Question

1. Which of the following factors affects the accounting for contingent liabilities? a.The coupon rate and...

1. Which of the following factors affects the accounting for contingent liabilities?

a.The coupon rate and market rate of interest

b.Investor's expectations

c.Financial and economic conditions

d.The likelihood of occurring and measurement

2. A company issues 5,000 shares of $15 par common stock. As a result, the earnings per share of the company _____.

a.decreases

b.increases

c.equals to $15

d.remains unchanged

3. Which of the following is a reason for a corporation to buy back its own stock?

a.To increase liquidity

b.To increase the shares outstanding

c.To increase solvency

d.To reissue as bonuses to employees

4. Treasury stock is reported in the _____ section of the balance sheet.

a.contingent liabilities

b.investment

c.current liabilities

d.stockholders' equity

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

a.Sufficient retained earnings

b.Order by the court of law

c.Prior declaration of stock dividends

d.Market value in excess of par value per share

6. Orange Inc. had 300,000 shares of $150 par value common stock outstanding at the beginning of the year. During the year, the company issued a 3-for-1 stock split. What is the number of shares outstanding after the split?

a.900,000 shares

b.300,000 shares

c.1,200,000 shares

d.600,000 shares

7. When a company has a high debt ratio, it is an indication of a:

a.high profit margin.

b.high solvency risk.

c.low asset turnover.

d.weak operating efficiency.

Business   Accounting   
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Answer #1

please post only 4 questions at a time.

1.d.The likelihood of occuring and measurement.

(contingent liabilities are dependant on liklihood of occurning and measurement , they are not dependant on interest rates, investor's expectations or economic conditions).

2.a. decreases.

(new issue of shares will reduce the earnings per share).

3.d.To reissue as bonuses to employees.

(buying back ownstock will not increase liquidity, it will reduce the shares outstanding, it will not affect the solvency, corportion can reissue the shares as bonuses to employees).

4.d.stock holder's equity.

(treasury stock is shown as a reduction from the paid in capital , in the stockholder's equity section of balance sheet).

5a.sufficeint retained earnings

(to pay cash dividends the corporation need to have sufficient retained earnings and not a court order.

Prior declaration of stock dividends, market value in excess of par value is not a requirement).

6.900,000 shares.

(3 for 1 spllit means => 3 shares for 1 share, so for 300,000 shares => (300,000 * 3/ 1 =>900,000 shares).

7.b.high solvency risk.

(high debt means high interest to be paid, which results in greater solvency risk).

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