Question

The following account balances are for Sycamore Subs in 2017.

Purchases	$755,000
Beginning Inventory	78,000
Purchase Returns	12,000
Sales	1,018,000
Cost of Goods Sold	326,000

Inventory roll-forward: What is the amount of ending inventory?

$508,000

$495,000

$692,000

$519,000

none of the answers are correct

What is gross profit? __________

2.   i._____

    

    What is the total effect of a stock dividend on the balance sheet?

a.   Stockholders’ equity is decreased

b.   Retained earnings is increased      

c.   Additional paid in capital is decreased     

d.   No effect… total stockholders’ equity stays the same, but total number of shares increases

e.   None of the above

ii._____

A corporation has 80,000 shares of $100 par value stock outstanding. If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be:

a.   20,000 shares.        

b.   80,000 shares.        

c.   100,000 shares.      

d.   320,000 shares.

Accy 306 Quiz #4, page 2 of 2

______3. Jimmy’s Company (Investor) owns 26% of the stock of Carlson Company (Investee). Carlson Company reports profits of $1,000,000. Carlson also pays $150,000 dividend to its shareholders during the same period. Jimmy’s Company will report equity income of:

a.	$740,000
b.	$39,000
c.	$260,000
d.	$150,000

______4. Listed below are Special Items” that may be reported in the income statement. All items are reported “net of tax”, except:

  

Discontinued Operations: example—segment of business placed up for sale

b. Extraordinary items: example—casualties from natural disasters       

c. Equity earnings: example—proportionate share of earnings from a non-controlling interest held

d. Unusual or infrequent item disclosed separately: example—restructuring charges

e. Net income attributable to non-controlling interests

______5. Which of the following is not included as a component of Comprehensive Income?

Foreign current translation adjustments

Changes in Stockholders’ Equity due to minimum pension liability adjustments

Unrealized gains and losses due to fair value accounting for derivative instruments

Treasury stock

All of the above are components of comprehensive income

  

Answer 1

Ans 1
Beginning Inventory+Net purchases-cost of good sold=Ending Inventory
78000+(755000-12000)-326000	495000
Option B is correct $495000
Gross profit=sales-COGS	692000
1018000-326000
ans 2
No effect as total stockholders’ equity stays the same
As stock dividend decraeses retained earnings and increases common stock and additional paid in capital with the same amount hence there is no effect on total equity.
ii)
Shares outsatnding after split
80000*4	320000
option d 320000 is correct
ans 3
Equity income=1000000*26%	$260,000
Option c $260000
ans 4
d. Unusual or infrequent item disclosed separately: example—restructuring charges
As this expense is operating expense so it is not shown net of taxes
ans 5 Treasury stock
As trasury stock is buy back of own shares so it is shown seorately in stockholder equity and is not part of comprehensive income