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Exam 8: Liabilities and Stockholders Equity

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Question 21

Multiple Choice

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Which of the following is necessary for a corporation to pay cash dividends?

A) Market value in excess of par value per share
B) Order by the court of law
C) Sufficient retained earnings
D) Prior declaration of stock dividends

E) A) and D)
F) All of the above

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Question 22

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

A) True
B) False

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Question 23

Multiple Choice

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Where is interest expense listed on the income statement?

During the first year of operations, employees earned vacation pay of $50,000.The vacations will be taken during the second year.The vacation pay expense should be recorded in the first year of operations.

On November 21 of the current year, Maroon Inc.reacquired 50,000 shares of its common stock at $4 per share.As a result of this transaction, net assets of the company:

The _____ is determined by transactions between buyers and sellers of similar bonds.

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

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

One of the conditions for paying a cash dividend is sufficient retained earnings.

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

As interest is recorded on an interest-bearing note, the Interest Expense account is:

On March 15, Silver Co.issued a $80,000, 5%, 90-day note payable to Gold Co.How much will Silver Co.have to pay at maturity? (Assume 360 days in a year)

Treasury stock is a contra-equity account.

Which of the following will be classified as a current liability?

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.

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.

An employee receives an hourly rate of $30, 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, $300; cumulative earnings for year prior to current week, $90,700; 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?

If 50,000 shares are authorized, 35,000 shares are issued, and 1,000 shares are reacquired, the number of outstanding shares is 36,000.

_____ liabilities may arise from past transactions if certain events occur in the future.

Obligations that depend on future events and are based on past transactions are contingent liabilities.