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Exam 8: Liabilities and Stockholders Equity

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Question 71

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

A) True
B) False

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Question 72

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

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.

E) A) and D)
F) None of the above

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Question 73

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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.

Cash dividends are not paid on shares of treasury stock.

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

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.

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.

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

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

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.

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

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.