Bakersfield College

ACG 2021

1)R Co. has outstanding 100 million shares, $1 par common stock, selling for $8 per share. After a 1 for 4 reverse stock split:

1. R would have 25 million shares, $4 par per share.
2. The market price per share would be about $2.
3. Fractional shares would be issued.
4. Retained earnings would be reduce

2. F Co. declares a 5% stock dividend. If the market price at declaration is $12 per share, a shareholder with 110 shares likely would receive:
   1. Five additional shares.
   2. Fractional share rights for 5½ shares.
   3. Five additional shares and $6 in cash.
   4. Five additional shares and a fractional share right for 2½ shares.

3. Which of the terms or phrases listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards?
   1. Accumulated other comprehensive income.
   2. Investment revaluation reserve.
   3. Share premium.
   4. Preference shares.

4. Heidi Aurora Imports applies International Financial Reporting Standards. The company issued shares of the company’s Class B stock. Heidi Aurora Imports should report the stock in the com- pany’s statement of financial position:
   1. Among liabilities if the shares are mandatorily redeemable or redeemable at the option of the shareholder.
   2. As equity unless the shares are mandatorily redeemable.
   3. As equity unless the shares are redeemable at the option of the issuer.
   4. Among liabilities unless the shares are mandatorily redeemable.

5. Mandatorily redeemable preferred stock (preference shares) is reported as debt, with the dividends reported in the income statement as interest expense, using:
   1. U.S. GAAP.
   2. IFRS.
   3. Both U.S. GAAP and IFRS.
   4. Neither U.S. GAAP nor IFRS.

6. Revenue and expense items and components of other comprehensive income can be reported in a single statement of comprehensive income using:
   1. U.S. GAAP.
   2. IFRS.
   3. Both U.S. GAAP and IFRS.
   4. Neither U.S. GAAP nor IFRS.

7. Which of the following statements is true with regard to preferred stock (preference shares)?
   1. Most preferred stock (preference shares) is reported under U.S. GAAP as debt.
   2. Most preferred stock (preference shares) is reported under IFRS as equity.
   3. Under U.S. GAAP, mandatorily redeemable preferred stock is reported as equity.
   4. Under IFRS, preferred stock dividends are reported in the income statement as interest expense.

8. Under IFRS, components of other comprehensive income:
   1. Can be reported as part of a single statement of comprehensive income.
   2. Are not permitted to be reported.
   3. Must be reported in a separate statement of comprehensive income.
   4. Can be reported as part of a statement of shareholders’ equity.

Matching Pair Questions

9. Use I = Increase, D = Decrease, or N = No effect, to indicate the effect on retained earnings for each of the listed transactions.

           Declaration of a property dividend.

           Net income for the year.

           Purchase of treasury stock at a cost greater than the original issue price.

           Purchase of treasury stock at a cost less than the original issue price.

           Issue common stock.

           Resale of treasury stock for less than cost, assuming no previous treasury stock sales.

           Resale of treasury stock for more than cost.

10. Use I = Increase, D = Decrease, or N = No effect, to indicate the effect on retained earnings for each of the listed transactions.

           A net loss for the year.

           A stock split effected in the form of a stock dividend.

           A stock split in which the par per share is reduced (but not effected in the form of a stock dividend).

           Declaration of a 5% stock dividend.

           Declaration of a cash dividend.

           Issue stock for noncash assets.

           Payment of previously declared cash dividend.

           Retirement of common stock at a cost greater than the original issue price.

           Retirement of common stock at a cost less than the original issue price.

           Resale of treasury stock for less than book value assuming no previous treasury stock sales.

11. Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the number for the correct term.

TERM                                                                   PHRASE                                        NUMBE R

1. Large stock dividend                            A debit balance for retained earnings.                          
2. Participating                                             A feature that could increase the dividend                 

yield on preferred stock.

3. Deficit                                                         Follows retained earnings in a balance                         

sheet.

4. Accumulated other comprehensive income
5. Paid-in capital—share repurchase

A stock split in the form of a stock                                  

dividend.

Associated with retiring stock.                                         

12.          Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the number for the correct term.

13.          Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the number for the correct term.

TERM                                                                   PHRASE                                         NUMBER

1. Restriction of retained earnings

Net income as a percentage of average book                       

value.

2. Treasury stock                              Paid-in capital and/or retained earnings affected                

when sold.

3. Limited liability company          Preferred practice is to disclose in the footnotes.                

4. Return on shareholders' equity

Similar to an S corporation, but no limit on                              

number of owners.

5. Earnings-price ratio                     Used in evaluating stock performance.                                    

14. Use I = Increase, D = Decrease, or N = No effect, to indicate the effect on total shareholders’ equity for each of the listed transactions.

           Declaration of a property dividend.

           Net income for the year.

           Purchase of treasury stock at a cost greater than the original issue price.

           Purchase of treasury stock at a cost less than the original issue price.

           Issue common stock.

           Resale of treasury stock.

15. Use I = Increase, D = Decrease, or N = No effect, to indicate the effect on total shareholders’ equity for each of the listed transactions.

           A net loss for the year.

           A stock split effected in the form of a stock dividend.

           A stock split in which the par per share is reduced (but not effected in the form of a stock dividend).

           Declaration of a 5% stock dividend.

           Declaration of a cash dividend.

           Issue stock for noncash assets.

           Payment of previously declared cash dividend.

           Retirement of common stock at a cost greater than the original issue price.

           Retirement of common stock at a cost less than the original issue price.

           Resale of treasury stock for less than book value.

16. Indicate by letter whether each of the terms or phrases listed below is more associated with finan- cial statements prepared in accordance with U.S. GAAP (U) or International Financial Reporting Standards (I).   

Terms and phrases

                      Preferred stock

                      Investment revaluation reserve

                      Liabilities listed after Equity in the balance sheet (statement of financial position)

                      Accumulated other comprehensive income

                      Asset revaluation reserve

                      Share premium

                      Equity listed after Liabilities in the balance sheet (statement of financial position)

                      Share premium

                      Net gains (losses) on investments—AOCI

                      Paid-in capital—excess of par

                      Ordinary shares

                      Preference shares

                      Common stock