Nichols Fruits leased farm equipment from King Machinery on January 1, 2016. The present value of the lease payments discounted at 10% was $40 million. Ten annual lease payments of $6 million are due at the beginning of each year beginning January 1, 2016. King had constructed the equipment recently for $33 million. The total decrease in earnings (pretax) in Nichols' 2016 income statement would be:
A) $3,400,000.
B) $4,000,000.
C) $6,066,667.
D) $7,400,000.
Answer: D
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Accounting Chapter 15
- How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position?
- Noncumulative preferred dividends in arrears
- Dividends are not paid on
- Assume common stock is the only class of stock outstanding in the Manley Corporation. Total stockholders' equity divided by the number of common stock shares outstanding is called
- Younger Company has outstanding both common stock and nonparticipating, non-cumulative preferred stock. The liquidation value of the preferred is equal to its par value. The book value per share of the common stock is unaffected by
- The payout ratio can be calculated by dividing
- The rate of return on common stock equity is calculated by dividing
- Which one of the following disclosures should be made in the equity section of the balance sheet, rather than in the notes to the financial statements?
- What effect does the issuance of a 2-for-1 stock split have on each of the following?
- A feature common to both stock splits and stock dividends is
- The balance in Common Stock Dividend Distributable should be reported as a(n)
- At the date of declaration of a small common stock dividend, the entry should not include
- The issuer of a 5% common stock dividend to common stockholders preferably should transfer from retained earnings to contributed capital an amount equal to the
- Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?
- The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding
- Which dividends do not reduce stockholders' equity?
- If management wishes to "capitalize" part of the earnings, it may issue a
- A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to
- A dividend which is a return to stockholders of a portion of their original investments is a
- Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2010, Houser distributed these shares of stock as a dividend to its stockholders. This is an example of a
- Which of the following statements about property dividends is not true?
- Cash dividends are paid on the basis of the number of shares
- An entry is not made on the
- At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the
- Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as
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