Week Six Homework – Chapter 11 & 12 Accounting

S11-7
1.
Earnings = Net income − preferred dividends per share /average number of common shares outstanding

2.
Earnings per share of common stock:
Income (loss) from continuing operations
Income (loss) from discontinued operations
Income (loss) before extraordinary item and cumulative effect of change in accounting principle
Extraordinary gain or loss
Cumulative effect of change in accounting principle
Net income (net loss)

3.

Earnings per share is useful because it relates a company’s income to one share of the company’s stock. Stock prices are quoted at an amount per share. Earnings per share is used to help determine the value of a share of stock.

S11-12
1.
Management of Ashburnham Computer, Inc. is responsible for the company’s financial statements.

2.
The accounting standard for financial statements is accounting principles generally accepted in the United States of America.
3.
Management has established and maintains internal accounting control over financial reporting to fulfill its responsibility for reliable financial information.
4.
Independent Registered Public Accounting Firm, auditors located in Portage, Michigan, gave an outside opinion on Ashburnham’s financial statements. Independent Registered Public Accounting Firm released its opinion on December 28, 2010.
5.
The audit covered Ashburnham’s balance sheets at September 30, 2010, and September 30, 2009, income statements (statements of operations), statements of shareholders’ equity and cash flows for the three years ended September 30, 2010.
6.
The standard for conducting an audit is the standards of the Public Company Accounting Oversight Board (United States).
7.
The auditor believed that Ashburnham’s financial statements conformed to U.S. generally accepted accounting