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 Multiple Choice
1. c Proprietorships and partnerships are not separate legal entities, so they do not pay income
tax as an entity, like a corporation does.
2. a
3. b Comprehensive income can appear on an income statement but is not a special item.
4. d If restructuring costs are part of a discontinued operation, they are included as part of the
discontinued operations amount on the income statement. Otherwise, restructuring costs are
reported in other revenues and expenses, which is part of operating income.
5. c  
6. d  
7. a If there were no discontinued operations, the name would be “income before extraordinary
item” or “net income” if there were no extraordinary items.
8. b  
9. a  
10. c  
11. d [$850,000 − (50,000 × $100 × .08)]/400,000 = $1.125.
12. d $3,250,000/175,000 = $18.57. Book value per share is calculated by using the outstanding
shares. The retained earnings balance is included as part of the $3,250,000 total stockholders’
equity. (In this example, there is no preferred stock to subtract.).
13. a Total stockholders’ equity (book value) that the common shareholders can claim is:.
   
  Par value of common stock: 200,000 × $.05: $     10,000
  Paid-in capital in excess of par: 3,590,000
  Retained earnings:
800,000
Less: Treasury stock:
     (50,000)
  Total
    Per share: $4,350,000/200,000 outstanding shares = $21.75
14. a Total stockholders’ equity (book value) is:
   
  Preferred stock: 3,000 × $101
$303,000
  Common stock:
775,000
  Retained earnings:
      500,000 
  Total stockholders’ equity
1,578,000
Less: preferred stockholders’ claim  
  Call price 3,000 × $105 =
(315,000)
  Dividends in arrears: 3,000 × $100 × .06
      (18,000)
Book value for common stockholders
Per share: $1,245,000/50,000 outstanding shares = $24.90
15. b  
16. d  
17. d  
18. c ($630,000/200,000) = $3.15. Earnings per share is calculated only for outstanding shares.
Learning Goal 31
SOLUTIONS
     
Learning Goal 31: Corporate Financial Statements
S1
  
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