Chapter 9 Current Liabilities

On January 1, 2012 Omega Corporation issued a three year $1000 bond with a nominal interest rate of 9%. The companies issue price for the bond would be

$1000

A company issued 5000 shares of $5 par common stock for $20 per share, The company purchased 2,000 shares as treasury stock for $22 dollars per share, How much money is in the treasury stock account

$44,000

You invested 5000 for nine months at a 12% annual interest rate. The total amount of interest you can receive in a year is

$450

A company has issued 1000 shares of $10 par common stock in exchange for a machine. The company believes the machine has a fair market value of $12,000 What amount should be recorded?

12,000 dollars if the fair market value of the stock cannot be determined

At december 31, 2012 Rhodes company has 10,000 shares of $10 par, 6% cumulative preferred stock outstanding and 4,000 shares of $5 par common stock outstanding. The company did not pay a dividend in 2010 or 2011. If the company pays a dividend in 2012, how much must be paid for the preferred stockholders to receive a dividend?

18,000

A company issues 15,000 shares of its $20 par common stock for $30 per share the amount of cash the company receives from stockholders is

450,000 dollars (shares x share price)

An invoice received from a supplier for $5000 on January first with terms 3/15 n/30 means that the company should pay

4850 before January 16th

A company has 10,000 shares of of stock authorized at January 1. During the year, 6000 shares are issued to the stockholders and the company purchases 500 shares at treasury stock. At december 31, the number of shares outstanding is

5500 (issued -treasury= shares outstanding)

To record the issuance of bonds when the face rate of interest is less than the market rate, the company would increase

Cash, Discount on bonds payable and bonds payable.

Which of the following is not a difference between accounts payable and notes payable: A) accounts payable is the money owed for the purchase of inventory on credit B) notes payable is money owed to a creditor C) Notes payable is represented by a formal agreement D) notes payable is associated with interests

D) notes payable are NOT associated with interest

the payment of cash dividends results in

a decrease of assets

The treasury stock account should be considered

a deduction in the stockholders equity portion of the balance sheet

When issued price is higher than par value of common stock, the excess is reported as

additional paid in capital

When a liability is accrued, another account is used in the transaction besides the liability account is:

an Expense

The transaction for the payment of a liability would result in

an decrease in asset and a decrease in liability

When are cash dividends a reduction from the retained earnings account?

at the time the dividend is declared

Which of the following is not a current liability: taxes payable, unearned revenue, bonds payable, interest payable.

bonds payable

When bonds are redeemed or retired before their specified due date they are called

callable bonds

Which stock carries voting rights?

common stock

What compounding interest strategy will yield the highest amount of money?

compounding daily (or as frequently as possible)

The stockholders equity section of the balance sheet can be first classified into which of the following two categories: common stock and preferred stock; contributed capital and retained earnings; par value and additional paid in capital; contributed capital and treasury stock.

contributed capital and retained earnings

When a corporation issues bonds on general credit the bonds issued are called

debenture bonds

On the declaration date (of dividends), the accountant should make an accounting record to

decrease retained earnings and increase one liability

All of the following would normally appear in the stockholders equity section of the balance sheet except: par value, outstanding shares, dividends in arrears, treasury stock

dividends in arrears

A 2 for 1 stock split will

double the number of shares of stock and half the par value

Par value

is the arbitrary amount stated on the stock certificate to fulfill legal requirements

For users of financial statements, the current liability classification in the balance sheet is important because it is closely tied to the concept of

liquidity

When serial bonds are issued,

not all of the bonds are due on the same date

the formula needed to compute additional paid in capital in excess of par is

number of issued shares times (selling price per share- par value per share)

Stock held by stockholders are called

outstanding stock

The excess of the issue price over the face value of the bond is referred to as

premium

Bonds that are backed by collateral are

secured bonds

If the market rate had been 10% at the time of issuance (three year $1000 bond at a nominal rate of 9%), then

the bonds would be issued at a discount

If the market rate had been 8% at the time of issuance (three year $1000 bond at a nominal rate of 9%), then

the bonds would have been issued at a premium

When a company has common stock with a $10 per share par value and the stock is issued for $15 per share

the company should show $5 per share as an increase in the additional paid in capital portion of the stockholders equity

what are dividends in arrears

the portion of an annual dividend on cumulative preferred stock which has not been paid

A company has issued both common and preferred stock. When a company pays a cash dividend to stockholders

the preferred stockholders receive a dividend before common stockholders are paid

true about treasury stock:

treasury stock is not outstanding, treasury stock is created when a company buys its own stock AFTER ISSUING IT, treasury stock reduces stockholders equity.

What is true about par value

usually very low, is arbitrary amount stated on the stock certificate to fulfill legal requirements, and the amount of common stock can be calculated as its par value per share times number of shares issued

A company purchased machinery by issuing 2000 shares of $3 par value common stock. Since the company is new, there is no established market price for the stock. How would the company record the transaction?

At the fair market value of the machine

If you invest for five years what is the best interest strategy to get the highest amount of money?

Investing with compound interest

On June 1, 2014 Abby corporation issued a two year 5000 bond. What is the maturity date of this bond?

May 31st 2015

Which of the following is not likely to appear in the Long term liability category of the balance sheet? A) bonds payable, B) Leases C) taxes payable D) deferred taxes

Taxes payable