Question 1

The declaration and issuance of a stock dividend does not affect the total amount of a corporation's assets, liabilities, or stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 2

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.

Accepted Answer

A) True 
 B)False

Question 3

The excess of issue price over par of common stock is termed as:

Accepted Answer

A)  discount. 
B)  income. 
C)  deficit. 
D)  premium. 
A)  discount. 
B)  income. 
C)  deficit. 
D)  premium.

Question 4

Liabilities that are due and payable beyond one year or paid out of noncurrent assets are termed long-term liabilities.

Accepted Answer

A) True 
 B)False

Question 5

If the market rate of interest is greater than the contractual rate of interest, bonds will sell:

Accepted Answer

A)  at a premium. 
B)  at face value. 
C)  at a discount. 
D)  only after the stated rate of interest is increased. 
A)  at a premium. 
B)  at face value. 
C)  at a discount. 
D)  only after the stated rate of interest is increased.

Question 6

The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a:

Accepted Answer

A)  stock dividend. 
B)  stock split. 
C)  stock option. 
D)  preferred dividend. 
A)  stock dividend. 
B)  stock split. 
C)  stock option. 
D)  preferred dividend.

Question 7

The amount of capital paid-in by the stockholders of the corporation is called legal capital.

Accepted Answer

A) True 
 B)False

Question 8

Obligations that depend on future events and are based on past transactions are contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not necessary for a corporation to pay cash dividends?

Accepted Answer

A)  Sufficient cash 
B)  Formal action of the board of directors 
C)  Prior declaration of stock dividends 
D)  Sufficient retained earnings 
A)  Sufficient cash 
B)  Formal action of the board of directors 
C)  Prior declaration of stock dividends 
D)  Sufficient retained earnings

Question 10

FICA tax is a payroll tax that is paid by both the employee and the employer.

Accepted Answer

A) True 
 B)False

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

When a corporation issues bonds, it executes a contract with the bondholders known as a bond debenture.

Accepted Answer

A) True 
 B)False

Question 14

Medicare taxes are withheld from an employee's pay only till the employee has earned a specific amount each year.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is usually not a prerequisite to paying cash dividends?

Accepted Answer

A)  Formal action by the board of directors 
B)  Market value in excess of par value per share 
C)  Sufficient cash 
D)  Sufficient retained earnings 
A)  Formal action by the board of directors 
B)  Market value in excess of par value per share 
C)  Sufficient cash 
D)  Sufficient retained earnings

Question 17

One of the conditions for paying a cash dividend is formal action by the board of directors.

Accepted Answer

A) True 
 B)False

Question 18

When are contingent liabilities required to be recorded?

Accepted Answer

A)  When the liability is probable 
B)  When the amount is reasonably estimable 
C)  When the liability becomes legally enforceable 
D)  When the liability is probable reasonably estimable. 
A)  When the liability is probable 
B)  When the amount is reasonably estimable 
C)  When the liability becomes legally enforceable 
D)  When the liability is probable reasonably estimable.

Question 19

The interest rate specified in the bond indenture is called the:

Accepted Answer

A)  discount rate. 
B)  contract rate. 
C)  market rate. 
D)  effective rate. 
A)  discount rate. 
B)  contract rate. 
C)  market rate. 
D)  effective rate.

Question 20

June Co. is considering the following alternative plans for financing the company:
 $\begin{array}{|l|l|l|}
\hline \text { Plan II } & \text { PlanI } & \
\hline \$ 3,000,000 & - & \text { Issue } 10 \% \text { Bonds (at face) } \
\hline \$ 1,000,000 & \$ 4,000,000 & \text { Issue } \$ 10 \text { Common Stock } \
\hline & & \

\end{array}$ Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

Accepted Answer

None

The declaration and issuance of a stock dividend does not affect the total amount of a corporation's assets, liabilities, or stockholders' equity.

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.

The excess of issue price over par of common stock is termed as:

Liabilities that are due and payable beyond one year or paid out of noncurrent assets are termed long-term liabilities.

If the market rate of interest is greater than the contractual rate of interest, bonds will sell:

The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a:

The amount of capital paid-in by the stockholders of the corporation is called legal capital.

Obligations that depend on future events and are based on past transactions are contingent liabilities.

Which of the following is not necessary for a corporation to pay cash dividends?

FICA tax is a payroll tax that is paid by both the employee and the employer.

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.

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

When a corporation issues bonds, it executes a contract with the bondholders known as a bond debenture.

Medicare taxes are withheld from an employee's pay only till the employee has earned a specific amount each year.

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

Which of the following is usually not a prerequisite to paying cash dividends?

One of the conditions for paying a cash dividend is formal action by the board of directors.

When are contingent liabilities required to be recorded?

The interest rate specified in the bond indenture is called the:

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters

Exam 8: Liabilities and Stockholders Equity

The declaration and issuance of a stock dividend does not affect the total amount of a corporation's assets, liabilities, or stockholders' equity.

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.

The excess of issue price over par of common stock is termed as:

Liabilities that are due and payable beyond one year or paid out of noncurrent assets are termed long-term liabilities.

If the market rate of interest is greater than the contractual rate of interest, bonds will sell:

The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a:

The amount of capital paid-in by the stockholders of the corporation is called legal capital.

Obligations that depend on future events and are based on past transactions are contingent liabilities.

Which of the following is not necessary for a corporation to pay cash dividends?

FICA tax is a payroll tax that is paid by both the employee and the employer.

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.

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

When a corporation issues bonds, it executes a contract with the bondholders known as a bond debenture.

Medicare taxes are withheld from an employee's pay only till the employee has earned a specific amount each year.

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

Which of the following is usually not a prerequisite to paying cash dividends?

One of the conditions for paying a cash dividend is formal action by the board of directors.

When are contingent liabilities required to be recorded?

The interest rate specified in the bond indenture is called the:

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters