Finch Company Began Its Operations on March 31 of the Current

question 175

Multiple Choice

Finch Company began its operations on March 31 of the current year. Finch Co. has the following projected costs: (1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is paid in the following month.
(2) Insurance expense is $1,000 a month, however, the insurance is paid four times yearly in the first month of the quarter, i.e. January, April, July, and October.
(3) Property tax is paid once a year in November.
The cash payments for Finch Company in the month of May are:

• A) $185,600
• B) $149,900
• C) $187,600
• D) $189,100

Recognize the potential dilutive effects of convertible securities and stock options on diluted EPS.

Understand how stock dividends and splits impact retained earnings and total stockholders' equity.

Distinguish the impact on EPS for conveying information on continuing operations, discontinued operations, extraordinary items, and changes in accounting principles.

Understand the conceptual and practical implications of stock and cash dividends on financial statements.

---

Definitions:

Bond Premium

The amount by which the market price of a bond exceeds its par value, typically arising when the bond's interest rate is higher than the market rate.

Forward Contract

A customized financial agreement to buy or sell an asset at a specified future date at a price agreed upon today.

Future Date

A specified day in the future, often used in the context of agreements or financial transactions that will occur at a later time.

Amortized Historical Cost

The accounting method of gradually writing off the initial cost of an asset over a period, adjusting for depreciation or amortization.