Chapter 8
False
JFND-GO3A-EW4R-CP4R
44. Treasury stock is a contra-equity account.
a.
b.
True
Easy
False
JFND-GO3A-EW4R-CP4D
45. Cash dividends are not paid on shares of treasury stock.
a.
b.
True
Easy
False
Chapter 8
46. The declaration of a cash dividend decreases a corporation’s stockholders’ equity and decreases its assets.
a.
b.
False
Moderate
False
JFND-GO3A-EW4R-CP31
47. The declaration of a cash dividend decreases a corporation’s stockholders’ equity and increases its liabilities.
a.
b.
True
Moderate
False
JFND-GO3A-EW4R-CP3U
Chapter 8
48. One of the conditions for paying a cash dividend is formal action by the board of directors.
a.
b.
True
Easy
False
JFND-GO3A-EW4R-CP3O
GO4W-NQNBEE
49. One of the conditions for paying a cash dividend is sufficient retained earnings.
a.
b.
True
Easy
False
JFND-GO3A-EW4R-CP3Z
JFND-GO3A-EW4R-CP3T
Chapter 8
50. 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.
a.
b.
True
Challenging
False
JFND-GO3A-EW4R-CP3S
51. A 10% stock dividend will increase the book value per share.
a.
b.
False
Easy
False
GEA1-43J1-G7TS-R3DN-GPDI-GWN8-EPRW-EMJW-GWAU-CC3S-CW5S-G3DD-
Chapter 8
52. The declaration and issuance of a stock dividend does not affect the total amount of a corporation’s assets, liabilities,
or stockholders’ equity.
a.
b.
True
Challenging
False
Bloom’s: Understanding
JFND-GO3A-EW4R-CP3W
GO4W-NQNBEE
53. The declaration of a stock dividend decreases a corporation’s stockholders’ equity and decreases its liabilities.
a.
b.
False
Easy
False
JFND-GO3A-EW4R-CPNN
Chapter 8
54. Before a stock dividend can be declared or paid, there must be sufficient cash.
a.
b.
False
Easy
False
JFND-GO3A-EW4R-CPNB
55. 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.
a.
b.
True
Moderate
False
JFND-GO3A-EW4R-CPB3
56. 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.
a.
Chapter 8
b.
False
Moderate
False
JFND-GO3A-EW4R-CPBA
GO4W-NQNBEE
57. 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.
a.
b.
False
Challenging
False
JFND-GO3A-EW4R-CPNG
GO4W-NQNBEE
58. 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.
a.
b.
Chapter 8
True
Easy
False
JFND-GO3A-EW4R-CPNF
59. 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.
a.
b.
False
Moderate
False
JFND-GO3A-EW4R-CPNR
GO4W-NQNBEE
60. A corporation has 10,000 shares outstanding of $25 par value and a current market value of $100 per share. If the
corporation issues a 5-for-1 stock split, the market value of the stock will fall to approximately $20.
a.
b.
True
Chapter 8
61. Bonds payable due in 2020 are reported on the balance sheet as long-term liabilities.
a.
b.
True
Easy
False
JFND-GO3A-EW4R-CPBU
62. 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.
a.
b.
True
Moderate
False
JFND-GO3A-EW4R-CPND
Chapter 8
63. The debt ratio measures the percent of the company’s assets financed by debt.
a.
b.
True
Easy
True / False
False
SACC.WARR.18.8-9 – LO: 08.09
United States – BUSPROG: Analytic
Bloom’s: Remembering
7/19/2016 10:16 AM
11/21/2016 3:10 AM
JFND-GO3A-EW4R-CPBO
64. The following information is available for Amanda Co. for the current year.
Common shares outstanding
150,000
Preferred stock dividend declared and paid
$90,000
Net income
$300,000
Calculate the company’s earnings per share.
a.
$1.10
b.
$2.60
c.
$2.00
Challenging
True / False
False
SACC.WARR.18.8-8 – LO: 08.08
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 10:16 AM
11/22/2016 1:45 AM
JFND-GO3A-EW4R-CPB1
Chapter 8
d.
$1.40
Moderate
Multiple Choice
False
SACC.WARR.18.8-1 – LO: 08.01
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 10:16 AM
11/21/2016 6:24 AM
JFND-GO3A-EW4D-YQNR
GO4W-NQNBEE
65. 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?
a.
$5.00
b.
$2.50
c.
$6.00
d.
$3.00
c
Moderate
Multiple Choice
False
SACC.WARR.18.8-1 – LO: 08.01
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 10:16 AM
7/19/2016 10:16 AM
JFND-GO3A-EW4D-YQND
66. Liabilities due beyond one year are classified as _____.
a.
current liabilities
Chapter 8
b.
long-term liabilities
c.
contingent liabilities
d.
fixed liabilities
Multiple Choice
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
Bloom’s: Understanding
7/19/2016 10:16 AM
7/19/2016 10:16 AM
67. Current liabilities are:
a.
due but not receivable for more than one year.
b.
due but not payable for more than one year.
c.
due and receivable within one year.
d.
due and payable within one year.
Multiple Choice
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
Bloom’s: Remembering
7/19/2016 10:16 AM
7/19/2016 10:16 AM
68. Joe Co. paid a notes payable of $6,000 with interest. As a result of this transaction, the company’s:
Chapter 8
a.
earnings per share increases.
b.
earnings per share decreases.
c.
net assets do not change.
d.
net assets increase.
Multiple Choice
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 10:16 AM
11/21/2016 3:48 AM
69. Which of the following will be classified as a current liability?
a.
Two-year notes payable
b.
Bonds payable
c.
Mortgage loan
d.
Unearned rent
Multiple Choice
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
Bloom’s: Understanding
7/19/2016 10:16 AM
7/19/2016 10:16 AM
Chapter 8
70. Rico Inc. issues a 90-day, 4%, $3,000 note on account. This transaction:
a.
increases net assets and earnings per share of the company.
b.
decreases net assets and increases earnings per share of the company.
c.
has no effect on net assets and earnings per share of the company.
d.
decreases net assets and earnings per share of the company.
c
Moderate
Multiple Choice
False
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 10:16 AM
11/21/2016 3:51 AM
JFND-GO3A-EW4R-CPKN
GO4W-NQNBEE
71. 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)
a.
$84,000
b.
$79,000
c.
$80,000
d.
$81,000
Moderate
Multiple Choice
False
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
United States – AK – DISC: AICPA: FN-Measurement
Bloom’s: Applying
7/19/2016 10:16 AM
7/19/2016 10:16 AM
JFND-GO3A-EW4R-CPKB
GEA1-43J1-G7TS-R3DN-GPDI-GWN8-EPRW-EMJT-CC3S-GQJ3-GPOU-NQJ3-CCSS-
Chapter 8
72. Where is interest expense listed on the income statement?
a.
Other expense section
b.
Cost of merchandise sold
c.
Operating expenses
d.
Interest expense is listed on the balance sheet, not the income statement.
Multiple Choice
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
United States – AK – DISC: AICPA: FN-Reporting
Bloom’s: Understanding
7/19/2016 10:16 AM
7/19/2016 10:16 AM
73. As interest is recorded on an interest-bearing note, the Interest Expense account is:
a.
decreased; the Interest Payable account is increased.
b.
increased; the Interest Payable account is increased.
c.
increased; the Notes Payable account is decreased.
d.
increased; the Notes Payable account is increased.
Multiple Choice
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
Bloom’s: Understanding
7/19/2016 10:16 AM
7/19/2016 10:16 AM
Chapter 8
74. Which of the following transactions decreases the profitability of a company?
a.
Issuing a note payable
b.
Purchasing treasury stock
c.
Declaring cash dividend
d.
Recording payroll tax expense
Moderate
Multiple Choice
False
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 10:16 AM
11/21/2016 4:01 AM
JFND-GO3A-EW4R-CPJ1
75. 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?
a.
$798.85
b.
$873.77
c.
$1,242.00
d.
$1,323.00
Challenging
Multiple Choice
False
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
United States – AK – DISC: AICPA: FN-Measurement
Bloom’s: Applying
Chapter 8
76. 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?
a.
$798.85
b.
$873.77
c.
$953.16
d.
$1,223.77
Challenging
False
JFND-GO3A-EW4R-CPJO
GO4W-NQNBEE
77. 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?
a.
$1,147.95
b.
$1,059.75
c.
$1,470.00
d.
$1,359.75
Challenging
JFND-GO3A-EW4R-CPJT
Chapter 8
78. ABC Co. has a gross payroll of $18,000. The FICA tax rate is 7.65% of the gross payroll, and the federal and state
withholding are $1,600 and $963 respectively. On recording the payroll tax liability, net assets of the company:
a.
increase by $13,940.
b.
decrease by $14,060.
c.
increase by $21,940.
d.
decrease by $5,485.
Moderate
Multiple Choice
False
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 10:16 AM
11/21/2016 4:10 AM
JFND-GO3A-EW4R-CPJI
79. 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. Social
security tax rate is 6% on maximum of $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?
a.
$127.50
b.
$115.50
c.
$76.50
False
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 10:16 AM
7/19/2016 10:16 AM
JFND-GO3A-EW4R-CPJZ
GO4W-NQNBEE
Chapter 8
d.
$63.75
Challenging
Multiple Choice
False
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 10:16 AM
7/19/2016 10:16 AM
JFND-GO3A-EW4R-CPJS
GO4W-NQNBEE
80. The FICA tax withheld from employees contributes to:
a.
federal and state unemployment compensation.
b.
Social Security and federal unemployment compensation.
c.
Social Security and Medicare.
d.
Medicare only
c
Easy
Multiple Choice
False
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
United States – AK – DISC: AICPA: FN-Measurement
Bloom’s: Remembering
7/19/2016 10:16 AM
11/22/2016 3:40 AM
JFND-GO3A-EW4D-YOKN
81. Most employers are levied a tax on payrolls for:
a.
sales tax.
b.
medical insurance premiums.
Chapter 8
c.
federal unemployment compensation tax.
d.
union dues.
Multiple Choice
SACC.WARR.18.8-2 – LO: 08.02
United States – BUSPROG: Analytic
United States – AK – DISC: AICPA: FN-Measurement
Bloom’s: Understanding
7/19/2016 10:16 AM
7/19/2016 10:16 AM
82. On July 1, George Co. issued $3,000,000 of 10-year, 8% bonds at par. Interest on the bonds is payable semiannually
on December 31 and June 30. As a result of this transaction, net assets of the company:
a.
decrease by $240,000.
b.
increase by $3,000,000.
c.
is not effected.
d.
decrease by $120,000.
Multiple Choice
SACC.WARR.18.8-3 – LO: 08.03
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 10:16 AM
11/22/2016 1:48 AM
83. The _____ is determined by transactions between buyers and sellers of similar bonds.