Question 1

Illustrate the effects on the accounts and the financial statements of each of the following transactions:
Apr.30 ..........Issued a $70,000, 60-day, 6% note dated April 30 to Goldman Co.on account.
June 29........ Paid Goldman Co.the amount owed on note dated April 30.

Accepted Answer

The answer of Illustrate the effects on the accounts and...

Question 2

If bonds are issued at a premium, the stated interest rate is:

Accepted Answer

A)  higher than the market rate of interest. 
B)  lower than the market rate of interest. 
C)  too low to attract investors. 
D)  adjusted to a higher rate of interest.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)  period the cash is collected for a product sold on account. 
B)  future period when the cost of repairing the product is paid. 
C)  period of the sale of the product. 
D)  future period when the product is repaired or replaced.

Question 5

The major subdivisions of the Stockholders' Equity section of the balance sheet are:

Accepted Answer

A)  Paid-in Capital and Retained Earnings. 
B)  Common Stock and Preferred Stock. 
C)  Issued Capital, and Authorized Capital. 
D)  Expenses and incomes.

Question 6

Most employers are levied a tax on payrolls for:

Accepted Answer

A)  sales tax. 
B)  medical insurance premiums. 
C)  federal unemployment compensation tax. 
D)  union dues.

Question 7

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 8

The debt ratio of Jade Co.and Emerald Inc.are 30% and 51% respectively.This information indicates that:

Accepted Answer

A)  Jade Co.has a higher asset turnover than Emerald Inc. 
B)  Jade Co.'s operations are financed primarily with debt. 
C)  Emerald Inc.has a lower financial leverage than Jade Co. 
D)  Emerald Inc.'s operations are financed primarily with debt.

Question 9

Current liabilities are:

Accepted Answer

A)  due but not receivable for more than one year. 
B)  due but not payable for more than one year. 
C)  due and receivable within one year. 
D)  due and payable within one year.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

An employee receives an hourly rate of $27, with time and a half for all hours worked in excess of 40 during a week.Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; cumulative earnings for year prior to current week, $99,700; social security tax rate, 6.0% on maximum of $106,800; and Medicare tax rate, 1.5% on all earnings.What is the net pay for the employee?

Accepted Answer

A)  $798.85 
B)  $873.77 
C)  $953.16 
D)  $1,223.77

Question 12

June Co.is considering the following alternative plans for financing the company: $$\begin{array}{l}
& \text { Plan I } & \text { Plan II } \
\text { Issue } 10 \% \text { Bonds (at face) } & - & \$ 3,000,000 \
\text { Issue } \$ 10 \text { Common Stock } & \$ 4,000,000 & \$ 1,000,000\
\text { Income tax is estimated at } 40 \% \text { of income. }
\end{array}$$ 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

The answer of June Co.is considering the following alternative plans...

Question 13

Which of the following is a reason for a corporation to buy back its own stock?

Accepted Answer

A)  To increase liquidity 
B)  To increase solvency 
C)  To increase the shares outstanding 
D)  To reissue as bonuses to employees

Question 14

Nico Inc., which had 60,000 shares of common stock outstanding, declared a 4-for-1 stock split.
(a)What will be the number of shares outstanding after the split?
(b)If the common stock had a market price of $160 per share before the stock split, what would be an approximate market price per share after the split?

Accepted Answer

The answer of Nico Inc., which had 60,000 shares of...

Question 15

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

Accepted Answer

A) True 
 B)False

Exam 8: Liabilities and Stockholders Equity

Illustrate the effects on the accounts and the financial statements of each of the following transactions: Apr.30 ..........Issued a $70,000, 60-day, 6% note dated April 30 to Goldman Co.on account. June 29........ Paid Goldman Co.the amount owed on note dated April 30.

If bonds are issued at a premium, the stated interest rate is:

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

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

The major subdivisions of the Stockholders' Equity section of the balance sheet are:

Most employers are levied a tax on payrolls for:

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 debt ratio of Jade Co.and Emerald Inc.are 30% and 51% respectively.This information indicates that:

Current liabilities are:

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

Which of the following is a reason for a corporation to buy back its own stock?

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