Question 1

If prior to the last weekly payroll period of the calendar year, the cumulative earnings for an employee are $75,200, earnings subject to social security tax are $106,800, and the tax rate is 7.5%, the employer's social security tax on the $800 gross earnings paid on the last day of the year is $60.

Accepted Answer

A) True 
 B)False

Question 2

The par value per share of common stock represents:

Accepted Answer

A)  the minimum selling price of the stock established by the articles of incorporation. 
B)  the minimum amount the stockholder will receive when the corporation is liquidated. 
C)  the monetary amount assigned to each share of stock in the articles of incorporation. 
D)  the amount of dividends per share to be received each year.

Question 3

If paid-in capital in excess of par--preferred stock is $80,000, preferred stock is $500,000, paid-in capital in excess of par-common stock is $50,000, common stock is $1,000,000, and retained earnings is $230,000, the total stockholders' equity is $1,860,000.

Accepted Answer

A) True 
 B)False

Question 4

Joe Co.paid a notes payable of $6,000 with interest.As a result of this transaction, the company's:

Accepted Answer

A)  earnings per share increases. 
B)  earnings per share decreases. 
C)  net assets do not change. 
D)  net assets increase.

Question 5

The price at which stock is sold depends on a variety of factors such as:

Accepted Answer

A)  the financial condition and dividend record of the corporation. 
B)  the corporation's ability to measure potential liability. 
C)  the likelihood of an uncertain event happening. 
D)  the corporation's efficiency in using current assets to pay interest on debt.

Question 6

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 7

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 8

Medicare taxes are paid only by employee.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a reason to undergo a reverse stock split?

Accepted Answer

A)  To reduce the stock's market price per share. 
B)  To increase total stockholders' equity. 
C)  To reduce total stockholders' equity. 
D)  To increase the market value of the stock per share.

Question 10

The debt ratio measures the percent of the company's assets financed by debt.

Accepted Answer

A) True 
 B)False

Question 11

Vivi Corporation's earnings per share of common stock was $1.50 and a market price of $33.50, calculate the price-earnings ratio.

Accepted Answer

A)  50.6 
B)  22.3 
C)  44.0 
D)  33.5

Question 12

Liabilities due beyond one year are classified as _____.

Accepted Answer

A)  current liabilities 
B)  long-term liabilities 
C)  contingent liabilities 
D)  fixed liabilities

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

When a company has a high debt ratio, it is an indication of a:

Accepted Answer

A)  high solvency risk. 
B)  weak operating efficiency. 
C)  high profit margin. 
D)  low asset turnover.

Question 15

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 16

A company sold 200 shares of common stock with a par value of $5 at a price of $13 per share.What is the effect on the accounts of this transaction?

Accepted Answer

A)  Increase cash $2,600; increase retained earnings $2,600 
B)  Increase cash $1,000; increase common stock $1,000 
C)  Increase cash $2,600; increase common stock $1,000 and increase paid-in capital $1,600 
D)  Increase cash $2,600; increase common stock $1,600 and increase paid-in capital $1,000

Question 17

If $500,000 of 8% bonds are issued at 102, the amount of cash received from the sale is:

Accepted Answer

A)  $540,000 
B)  $510,000 
C)  $500,000 
D)  $530,000

Question 18

A corporation has 10,000 shares of $100 par value stock outstanding.If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be 40,000.

Accepted Answer

A) True 
 B)False

Question 19

The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired.What is the number of shares outstanding?

Accepted Answer

A)  5,000 
B)  100,000 
C)  60,000 
D)  55,000

Question 20

Jack Co.issued 675,000 shares at $0.25 per share of common stock.If 75,000 shares were subsequently reacquired, _____ shares are considered outstanding.

Accepted Answer

A)  750,000 
B)  600,000 
C)  675,000 
D)  75,000

Exam 8: Liabilities and Stockholders Equity

The par value per share of common stock represents:

If paid-in capital in excess of par--preferred stock is $80,000, preferred stock is $500,000, paid-in capital in excess of par-common stock is $50,000, common stock is $1,000,000, and retained earnings is $230,000, the total stockholders' equity is $1,860,000.

Joe Co.paid a notes payable of $6,000 with interest.As a result of this transaction, the company's:

The price at which stock is sold depends on a variety of factors such as:

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

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

Medicare taxes are paid only by employee.

Which of the following is a reason to undergo a reverse stock split?

The debt ratio measures the percent of the company's assets financed by debt.

Vivi Corporation's earnings per share of common stock was $1.50 and a market price of $33.50, calculate the price-earnings ratio.

Liabilities due beyond one year are classified as _____.

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

When a company has a high debt ratio, it is an indication of a:

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:

A company sold 200 shares of common stock with a par value of $5 at a price of $13 per share.What is the effect on the accounts of this transaction?

If $500,000 of 8% bonds are issued at 102, the amount of cash received from the sale is:

A corporation has 10,000 shares of $100 par value stock outstanding.If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be 40,000.

The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired.What is the number of shares outstanding?

Jack Co.issued 675,000 shares at $0.25 per share of common stock.If 75,000 shares were subsequently reacquired, _____ shares are considered outstanding.