Questions and Answers of Accounting Principles Volume 2

When calculating EPS: (a) Why is profit available to the common shareholders not always the same as profit? (b) Why is the weighted average number of shares used instead of the number of
Distinguish between basic earnings per share and fully diluted earnings per share.
What are the two components of comprehensive income?
Peninsula Supply Corporation provided the following schedule detailing the changes in the shareholders’ equity accounts during 2023 and 2024. Determine the missing amounts. Common shares, unlimited
Refer to the data for Peninsula Supply Corporation presented in BE14.11. (a) Prepare the statement of changes in shareholders’ equity for the year ended December 31, 2024. (b) Prepare the
Northlake Limited reports profit of $454,000 and its weighted average number of common shares is 220,000. Northlake also has 22,000, $2.50 preferred shares. Calculate earnings per share under each of
Franklin Corporation had 20,000 common shares on January 1, 2024. On March 1, 5,000 shares were repurchased. On June 1 and September 30, 6,000 and 10,000 shares were issued, respectively. Calculate
On December 31, 2023, Nettle Corporation had 5,000, $2 preferred shares and 80,000 common shares issued. During 2024, the company completed the following share transactions: Apr. 1 Sold 10,000
The following financial information (in millions except for per share amounts) is for two major corporations for the three fiscal years ended October 31 as follows: Instructions a.
P Salmon Limited reported profit of $465,325 for its November 30, 2024, year end. Cash dividends of $90,000 on the common shares and $65,000 on the noncumulative preferred shares were declared and
Describe the two methods of preparing a statement of comprehensive income.
The shareholders’ equity accounts of Gualtieri Inc. on August 1, 2023, the beginning of its fiscal year, are as follows: $4 noncumulative preferred shares (25,000 issued)
Ruby Red Rental Corporation had the following balances in its shareholders’ equity accounts at January 1, 2024: Accumulated other comprehensive income (loss)
Broadfoot Bakeries Inc. reported retained earnings of $394,000 on December 31, 2023. For the year ended December 31, 2024, the company had profit of $128,000, and it declared and paid dividends of
The shareholders’ equity accounts of Blue Bay Logistics Ltd. on April 1, 2023, the beginning of the fiscal year, are as follows: $6 cumulative preferred shares (20,000 issued)
The shareholders’ equity accounts of Kanada Inc. at September 30, 2023, are as follows: Preferred shares, $5 noncumulative, unlimited number authorized, 6,000 issued ..........
On January 1, 2024, Marchelle Incorporated had an unlimited number of common shares authorized, 220,000 issued, and the balance in the Common Shares account was $2.2 million. The company reported a
On March 1, 2024, Broadfoot Bakeries Inc. discovered that the cost of Land purchased in 2023 was erroneously recorded as rent expense. The cost of the Land was $5,000. The company’s year end is
The shareholders’ equity accounts of Tmao Inc. at December 31, 2023, are as follows: Preferred shares, $3 noncumulative, unlimited number authorized, 4,000 issued .........
The adjusted trial balance for Aster Automobiles Inc. at December 31, 2024, is presented below. Aster’s income tax rate is 25% and journal entries for income tax expense have not yet been prepared.
Kettle Creek Corporation had the following transactions and events: 1. Declared a cash dividend. 2. Issued common shares for cash. 3. Completed a 2-for-1 stock split of the common
P The adjusted trial balance for Pansy Paints Ltd. at December 31, 2024, is presented below. Pansy’s income tax rate is 25% and journal entries for income tax expense have not yet been prepared.
What are discontinued operations? Why is it important to report discontinued operations separately from profit or loss from continuing operations?
For the year ended December 31, 2024, Jet Set Airlines reported profit of $920,000 and a holding gain on an equity investment of $66,000, before income tax. This gain is other comprehensive income.
Describe intraperiod income tax allocation and why it is important.
The post-closing trial balance of Michaud Corporation at December 31, 2024, contains the following shareholders’ equity accounts: $4 cumulative preferred shares (15,000 shares issued)
On January 1, 2024, Fyre Lite Corporation had retained earnings of $650,000. During the year, Fyre Lite had the following selected transactions: 1. Declared and paid cash dividends,
Refer to the data given for Olivier Corporation in BE14.6. Assume that the profit before income tax of $320,000 is from $500,000 of revenue and $180,000 of operating expenses. Prepare an income
The post-closing trial balance of Jajoo Corporation at December 31, 2024, contains the following shareholders’ equity accounts: $5 noncumulative preferred shares (10,000
The ledger of Weather Vane Limited at September 30, 2024, contains the following summary data:Cash dividends—common ................................................................ $
On July 9, 2024, Silver Fox Enterprises Inc. discovered it had recorded the $75,000 purchase of land as a legal expense on November 8, 2023. The company had reported retained earnings of $573,500 at
Olivier Corporation reported the following pre-tax amounts for the year ended August 31, 2024: profit before income tax (on the company’s continuing operations), $320,000; loss from discontinued
The ledger of Zug Limited at October 31, 2024, contains the following summary data: Cash dividends—common ........................................... .$ 120,000 Common shares
The ledger of Port Hope Corporation at November 30, 2024, contains the following summary data: Cash dividends—common
You have recently inherited $10,000 and you are considering investing in Canadian Tire Corporation, Limited’s common shares and you want to learn more about the company.Instructions Go to
The ledger of Coquitlam Corporation at December 31, 2024, contains the following summary data: Cash dividends—common
On February 7, 2024, Flathead Corp. had a balance of $315,000 in its Common Shares account and the total number of shares issued was 25,000. On February 8, 2024, Flathead paid $10,000 to reacquire
Earnings per share is the most commonly cited financial ratio. Indeed, share prices rise and fall in reaction to a company’s earnings per share. The price-earnings ratio is also published in many
Shrink Ltd. has profit from continuing operations of $320,000 for the year ended December 31, 2024. It also has the following before considering income tax: a net gain of $60,000 from the
The following shareholders’ equity accounts are reported by Talty Inc. on January 1: Common shares (unlimited authorized, 500,000 issued) ...................................
On December 31, 2023, Liquorice Treats Limited reported 40,000 common shares issued and a balance in the Common Shares account of $250,000. On April 5, 2024, it reacquired 8,000 of these shares. This
Moosonee Ltd. had the following share transactions during its first year of operations: Jan. 6 Issued 200,000 common shares for $1.50 per share. 12 Issued 50,000 common shares for $1.75 per
The following is related to the shareholders’ equity of Adanac Limited on January 1: Common shares, 150,000 authorized, 14,000 shares issued ........................ $490,000 Contributed
On December 31, 2023, LeBlanc Corporation, a public company, had the following shareholders’ equity accounts: Instructions a. Journalize the transactions and closing entries for
Contrast the effects of a cash dividend and stock dividend on a company’s(a) Assets, (b) Liabilities(c) Share capital(d) Retained earnings (e) Number of shares.
On December 31, 2023, Asaad Corporation, a public company, had the following shareholders’ equity accounts:During 2024, the following transactions occurred: Feb. 1 Declared a $1 cash dividend
Loblaw Companies Limited is Canada’s food and pharmacy leader and the nation’s largest retailer. The company operates stores such as Real Canadian Superstore and Shoppers Drug Mart in communities
Access the consolidated financial statements for Dollarama Inc. for the year ended January 31, 2021, from the company’s website or from SEDAR (www.sedar.com). Refer to these statements to answer
Smart Mart Inc. is considering one of three options: (1) Paying a $0.40 cash dividend, (2) Distributing a 5% stock dividend(3) Effecting a 2-for-1 stock split. The current fair value
Before preparing financial statements for the current year, the chief accountant for Patel Ltd. provided the following information regarding the accounting for dividends and stock splits: 1.
On March 1, Houseboat Ltd. had 400,000 common shares issued and the balance in its Common Shares account was $600,000. The company declared a 5% stock dividend to shareholders of record on March 14,
Two independent companies have the same annual earnings of $100,000; however, the companies have different amounts of shareholders’ equity. Average shareholders’ equity is $300,000 for company 1
For the year ended March 31, 2021, Saputo Inc. reported (in millions) revenue $14,293.9; profit $625.6; beginning shareholders’ equity $6,559.1; and ending shareholders’ equity $6,444.0.
True Green Nurseries Ltd. is a private company that follows ASPE. It is authorized to issue an unlimited number of both common and $6.50 cumulative preferred shares. On December 31, 2024, there were
or the year ended December 31, 2024, Huron Lake Enterprises Ltd. had the following revenues and expenses: Sales, $745,000; Cost of Goods Sold, $450,000; Operating Expenses, $135,000; and Income Tax
Nygren Corporation, a private company, is authorized to issue an unlimited number of common shares and 500,000, $5 cumulative preferred shares. It began operations on January 1, 2024, and the
Annora Inc., a private company, is authorized to issue an unlimited number of common shares and 100,000 noncumulative $4 preferred shares. It began operations on January 1, 2024, and the following
A dividend is a “pro rata” distribution of retained earnings. Explain what “pro rata” means.
The following financial information (in millions) is for two major corporations for three fiscal years ended October 31: Instructions a. Calculate return on assets and return on equity for
Raiders Limited is a private company that follows ASPE. It is authorized to issue an unlimited number of both common and $5 cumulative preferred shares. On December 31, 2024, there were 35,000 common
For the year ended December 31, 2024, Grayfair Inc. reported profit of $175,000. During the year, the company declared a total of $120,000 cash dividends and paid $85,000 of these dividends. Prepare
Alverstone Inc. has the following shares outstanding: 54,000 common and 18,000 $0.75 cumulative preferred. On December 15, the directors declared dividends of $64,800 to the shareholders of record on
Choke Cherry Ltd. is a private company reporting under ASPE. Its adjusted trial balance at its fiscal year end, December 31, 2024, is shown below: Instructions Prepare a multi-step income
Rupert Engineering Corp. is a private company reporting under ASPE. Its adjusted trial balance at its fiscal year end, March 31, 2024, is show Instructions Prepare a multi-step income
Didsbury Digital Ltd. has a September 30 fiscal year end and a 15% income tax rate. The following information is available for its 2024 year end: 1. Earned $529,000 of service revenue and
On April 30, the directors of Three Rivers Corporation declared dividends of $0.75 per common share and directed that preferred dividends be paid as required to the shareholders of record on May 14,
Largent Corporation is authorized to issue 200,000, $4 cumulative preferred shares and an unlimited number of common shares. On January 1, 2024, the general ledger contained the following
Cattrall Corporation is authorized to issue an unlimited number of $5 cumulative preferred shares and an unlimited number of common shares. On February 1, 2023, the general ledger contained the
What factors help determine the market price of shares on an organized stock exchange?
Windswept Power Corporation issued 150,000, $4.50 cumulative preferred shares to fund its first investment in wind generators. In its first year of operations, it paid $450,000 of dividends to its
On January 1, 2024, Conway Ltd. had the following shareholders’ equity accounts: Common shares, unlimited number of shares authorized, 1.5 million issued ............$1,650,000 Retained
Refer to the information for Viceron Inc. and your answer in BE13.6. Prepare an income statement for Viceron Inc. for the year ended June 30, 2024.Data from Brief Exercise 13.6 For the year
On January 1, 2024, Schipper Ltd. had the following shareholders’ equity accounts: Common shares (1,000,000 issued) ..............................................$1,500,000 Retained
Accentrics Limited has the following information available regarding its share capital at December 31, 2023: Preferred shares, $3.50 cumulative, 20,000 shares
For the year ended June 30, 2024, Viceron Inc. had service revenue of $800,000 and operating expenses of $575,000. The company has a 15% income tax rate. No income tax instalments have been paid or
Paul Joyce purchases 100 common shares of TechTop Ltd. for $12 per share from the company’s initial public offering. Later, Paul purchases 200 more TechTop Ltd. common shares for $20 each on the
At the beginning of its first year of operations, Backwoods Limited has 3,000, $5 preferred shares and 50,000 common shares. Instructions Using the format shown below, allocate the total
As you learned in the “All About You” feature, possibly buying shares in publicly traded companies is one financial decision you’ll need to make when you graduate. Another decision about your
At the beginning of its first year of operations, Northwoods Limited has 5,000, $4 preferred shares and 50,000 common shares. Instructions Using the format shown below, allocate the total
New Wave Pool Corporation is authorized to issue common and $3 convertible preferred shares. Each preferred share is convertible into four common shares. On July 2, the company issued 100,000
Your cousin owns 100% of the common shares of a corporation, Ghost River Back Country Limited, a retail company specializing in outdoor clothing and equipment. The company has the opportunity to
Kari Corporation issued 5,000, $4 cumulative preferred shares at $80 each and 10,000 common shares at $18 each at the beginning of 2022. Each preferred share is convertible into four common shares.
Pro Com Ltd. issued 8,000, $5 cumulative preferred shares at $66 each and 15,000 common shares at $30 each at the beginning of 2022. Each preferred share is convertible into two common shares. The
Loblaw Companies Limited, headquartered in Toronto, Ontario, is a large food and pharmacy retailer. Loblaw’s authorized share capital includes an unlimited number of common shares, 1 million first
Juke Joint Ltd., a private company, began operations on March 12 by issuing 5,000 common shares for $20 cash per share. On September 10, the company issued 500 common shares in exchange for equipment
(a) The following terms pertain to the forming of a corporation: (1) Articles of incorporation(2) Bylaws (3) Organization costs. Explain these terms. (b) Donna Fleming believes a
Santiago Corp., a private corporation, received its articles of incorporation on January 3, 2024. It is authorized to issue an unlimited number of common shares and $1 preferred shares. It had the
Wetland Corporation, a private corporation, was organized on February 1, 2023. It is authorized to issue 100,000, $6 noncumulative preferred shares, and an unlimited number of common shares. The
On August 5, Hansen Corporation issued 2,000 common shares for $12 per share. Prepare the journal entry for this transaction.
Match the statements in Column A with the appropriate term from Column B. Column A 1. 2. 3. 4. 5. 6. 7. 8. A company whose shares are not traded on an organized stock exchange like the
Patrick Sabine, a student, asks for your help in understanding the following characteristics of a corporation: (a) Limited liability of shareholders, (b) Transferable ownership rights(c)
Here are some of the terms discussed in the chapter: 1. Retained earnings 2. Issued shares3. Legal capital 4. Liquidation preference5. Authorized shares6. Public corporation7.
Four independent situations follow: 1. Kevin Roberts, President and CEO of Hanley Tools Inc., has just been notified that his company has been sued due to the failure of one of its key products.
Presented below are four independent situations: 1. After passing their final accounting exam, four students put together plans to offer bookkeeping services to small companies. The students
Corporations can be classified in different ways. For example, they may be classified by purpose (for example, profit or not-for-profit) or by ownership (for example, public or private). Explain the
The partners of LR Company have decided to liquidate their partnership. Noncash assets were sold for $125,000. The profit and loss ratios of the partners Chan, Jung, and Forren are 3:2:3,
Hana has prepared the following list of statements about corporations: 1. A corporation is an entity separate and distinct from its owners. 2. As a legal entity, a corporation may buy, own,
Ol Low, Arnt Olson, and Stig Lokum decided to liquidate the LOL partnership on December 31 of the current year, and go their separate ways. The partners share profit and losses equally. As at
On November 15 of the current year, the account balances in Bluesky Partnership were Cash $11,000; Land $20,000; D. Black, Capital $15,000; V. Green, Capital $12,000; and B. Brown, Capital $4,000.
Prior to the distribution of cash to the partners, the accounts in the VCP Partnership Company are as follows: Cash ..........................................................................

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