question

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

answer

True

question

During the first year of operations, a company granted warranties on its products. The estimated cost of the product warranty liability at the end of the year is $12,750. The product warranty expense of $12,750 should be recorded in the year the related product sale is made.

answer

True

question

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

answer

True

question

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

answer

False

question

In order to record a contingent liability, the liability must be probable and reasonably estimated.

answer

True

question

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

answer

False

question

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

answer

True

question

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

answer

True

question

If prior to the last weekly payroll period of the calendar year, the cumulative earnings for an employee are $75,200, earnings subject to social security tax are $106,800, and the tax rate is 7.5%, the employer's social security tax on the $800 gross earnings paid on the last day of the year is $60

answer

True

question

Most employers are required to withhold federal unemployment taxes from employee earnings

answer

False

question

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

answer

True

question

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

answer

False

question

Federal unemployment compensation tax is a tax that is paid only by employers.

answer

True

question

Medicare taxes are withheld from an employee's pay only until the employee has earned a specific amount each year.

answer

False

question

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

answer

True

question

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.

answer

True

question

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

answer

True

question

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

answer

True

question

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.

answer

True

question

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.

answer

True

question

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

answer

True

question

The prices of bonds are quoted as a percentage of the bonds' face value.

answer

True

question

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

answer

True

question

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

answer

False

question

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

answer

False

question

If the market rate of interest is 6% and a corporation's bonds bear interest at 7%, the bonds will sell at a discount.

answer

False

question

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

answer

False

question

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

answer

True

question

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

answer

False

question

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

answer

True

question

The two main sources of stockholders' equity are investments contributed by stockholders and net income retained in the business.

answer

True

question

Paid-in capital and retained earnings are the two major categories of stockholders' equity for a corporation.

answer

True

question

The par value of common stock is rarely equal to its market value on the date the stock is issued.

answer

True

question

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

answer

True

question

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

answer

False

question

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

answer

True

question

The main source of paid-in-capital is from issuing stock.

answer

True

question

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

answer

False

question

If 50,000 shares are authorized, 37,000 shares are issued, and 2,000 shares are reacquired, the number of outstanding shares is 35,000.

answer

True

question

If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are reacquired, the number of outstanding shares is 19,500.

answer

False

question

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.

answer

False

question

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.

answer

True

question

Treasury stock is a contra-equity account.

answer

True

question

Cash dividends are not paid on shares of treasury stock.

answer

True

question

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

answer

False

question

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

answer

True

question

One of the prerequisites usually required to pay a cash dividend is sufficient retained earnings.

answer

True

question

One of the prerequisites required to pay a cash dividend is formal action by the board of directors.

answer

True

question

If 20,000 shares are authorized, 14,000 shares are issued, and 500 shares are held as treasury stock, a cash dividend of $1 per share would amount to $13,500.

answer

True

question

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

answer

False

question

The declaration and issuance of a stock dividend does NOT affect the total amount of a corporation's assets, liabilities, or stockholders' equity.

answer

True

question

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

answer

False

question

Before a stock dividend can be declared or paid, there must be sufficient cash.

answer

False

question

A corporation has 10,000 shares of $100 par value stock outstanding. If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be 40,000.

answer

True

question

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.

answer

False

question

The primary purpose of a stock split is to reduce the number of shares outstanding in order to encourage more investors to enter the market for the company's shares.

answer

False

question

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.

answer

True

question

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.

answer

False

question

A corporation has 10,000 shares of $25 par value stock outstanding that has a current market value of $100. If the corporation issues a 5-for-1 stock split, the market value of the stock will fall to approximately $20.

answer

True

question

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

answer

True

question

If paid-in capital in excess of par--preferred stock is $80,000, preferred stock is $500,000, paid-in capital in excess of par--common stock is $50,000, common stock is $1,000,000, and retained earnings is $230,000, the total stockholders' equity is $1,860,000.

answer

True

question

Earnings per common share is one factor that influences the decision to use debt financing or equity financing.

answer

True

question

What options does a business have when financing operations?

answer

Both debt financing and equity financing

question

Current liabilities are

answer

due and payable within one year.

question

Current liabilities are

answer

due and to be paid out of current assets within one year.

question

Which of the following would most likely be classified as a current liability?

answer

Unearned rent

question

A current liability is a debt that can reasonably be expected to be paid

answer

within one year.

question

On June 5 Glover Co. issued a $60,000, 6%, 120-day note payable to Jones Co. How much will Glover Co. have to pay at maturity?

answer

$61,200

question

Where is interest expense listed on the income statement?

answer

Other expense section

question

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

answer

increased; the Interest Payable account is increased

question

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?

answer

A business may use accelerated depreciation for tax reporting and straight-line for financial reporting purposes.

question

Which of the following is characteristic of deferred income tax payable?

answer

-Deferred income tax payable is often generated due to timing differences. -Deferred income tax payable may be either a current or long-term liability -Deferred income tax payable represents the deferred payment of taxes to later years through tax planning techniques.

question

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

answer

period of the sale of the product.

question

When are contingent liabilities required to be recorded?

answer

Both the liability must be probable and the amount must be reasonably estimable before the contingent liability is recorded.

question

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

answer

gross pay.

question

Gross earnings for a payroll period less payroll deductions are referred to as

answer

net pay.

question

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 gross pay for the employee?

answer

$1,323.00

question

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?

answer

$873.77

question

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?

answer

$1,059.75

question

Prior to the last weekly payroll period of the calendar year, the cumulative earnings of employees A and B are $106,150 and $91,000, respectively. Their earnings for the last completed payroll period of the year are $850 each. The amount of earnings subject to social security tax at 6% is $106,800. All earnings are subject to Medicare tax of 1.5%. Assuming that the payroll will be paid on December 29, what will be the employer's total FICA tax for this payroll period on the two salary amounts of $850 each?

answer

$115.50

question

Payroll taxes levied against employees become liabilities

answer

at the time the liability for the employee's wages is paid.

question

The par value per share of common stock represents

answer

the monetary amount assigned to each share of stock in the articles of incorporation.

question

Most employers are required to withhold from employees for

answer

only federal income tax.

question

Most employers are levied a tax on payrolls for

answer

federal unemployment compensation tax

question

A bond indenture is

answer

a contract between the corporation issuing the bonds and the bondholders.

question

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

answer

effective interest rate.

question

When the contract rate of interest on bonds is less than the market rate of interest, the bonds sell at

answer

a discount.

question

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

answer

higher than the market rate of interest.

question

When the contract rate of interest on bonds is higher than the market rate of interest, the bonds sell at

answer

a premium.

question

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

answer

at a discount.

question

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

answer

greater than face value.

question

When the market rate of interest on bonds is equal to the contract rate, the bonds will sell at

answer

their face value.

question

The interest rate specified in the bond indenture is called the

answer

contract rate.

question

If $1,000,000 of 8% bonds are issued at 102, the amount of cash received from the sale is

answer

$1,020,000.

question

If $1,000,000 of 10% bonds are issued at 98 3/4, the amount of cash received from the sale is

answer

$987,500.

question

If $4,000,000 of 12% bonds are issued at 103 1/4, the amount of cash received from the sale is

answer

$4,130,000.

question

Stockholders' equity

answer

includes retained earnings and paid-in capital.

question

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?

answer

55,000

question

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 75,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?

answer

70,000

question

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

answer

common stock.

question

The excess of issue price over par of common stock is termed a(n)

answer

premium.

question

A company sold 200 shares of common stock with a par vale of $5 at a price of $12 per share. Which section of the statement of cash flows will contain this transaction?

answer

Financing activities

question

A company sold 200 shares of common stock with a par value of $5 at a price of $13 per share. What is the effect on the accounts of this transaction?

answer

Increase cash $2,600; increase common stock $1,000 and increase paid-in capital $1,600

question

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?

answer

35,000

question

Which statement below is NOT a reason for a corporation to buy back its own stock?

answer

To increase the shares outstanding

question

How is treasury stock shown on the balance sheet?

answer

As a decrease in stockholders' equity

question

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

answer

Stockholders' equity

question

A corporation purchases 5,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

answer

Decrease $175,000

question

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

answer

Declared dividends

question

Which of the following is usually NOT a prerequisite to paying a cash dividend?

answer

Market value in excess of par value per share

question

The liability for a dividend is recorded on which of the following dates?

answer

The date of declaration

question

What is the effect of a stock dividend on the balance sheet?

answer

No effect on total assets, total liabilities, or total stockholders' equity

question

The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a

answer

stock split.

question

A corporation has 50,000 shares of $100 par value stock outstanding. If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be

answer

200,000 shares.

question

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

answer

$45

question

The primary purpose of a stock split is to

answer

reduce the market price of the stock per share.

question

What is one reason to undergo a REVERSE stock split?

answer

To increase the market value of the stock per share.

question

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

answer

Paid-in Capital and Retained Earnings.

question

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

answer

Bonds Payable

question

Significant changes in stockholders' equity are reported in the

answer

statement of stockholders' equity

question

Based on the following information, what is earnings per share? Common shares outstanding 115,000 Preferred stock dividend declared and paid $40,000 Net income $350,000

answer

$2.70

question

For the year that just ended, a company reports net income of $1,500,000. There are 500,000 shares authorized, 300,000 shares issued, and 250,000 shares of common stock outstanding. What is the earnings per share?

answer

$6.00

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