Prior to 2013, Trapper John Inc

question 9

Multiple Choice

Prior to 2013, Trapper John Inc. used sum-of-the-years'-digits depreciation on its store equipment. Beginning in 2013, Trapper John decided to use straight-line depreciation for these assets. The equipment cost $3 million when it was purchased at the beginning of 2011, had an estimated useful life of five years and no estimated residual value. To account for the change in 2013, Trapper John:

• A)Would retrospectively report $600,000 in depreciation expense annually for 2011 and 2012, and report $600,000 in depreciation expense for 2013.
• B)Would adjust accumulated depreciation and retained earnings for the excess charges made in 2011 and 2012.
• C)Would report depreciation expense of $400,000 in its 2013 income statement.
• D)None of the above is correct.

Identify and calculate the effects of stock splits on a company's financial statements.

Distinguish between the different types of dividends and understand their common uses in practice.

Comprehend the process and financial statement impacts of declaring dividends, including the declaration and payment dates.

Assess the strategic reasons behind issuing stock dividends and the potential impacts on company valuation and shareholder equity.

---

Definitions:

Chart of Accounts

An organized list of all the account titles and numbers used in the ledger of a company to classify transactions.

Transactions

Business activities or events that have a financial impact on the finances of a company, recorded in the accounting records.

T-Accounts

A graphic representation of financial transactions in the general ledger of a double-entry bookkeeping system where the left (debit) and right (credit) sides reflect different types of transactions.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that should match.