1. Which of the following transactions decreases the profitability of a company?

a.Purchasing treasury stock

b.Declaring cash dividend

c.Issuing a note payable

d.Recording payroll tax expense

2. Joe Co. paid a notes payable of $6,000 with interest. As a result of this transaction, the company's:

a.earnings per share decreases.

b.net assets increase.

c.net assets do not change.

d.earnings per share increases.

3. The FICA tax withheld from employees contributes to:

a.Federal and state unemployment compensation.

b.Social Security and federal unemployment compensation.

c.Medicare only.

d.Social Security and Medicare.

4. On July 1, Mark 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. On payment of interest, net assets of the company:

a.decrease by $120,000.

b.decrease by $150,000.

c.increase by $240,000.

d.remain unaffected.

5. The periodic interest to be paid on bonds is identified in the bond indenture and is expressed as a percentage of the face amount of the bond. This percentage or rate of interest is called the:

a.contract rate.

b.effective rate.

c.internal rate.

d.accrued rate.