Question 1

When the contract rate of interest on bonds is less than the market rate of interest, the bonds sell at:

Accepted Answer

A)  a premium. 
B)  their face value. 
C)  their maturity value. 
D)  a discount.

Question 2

A corporation purchases 5,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

Accepted Answer

A)  Increase $175,000 
B)  Increase $100,000 
C)  Decrease $175,000 
D)  Decrease $100,000

Question 3

What are current liabilities?

Accepted Answer

A)  Liabilities that are due and payable within two years. 
B)  Liabilities that are due and to be paid out of current assets within one year. 
C)  Liabilities that are due but not payable for more than one year. 
D)  Liabilities that are payable if a possible subsequent event occurs.

Question 4

The total earnings of an employee for a payroll period is referred to as the net pay.

Accepted Answer

A) True 
 B)False

Question 5

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

Accepted Answer

A) True 
 B)False

Question 6

A corporation has 50,000 shares of $100 par value stock outstanding that has a current market value of $180. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately:

Accepted Answer

A)  $30. 
B)  $36. 
C)  $45. 
D)  $50.

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

When the contract rate of interest on bonds is higher than the market rate of interest, the bonds sell at:

Accepted Answer

A)  a premium. 
B)  their face value. 
C)  their maturity value. 
D)  a discount.

Question 9

The following accounts and their balances appear in the ledger on December 31 of the current year:
 $\begin{array}{ll}
\$ 400,000 & \text { CommonStock, } \$ 20 \text { par } \
44,000 & \text { Paid-In Capital in Excess of Par } \
265,000 & \text { RetainedEarnings } \
20,000 & \text { Treasuy Stock }
\end{array}$
 Prepare the Stockholders' Equity section of the balance sheet as of December 31. Twenty five thousand shares of common stock are authorized, and 1,000 shares have been reacquired.

Accepted Answer

The answer of The following accounts and their balances appear...

Question 10

One of the conditions for paying a cash dividend is sufficient retained earnings.

Accepted Answer

A) True 
 B)False

Question 11

The following information is for employee William Heedy for the week ended March 15.
Total hours worked: 48
Rate: $16 per hour, with double time for all hours in excess of 40
Federal income tax withheld: $200
United Fund deduction: $50
Cumulative earnings prior to current week: $6,400
Tax rates:
Social security: 6% on maximum earnings of $106,800
Medicare tax: 1.5% on all earnings; on both employer and employee
State unemployment: 4.2% on maximum earnings of $7,000; on employer
Federal unemployment: 0.8% on maximum earnings of $7,000; on employer
 (a)Determine (1) total eanings, (2) total dechuctions, and (3) cash paid.
(b) Detemine each of the employer's payroll taxes related to the eanings of William Heedy for the week ended Mach 15 .

Accepted Answer

The answer of The following information is for employee William...

Question 12

For the year that just ended, a company reports net income of $1,500,000. There are 500,000 shares authorized, 300,000 shares issued, and 250,000 shares of common stock outstanding. What is the earnings per share?

Accepted Answer

A)  $5.00 
B)  $2.50 
C)  $6.00 
D)  $3.00

Question 13

The market interest rate related to a bond is also called the:

Accepted Answer

A)  stated interest rate. 
B)  effective interest rate. 
C)  contract interest rate. 
D)  straight-line rate.

Question 14

When the market rate of interest is less than the contract rate of a bond, the bond will sell for a discount.

Accepted Answer

A) True 
 B)False

Question 15

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 75,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?

Accepted Answer

A)  10,000 
B)  70,000 
C)  50,000 
D)  60,000

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Cash dividends are not paid on shares of treasury stock.

Accepted Answer

A) True 
 B)False

Question 18

If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are reacquired, the number of outstanding shares is 19,500.

Accepted Answer

A) True 
 B)False

Question 19

Earnings per common share is one factor that influences the decision to use debt financing or equity financing.

Accepted Answer

A) True 
 B)False

Question 20

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?

Accepted Answer

A)  5,000 
B)  35,000 
C)  45,000 
D)  55,000

Exam 8: Liabilities and Stockholders Equity

When the contract rate of interest on bonds is less than the market rate of interest, the bonds sell at:

A corporation purchases 5,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

What are current liabilities?

The total earnings of an employee for a payroll period is referred to as the net pay.

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

A corporation has 50,000 shares of $100 par value stock outstanding that has a current market value of $180. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately:

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.

When the contract rate of interest on bonds is higher than the market rate of interest, the bonds sell at:

One of the conditions for paying a cash dividend is sufficient retained earnings.

For the year that just ended, a company reports net income of $1,500,000. There are 500,000 shares authorized, 300,000 shares issued, and 250,000 shares of common stock outstanding. What is the earnings per share?

The market interest rate related to a bond is also called the:

When the market rate of interest is less than the contract rate of a bond, the bond will sell for a discount.

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 75,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?

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

Cash dividends are not paid on shares of treasury stock.

If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are reacquired, the number of outstanding shares is 19,500.

Earnings per common share is one factor that influences the decision to use debt financing or equity financing.

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?