1. A possible obligation that may, but probably will not, require an outflow of resources a. must be recognized as a provision, and disclosure of the provision is also required. b. does not need to be recognized as a provision, and no disclosure is required. c. must be recognized as a provision, but no disclosure is required. d. does not need to be recognized as a provision, but disclosure is required. 2. Jusper Ltd. uses a periodic inventory system. In early 2013, Jusper's accountant discovered that inventory was understated by $6,000 in 2011, but overstated by $8,000 in 2012. Which of the following statement is true, assuming the income tax rate is 40%? a. Cost of goods sold for the year 2012 was overstated by $2,000. b. Income tax expense for the year 2012 was overstated by $5,600. c. Retained earnings at the end of 2012 were understated by $5,600. d. None of the above answers. 3. Which of the following event will not decrease a company's retained earnings? a. Repurchase common shares. b. Declaration of a 5-percent stock dividend. c. Declaration of a cash dividend for preferred shares. d. Declaration of a 2-for-1 stock split. 4. FOX Co. has 20,000 preferred shares and 110,000 common shares outstanding. FOX didn't pay any dividends in 2011 and 2012, but decided to pay a total of $35,000 in cash dividends in 2013. The preferred shares are cumulative with a dividend of $0.30 per share. How much would FOX's common shareholders receive in 2013 as cash dividends? a. $29,000. c. $18,000. b. $23,000. d. $17,000