Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

If 50,000 shares are authorized,35,000 shares are issued,and 2,000 shares are reacquired,the number of outstanding shares is 33,000.

Accepted Answer

A) True 
 B)False

Question 4

FICA tax is a payroll tax that is paid by both the employee and the employer.

Accepted Answer

A) True 
 B)False

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Income tax based on taxable income may differ from the income tax based on "Income before Taxes" on the income statement.Which of the following could be a reason for this difference?

Accepted Answer

A)  A business may use accelerated depreciation for tax reporting and straight-line for financial reporting purposes.
B)  Tax payments may not equal the tax due.
C)  Taxable income is based on Generally Accepted Accounting Principles.
D)  All of these could be reasons for the difference.E) B) and C)
F) None of the above

Question 8

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)  55,000E) All of the above
F) A) and C)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

FICA tax becomes a liability to the federal government at the time the employees are paid.

Accepted Answer

A) True 
 B)False

Question 11

If a corporation issues only one class of stock,it is called

Accepted Answer

A)  common stock.
B)  treasury stock.
C)  no-par stock.
D)  preferred stock.E) A) and D)
F) B) and C)

Question 12

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

Question 13

Which one of the following is usually NOT necessary in order for a corporation to pay a cash dividend?

Accepted Answer

A)  Sufficient cash
B)  Formal action of the board of directors
C)  Declared dividends
D)  Sufficient retained earningsE) B) and D)
F) C) and D)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Medicare taxes are paid by both the employee and the employer.

Accepted Answer

A) True 
 B)False

Question 16

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.E) B) and C)
F) All of the above

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

The total earnings of an employee for a payroll period are referred to as

Accepted Answer

A)  take-home pay.
B)  pay net of taxes.
C)  net pay.
D)  gross pay.E) B) and D)
F) None of the above

Question 19

Which of the following accounts is reported in the noncurrent liabilities section of the corporate balance sheet?

Accepted Answer

A)  Bonds Payable
B)  Common Stock
C)  Dividends Payable
D)  CashE) All of the above
F) C) and D)

Question 20

What is one 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.E) A) and D)
F) None of the above

Exam 8: Liabilities and Stockholders Equity

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Most employers are levied a tax on payrolls for

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which one of the following is usually NOT necessary in order for a corporation to pay a cash dividend?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Income tax based on taxable income may differ from the income tax based on "Income before Taxes" on the income statement.Which of the following could be a reason for this difference?

Correct AnswerverifiedShow Answer

What is one reason to undergo a REVERSE stock split?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

FICA tax becomes a liability to the federal government at the time the employees are paid.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Medicare taxes are paid by both the employee and the employer.

Correct AnswerverifiedShow Answer

If a corporation issues only one class of stock,it is called

Correct AnswerverifiedShow Answer

FICA tax is a payroll tax that is paid by both the employee and the employer.

Correct AnswerverifiedShow Answer

Which of the following accounts is reported in the noncurrent liabilities section of the corporate balance sheet?

Correct AnswerverifiedShow Answer

The total earnings of an employee for a payroll period are referred to as

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

If 50,000 shares are authorized,35,000 shares are issued,and 2,000 shares are reacquired,the number of outstanding shares is 33,000.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified