CFA Practice Question

CFA Practice Question

All of the following treatments are allowed under U.S. generally accepted accounting principles EXCEPT:
A. treating a 40 percent stock distribution as a stock dividend.
B. charging appropriated retained earnings to recognize the outcome of a court case.
C. a company that issued $100 par value preferred stock now selling in the market at $80 should carry that stock on the balance sheet at $100.
Explanation: You cannot charge that against retained earnings directly.

User Contributed Comments 5

User Comment
StanleyMo C is due to the revaluation not allow. Am i right?

A i guess every rules allow them.
ninad123 owner's equity appearing on the balance sheet is not an indication of the fair market value of the company it is the book value
Mariana80 So what would you do if you the company will incur some cost due to the result of a court case?
SKIA Mariana80 - you expense them -- only capitalize legal costs if they are to secure a patent (even if that patent is developed internally)
Alexander5 Still don’t get it!
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