Financial Statements Quiz

An extraordinary item appears on the income statement before the section on discontinued operations.

• TRUE

• FALSE

Comprehensive income differs from net income in that it includes events that are recognized but not realized.

• TRUE

• FALSE

Earnings per share is equal to net income applicable to common stock, divided by the weighted number of common shares outstanding.

• TRUE

• FALSE

In order to receive a dividend, a stockholder must have owned the stock as of the declaration date.

• TRUE

• FALSE

A stock split changes the par value of a stock, whereas a stock dividend does not.

• TRUE

• FALSE

A stock dividend provides a stockholder with more shares of stock, but his or her percentage of ownership in the company is no larger than before.

• TRUE

• FALSE

In determining earnings per share when a preferred stock has dividends in arrears, only the current year's dividend is deducted to arrive at earnings per share.

• TRUE

• FALSE

When a small (under 10%) stock dividend is declared, the market value of the stock is transferred from Retained Earnings into other stockholder equity accounts.

• TRUE

• FALSE

Diluted earnings per share are shown to alert investors that earnings per share could be increased by the effects of conversions of securities into common stock

• true

• false

The price earnings ratio is based on expected future earnings, while the earnings per share ratio is based on historical earnings.

• TRUE

• FALSE