TC - 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 amount of cash dividends to be paid if a $3 per share dividend is declared?
  • $5.00
  • 50,000
  • income statement
  • $105,000
IE - If earnings per share for a company changes from $4.50 to $5.20, what does this indicate about the company's profitability?
  • a debit to Paid-in Capital from the Sale of Treasury Stock for $200.
  • Because interest payments reduce income tax expense.
  • A favorable trend in the company's profitability is indicated.
  • the interest expense is deductible for tax purposes by the corporation.
Under the corporate form of business organization
  • reduce the market price per share of the stock.
  • stockholders wishing to sell their corporation shares need not get the approval of other stockholders, thus making it easy to transfer ownership rights.
  • the bonds will sell for their face amount.
  • should be reported on the balance sheet as a deduction from the face amount of the related bonds payable.
TD - The date on which cash dividends are paid is on the
  • date of payment.
  • Net income
  • members' equity
  • credit to Notes Payable.
Douglas Company issued 5-year bonds on JanuaryThe 12% bonds have a face value of $35,000,000 and pay interest every January 1 and JulyThe bonds sold for $37,702,483 based on the market interest rate of 10%. Douglas Company uses the effective interest rate method to amortize bond discounts and premiums. On July 1 of the same year, Douglas Company should record interest expense (rounded to the nearest dollar) of
  • convertible
  • $5,217
  • $7,032
  • $1,885,124.
TE - The entry to record issuance of an installment notes payable would include a
  • subtracted from net income
  • Cash Dividends Payable.
  • credit to Notes Payable.
  • the cost method.
TE - The entry to record an installment note payment would include a
  • credit to Notes Payable.
  • debit to Notes Payable.
  • Retained Earnings
  • mortgage notes
TJ - The journal entry to issue 1,000,000 shares of $5 par common stock for $9.00 per share on July 2nd would be
  • Cash 9,000,000 Common Stock 5,000,000 Paid in Capital in Excess of Par-C/S 4,000,0
  • All of these choices are correct.
  • Each shareholder will own the same total par amount of stock before and after the split.
  • added to the face amount of the related bonds payable on the balance sheet.
IT - If the market rate of interest is equal to the contract rate of interest
  • EPS cannot be calculated if a company has no preferred stock
  • the bonds will sell for their face amount.
  • subtracted from net income
  • a current liability on the balance sheet.
Before deciding on long-term borrowing as part of a financing plan, a key measurement that should be considered is:
  • Dividends Payable.
  • less than $300,000.
  • earnings per share.
  • mortgage notes
Treasury stock shares are
  • Paid-in Capital in Excess of Par will be credited for $85,000.
  • added to the face amount of the related bonds payable on the balance sheet.
  • issued shares that are held by the treasurer of the corporation.
  • should be reported on the balance sheet as a deduction from the face amount of the related bonds payable.
WD - Which of the following is the appropriate general journal entry to record the declaration of cash dividends?
  • denominations in which the bonds are sold.
  • All of these choices are correct.
  • Cash 9,000,000 Common Stock 5,000,000 Paid in Capital in Excess of Par-C/S 4,000,0
  • Cash Dividends Cash Dividends Payable
TP - The purchase and resale of treasury stock is normally recorded using
  • All of these choices are correct.
  • debit to Notes Payable.
  • the cost method.
  • principal only.
Treasury stock that was purchased for $2,500 is sold for $3,As a result of these two transactions combined
  • debit Cash, credit Premium on Bonds Payable and Bonds Payable
  • stockholders' equity will be increased by $500
  • the right to use the assets of the company.
  • only those earnings available to common stockholders.
TN - The number of times interest charges are earned is used for all of the following except
  • Because interest payments reduce income tax expense.
  • only those earnings available to common stockholders.
  • number of times interest charges are earned is used for all of these.
  • added to the face amount of the related bonds payable on the balance sheet.
TN - The numerator in the earnings per share calculation
  • only those earnings available to common stockholders.
  • reduce the market price per share of the stock.
  • All of these choices are correct.
  • Retained earnings represent surplus cash.
TM - The market interest rate related to a bond is also called the
  • subtracted from net income
  • All of these choices are correct.
  • effective interest rate
  • the cost method.
TC - 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 10,000 were subsequently reacquired. What is the number of shares outstanding?
  • 50,000
  • $103,769
  • $8,000
  • $700,000
A1000 - A $1,000 bond quoted at 100 could be purchased or sold at
  • $8,400
  • $1,000
  • $1,015,000
  • $22,000
TN - The number of shares of stock that a corporation can issue as stated in its charter is referred to as
  • only those earnings available to common stockholders.
  • authorized.
  • convertible
  • date of payment.
Wave Corporation began the current year with a retained earnings balance of $25,During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $5,000 on equipment. Also, during the current year the company earned net income of $15,000 and declared cash dividends of $5,Compute the year-end retained earnings balance.
  • $30,000
  • $1,000
  • $60.
  • $103,769
Cash dividends are paid to __________ stock.
  • outstanding
  • $1,225,000
  • debit to Notes Payable.
  • authorized.
A98 - A $1,000 bond quoted at 98 could be purchased or sold for
  • $7,032
  • $980
  • $60.
  • $22,000
AU - Any unamortized discount is reported
  • The owners are personally liable for corporate actions.
  • Retained earnings represent surplus cash.
  • reduce the market price per share of the stock.
  • as a deduction to the face amount of the bonds
WC - Which of the following is not a source of financing for a company?
  • Treasury stock
  • The owners are personally liable for corporate actions.
  • Corporations have less regulatory costs than other business forms.
  • the cost method.
IT - If the number of times interest charges are earned has increased from 3.0 to 3.5
  • the bonds will sell for their face amount.
  • multiplying the interest rate by the carrying amount (book value) of the note at the beginning of the period.
  • debtholders have increased protection regarding the company's ability to make its interest payments.
  • Retained earnings represent surplus cash.
WC - Which of the following is not a term used to refer to owners' equity in a corporation?
  • authorized.
  • members' equity
  • the cost method.
  • Cash Dividends Cash Dividends Payable
When the market rate of interest was 11%, Christopher Corporation issued $100,000 of 5-year,12% bonds that pay interest semiannually. The selling price of this bond issue was
  • $1,885,124.
  • $160,000
  • $1,000
  • $103,769
AI - An installment note may be secured by a pledge of the borrower's assets. Such notes are called
  • members' equity
  • credit to Notes Payable.
  • mortgage notes
  • principal only.
WC - Which of the following is not characteristic of a corporation?
  • Net income
  • number of times interest charges are earned is used for all of these.
  • Corporations have less regulatory costs than other business forms.
  • Total contributed capital increases
IE - If earnings per share changes from $3.30 to $2.60, what does this indicate about the company's profitability?
  • An unfavorable trend in the company's profitability is indicated.
  • does not change the balance in retained earnings.
  • Earnings per share on common stock are always lower.
  • Paid-in Capital in Excess of Par will be credited for $85,000.
Bonds that may be exchanged for other securities, such as common stock, are called
  • credit to Notes Payable.
  • authorized.
  • constant
  • convertible
WA - Which of the following statements is not correct with regards to prior period adjustments?
  • 50,000
  • Total contributed capital increases
  • $105,000
  • Prior period adjustments are reported as an adjustment to the ending balance of retained earnings in the current period.
I1000 - If $1,000,000 of 8% bonds are issued at 101 1/2, the amount of cash received from the sale is
  • $1,225,000
  • $1,000
  • $700,000
  • $1,015,000
AB - A bond is
  • the underlying contract between the corporation issuing the bonds and the bondholders
  • reduce the market price per share of the stock.
  • a form of an interest-bearing note
  • All of these choices are correct.
The term deficit is used to refer to a debit balance in which of the following accounts of a corporation?
  • US Treasury bills
  • date of payment.
  • Retained Earnings
  • earnings per share.
Peachtree Company borrows $30,000 from the local bank at 7% interest. The term of the note is five years and the annual payments remain constant at $7,Determine the interest expense Peachtree Company should record in the first year.
  • $5,217
  • $160,000
  • $7,032
  • $5.00
Luke Enterprises has 300,000 shares of $20 par common stock outstanding. On January 19, Luke Enterprises declared a 3% stock dividend. The market price of the stock on January 19 was $28 per share. The journal entry to record the stock dividend would include
  • denominations in which the bonds are sold.
  • All of these choices are correct.
  • None of these choices are correct
  • All of these answers are correct
WE - Which of the following increases retained earnings?
  • Net income
  • members' equity
  • The owners are personally liable for corporate actions.
  • Corporations have less regulatory costs than other business forms.
AH - A high ratio of number of times interest charges are earned ndicates
  • Prior period adjustments are reported as an adjustment to the ending balance of retained earnings in the current period.
  • income statement
  • $30,000
  • extremely good protection in the event of an earnings decline.
TI - The interest portion of an installment note payment is computed by
  • multiplying the interest rate by the carrying amount (book value) of the note at the beginning of the period.
  • debtholders have increased protection regarding the company's ability to make its interest payments.
  • number of times interest charges are earned is used for all of these.
  • added to the face amount of the related bonds payable on the balance sheet.
AC - A corporation purchases 1,000 shares of its own common stock for $4,000 on Feb.On April 13, half of the treasury stock was sold for $3,On April 26, the other half of the treasury stock was sold for $1,The entry to record the April 26 sale would include
  • denominations in which the bonds are sold.
  • a current liability on the balance sheet.
  • the right to use the assets of the company.
  • a debit to Paid-in Capital from the Sale of Treasury Stock for $200.
Hsu Company issued $100,000 of 8% bonds on January 1, 2016 at face value. The bonds pay interest semiannually on January 1 and JulyThe total interest expense related to these bonds for the year ended December 31, 2016, is
  • $160,000
  • $22,000
  • $7,032
  • $8,000
I8 - If $1,000,000 of 8% bonds are issued at 101 1/2, the amount of cash received from the sale is
  • less than $300,000.
  • principal only.
  • Cash 9,000,000 Common Stock 5,000,000 Paid in Capital in Excess of Par-C/S 4,000,0
  • $1,015,000
All of the following are normally found in a corporation's stockholders' equity section except
  • Dividends Payable.
  • Retained earnings represent surplus cash.
  • Cash Dividends Payable.
  • Retained Earnings
TP - The payment of a portion of the amount initially borrowed of an installment note is referred to as
  • Capital Stock.
  • principal only.
  • credit to Notes Payable.
  • authorized.
When a corporation completes a 2-for-1 stock split
  • Net Income - Preferred Dividends) / Average Number of Common Shares Outstanding
  • All of these choices are correct.
  • EPS cannot be calculated if a company has no preferred stock
  • both market price per share and par value per share are decreased
AB - A bond indenture is
  • as an addition to the face amount of the bonds.
  • the underlying contract between the corporation issuing the bonds and the bondholders
  • the interest expense is deductible for tax purposes by the corporation.
  • added to the face amount of the related bonds payable on the balance sheet.
AS - A statement of stockholders' equity is normally prepared when
  • the ease of transfer of ownership
  • None of these choices are correct
  • All of these choices are correct.
  • Total contributed capital increases
AM - A major objective of a stock split is to
  • reduce the market price per share of the stock.
  • as an addition to the face amount of the bonds.
  • All of these choices are correct.
  • a current liability on the balance sheet.
AC - A corporation issues for cash $1,000,000 of 8%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 10%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following is true?
  • The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity.
  • the underlying contract between the corporation issuing the bonds and the bondholders
  • $24,000
  • multiplying the interest rate by the carrying amount (book value) of the note at the beginning of the period.
When a corporation issues bonds, the price that buyers are willing to pay for the bonds does not depend on which of the following?
  • The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity.
  • denominations in which the bonds are sold.
  • Earnings per share on common stock are always lower.
  • a debit to Paid-in Capital from the Sale of Treasury Stock for $200.
B - _______________ are issued at a discount; however, there is no interest paid on these.
  • US Treasury bills
  • Treasury stock
  • Dividends Payable.
  • mortgage notes
AC - A corporation issues 2,000 shares of common stock for $32,The stock has a stated value of $12 per share. The journal entry to record the stock issuance would include a credit to Common Stock for
  • $24,000
  • $160,000
  • $8,000
  • $5.00
IS - If Smart Company issues 1,000 shares of $5 par value common stock for $90,000, the account
  • Paid-in Capital in Excess of Par will be credited for $85,000.
  • Corporations have less regulatory costs than other business forms.
  • added to the face amount of the related bonds payable on the balance sheet.
  • Earnings per share on common stock are always lower.
All of the following statements about retained earnings are true except
  • All of these choices are correct.
  • Retained Earnings
  • Because interest payments reduce income tax expense.
  • Retained earnings represent surplus cash.
Financial statement data for the year ending December 31 for the Power Company is shown below:Net income $680,000Preferred dividends 20,000Average number of common shares outstanding 120,000 sharesWhat is earnings per share for the year?
  • $700,000
  • $5.50
  • $22,000
  • $160,000
Creighton Company reported the following on the company's income statement for the year.Interest expense $600,000Income before income tax expense 4,200,000What is the number of times interest charges were earned?
  • $60.
  • $5.50
  • $24,000
  • 8.0
What is the total stockholders' equity based on the following account balances?Common Stock $500,000PaidIn Capital in Excess of Par—C/S 50,000Retained Earnings 190,000Treasury Stock 40,000
  • $700,000
  • $24,000
  • $1,000
  • $103,769
TE - The effective interest rate method of amortization provides for a _________ rate of interest over the life of the bonds.
  • the cost method.
  • authorized.
  • less than $300,000.
  • constant
Why is the number of times interest charges are earned computed using income before income taxes?
  • the interest expense is deductible for tax purposes by the corporation.
  • only those earnings available to common stockholders.
  • EPS cannot be calculated if a company has no preferred stock
  • Because interest payments reduce income tax expense.
AC - A corporation may reacquire (purchase) its own stock for the following reasons except
  • Total contributed capital increases
  • a form of an interest-bearing note
  • All of these choices are correct.
  • denominations in which the bonds are sold.
IT - In the calculation of earnings per share, preferred stock dividends are
  • credit to Notes Payable.
  • less than $300,000.
  • subtracted from net income
  • Retained Earnings
Corporations finance their operations using which of the following?
  • All of these answers are correct
  • None of these choices are correct
  • only those earnings available to common stockholders.
  • All of these choices are correct.
Carmen Company issued 10-year bonds on JanuaryThe 15% bonds have a face value of $100,000 and pay interest every January 1 and JulyThe bonds were sold for $117,205 based on the market interest rate of 12%. Carmen Company uses the effective interest rate method to amortize bond discounts and premiums. On July 1 of the same year, Carmen should record interest expense (round to the nearest dollar) of
  • $7,032
  • $24,000
  • $22,000
  • $8,400
WS - Which of the following statements is not true about a 4-for-1 split?
  • Earnings per share on common stock are always lower.
  • The owners are personally liable for corporate actions.
  • the bonds will sell for their face amount.
  • Total contributed capital increases
All of the following are conditions for a cash dividend except
  • Dividends Payable.
  • date of payment.
  • debit to Notes Payable.
  • All of these choices are correct.
TT - The term deficit is used to refer to a debit balance in which of the following accounts of a corporation?
  • Dividends Payable.
  • the cost method.
  • Retained Earnings
  • earnings per share.
TB - The balance in Unamortized Premium on Bonds Payable should be
  • Corporations have less regulatory costs than other business forms.
  • added to the face amount of the related bonds payable on the balance sheet.
  • only those earnings available to common stockholders.
  • debit Cash, credit Premium on Bonds Payable and Bonds Payable
TJ - The journal entry a company records for the issuance of bonds when the contract rate is larger than the market rate of the bond is
  • Cash 9,000,000 Common Stock 5,000,000 Paid in Capital in Excess of Par-C/S 4,000,0
  • debit to Notes Payable.
  • A favorable trend in the company's profitability is indicated.
  • debit Cash, credit Premium on Bonds Payable and Bonds Payable
Earnings per common share is calculated as
  • Each shareholder will own the same total par amount of stock before and after the split.
  • Net Income - Preferred Dividends) / Average Number of Common Shares Outstanding
  • has the right to receive regular dividends that were not declared (paid) in prior years
  • should be reported on the balance sheet as a deduction from the face amount of the related bonds payable.
An advantage of the corporate form of business entity is
  • the corporation reserves the right to redeem them early.
  • All of these choices are correct.
  • the ease of transfer of ownership
  • subtracted from net income
Cumulative preferred stock
  • issued shares that are held by the treasurer of the corporation.
  • multiplying the interest rate by the carrying amount (book value) of the note at the beginning of the period.
  • as a deduction to the face amount of the bonds
  • has the right to receive regular dividends that were not declared (paid) in prior years
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