Question 1

If the market rate of interest is 9% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.

Accepted Answer

A) True 
 B)False

Question 2

The issuance of common stock affects both paid-in capital and retained earnings.

Accepted Answer

A) True 
 B)False

Question 3

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.E) A) and B)
F) A) and C)

Question 4

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

Accepted Answer

A) True 
 B)False  True

Question 5

For accounting purposes,stated value is treated the same way as par value.

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.E) B) and C)
F) None of the above

Question 7

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 8

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.

Accepted Answer

A) True 
 B)False

Question 9

A 10% stock dividend will increase the number of shares outstanding and the book value per share.

Accepted Answer

A) True 
 B)False

Question 10

The declaration of a cash dividend decreases a corporation's stockholders' equity and decreases its assets.

Accepted Answer

A) True 
 B)False

Question 11

Indicate whether the following actions would (+)increase, (-)decrease,or (0)not affect
a company's total assets,liabilities,and stockholders' equity.

Accepted Answer

The answer of Indicate whether the following actions would (+)increase,...

Question 12

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.E) B) and C)
F) A) and D) C

Question 13

The declaration of a cash dividend decreases a corporation's stockholders' equity and increases its liabilities.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

In which section of the balance sheet would treasury stock be reported?

Accepted Answer

A)  Fixed assets
B)  Long-term liabilities
C)  Stockholders' equity
D)  Intangible assetsE) A) and D)
F) B) and C)

Question 16

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 17

Federal unemployment compensation tax becomes an employer's liability at the time the employee is paid.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

A bond indenture is

Accepted Answer

A)  a contract between the corporation issuing the bonds and the underwriters selling the bonds.
B)  the amount due at the maturity date of the bonds.
C)  a contract between the corporation issuing the bonds and the bondholders.
D)  the amount for which the corporation can buy back the bonds prior to the maturity date.E) C) and D)
F) None of the above C

Question 20

A bond is simply a form of an interest-bearing note.

Accepted Answer

A) True 
 B)False

Exam 8: Liabilities and Stockholders Equity

If the market rate of interest is 9% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.

Correct AnswerverifiedShow Answer

The issuance of common stock affects both paid-in capital and retained earnings.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedTrue

For accounting purposes,stated value is treated the same way as par value.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

A 10% stock dividend will increase the number of shares outstanding and the book value per share.

Correct AnswerverifiedShow Answer

The declaration of a cash dividend decreases a corporation's stockholders' equity and decreases its assets.

Correct AnswerverifiedShow Answer

Indicate whether the following actions would (+)increase, (-)decrease,or (0)not affect a company's total assets,liabilities,and stockholders' equity.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedC

The declaration of a cash dividend decreases a corporation's stockholders' equity and increases its liabilities.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In which section of the balance sheet would treasury stock be reported?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Federal unemployment compensation tax becomes an employer's liability at the time the employee is paid.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A bond indenture is

Correct AnswerverifiedC

A bond is simply a form of an interest-bearing note.

Correct AnswerverifiedShow Answer

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True

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C

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C

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