Question Details

Prior period adjustments are reported 



	1.	If the board of directors authorizes a $1,000,000 restriction of retained earnings for a future plant expansion, the effect of this action is to
a.	decrease total assets and total stockholders' equity.
b.	increase stockholders' equity and decrease total liabilities.
c.	decrease total retained earnings and increase total liabilities.
d.	reduce the amount of retained earnings available for dividend declarations.

	2.	A credit balance in retained earnings represents
a.	the amount of cash retained in the business.
b.	a claim on specific assets of the corporation.
c.	a claim on the aggregate assets of the corporation.
d.	the amount of stockholders' equity exempted from the stockholders' claim on total assets.

	3.	A net loss
a.	occurs if operating expenses exceed cost of goods sold.
b.	is not closed to Retained Earnings if it would result in a debit balance.
c.	is closed to Retained Earnings even if it would result in a debit balance.
d.	is closed to the paid-in capital account of the stockholders' equity section of the balance sheet.

	4.	Prior period adjustments are reported 
a.	in the footnotes of the current year's financial statements.
b.	on the current year's balance sheet.
c.	on the current year's income statement.
d.	on the current year's retained earnings statement.

	5.	Retained earnings are occasionally restricted
a.	to set aside cash for dividends.
b.	to keep the legal capital associated with paid-in capital intact.
c.	due to contractual loan restrictions.
d.	if preferred dividends are in arrears.




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