
8) Interest revenue and interest expense are not included in the calculation of income from continuing
operations.
9) Income tax expense is added to arrive at income from continuing operations.
10) Which of the following is NOT included in income from continuing operations?
A) gain on sale of machinery
B) a segment of a business that has been discontinued
C) cost of goods sold
D) losses due to lawsuits
11) Which of the following statements regarding income from continuing operations is incorrect?
A) Income from continuing operations represents the part of the business that should continue from
period to period.
B) Income from continuing operations helps investors make predictions about future earnings.
C) Income tax expense is subtracted to arrive at income from continuing operations.
D) A gain on sale of equipment is outside the business’s core business and is not part of other income.
12) The disposal of a business segment is reported as discontinued operations.
13) Gains and losses on the sale of plant assets are always reported as discontinued operations.
14) Discontinued operations are reported without consideration of the income tax effects.
15) A company that reports a discontinued operation item must also report earnings per share for the
item.
16) Gains and losses on the sale of plant assets are reported as discontinued operations.
17) Regarding discontinued operations, which of the following statements is incorrect?
A) Gains and losses on the sale of plant assets and equipment are reported as Other Income and
(Expenses).
B) A loss on discontinued operations is reported with an addition for the applicable income tax.
C) The sale of an identifiable division of the business is reported on the income statement under the
category Discontinued Operations.
D) The Discontinued Operations category of the income statement includes information about segments
of the business that have been sold.
18) Regarding discontinued operations, which of the following statements is correct?
A) Gains and losses on the sale of plant assets are reported as discontinued operations.
B) A loss on discontinued operations is reported with an addition for the applicable income tax.
C) A loss on discontinued operations is included with an addition for the income tax savings on the loss.
D) The disposal of the financing segment of a large corporation would be reported as a discontinued
operation.
19) Adams Corporation’s accounting records include the following items for the year ending December
31, 2019:
Gain on Sale of Equipment $12,000 Gain on Discontinued Operations $75,000
Loss on Disposal of Equipment 5,000 Net Sales 650,000
Cost of Goods Sold 285,000 Operating Expenses 120,000
The income tax rate for the company is 25%. Prepare Adams‘ multi-step income statement for the year
ended December 31, 2019. Omit earnings per share.
20) A company that reports a discontinued operation must also report earnings per share for this item in
the notes to the financial statements.
21) Earnings per share for income from continuing operations must be reported on the face of the income
statement.
22) When computing earnings per share, preferred dividends are subtracted from net income because the
preferred stockholders have the first claim to dividends.
23) Earnings per share reports the amount of net income (loss) for each share of the company’s issued
common stock.