Exam 8: Liabilities and Stockholders Equity

FICA tax is a payroll tax that is paid only by employers.

Federal unemployment compensation taxes that are collected by the federal government are not paid directly to the unemployed but are allocated among the states for use in state programs.

Most employers are required to withhold federal unemployment taxes from employee earnings.

The reduction in the par or stated value of common stock,accompanied by the issuance of a proportionate number of additional shares,is called a stock split.

The cost of a product warranty should be included as an expense in the:

Preferred stockholders must receive their current-year dividends before the common stockholders can receive any dividends.

A corporation has 10,000 shares of $100 par value stock outstanding that has a current market value of $160.If the corporation issues a 4-for-1 stock split,the market value of the stock will fall to approximately $32.

Bonds payable due in 2020 are reported on the balance sheet as long-term liabilities.

Cash dividends are not paid on shares of treasury stock.

For proper matching of revenues and expenses,the estimated cost of fringe benefits must be recognized as an expense of the period during which the employee earns the benefits.

A corporation has 10,000 shares of $100 par value stock outstanding.If the corporation issues a 5-for-1 stock split,the number of shares outstanding after the split will be 2,000.

Most employers are required to withhold a portion of the earnings of each employee for FICA tax.

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.