Exercises 1, 2, and 3, which are WP TV, J, 1. A The date on which a cash dividend becomes a binding legal obligation is on the a declaration date. b. date of record. c. payment date. d. last day of the fiscal year-end. 2. The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to a decrease total liabilities and stockholders' equity. b. increase total expenses and total liabilities. c. increase total assets and stockholders' equity. d. decrease total assets and stockholders' equity. 3. Which one of the following events would not require a formal journal entry on a corporation's books? a 2 for 1 stock split b. 100% stock dividend c. 2% stock dividend d. Si per share cash dividend 4. Regular dividends are declared out of a. Paid-in Capital in Excess of Par. b. Treasury Stock c. Common Stock. d. Retained Earnings. 5. Which of the following is not a significant date with respect to dividends? a. The declaration date b. The incorporation date c. The record date d. The payment date 6. Solaris, Inc. has 2,000 shares of 5%, $10 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2014. What is the annual dividend on the preferred stock? a $5 per share b. $1,000 in total c. $10,000 in total d. $.05 per share 7. Rendezvous, Inc. has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of Si par value common stock outstanding at December 31, 2014. There were no dividends declared in 2013. Th board of directors declares and pays a $110,000 dividend in 2014. What is the amount of dividends received b the common stockholders in 2014? SO b. $50,000 c. S110,000 d. $60,000 8. Burnell, Inc. has 5,000 shares of 4%, 550 par value, cumulative preferred stock and 100,000 shares of Si par value common stock outstanding at December 31, 2013, and December 31, 2012. The board of directors declared and paid a $8,000 dividend in 2013. In 2014, $30,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2014? Preferred Common a. $18,000 $12.000 b. $15,000 SI5.000 c. S12.000 $18.000 $20.000 d. S10,000 9. Which of the following show the proper effect of a stock split and a stock dividend? a b. c. d. Item Total paid-in capital Total retained carnings Total par value (common) Par value per share Stock Split Increase Decrease Decrease Decrease Stock Dividend Increase Decrease Increase No change 10. A prior period adjustment for understatement of net income will a be credited to the Retained Earnings account. b. be debited to the Retained Earnings account. c. show as again on the current year's Income Statement. d show as an asset on the current year's Balance Sheet 11. From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is a. bond interest is deductible for tax purposes. b. interest must be paid on a periodic basis regardless of earnings. c. income to stockholders may increase as a result of trading on the equity. d. the bondholders do not have voting rights. 12. Secured bonds are bonds that a. are in the possession of a bank. b. are registered in the name of the owner. c. have specific assets of the issuer pledged as collateral. d. have detachable interest coupons. 13. Bonds that may be exchanged for common stock at the option of the bondholders are called a options. b. stock bonds. c. convertible bonds. d. callable bonds 14. AS1,000 face value bond with a quoted price of 98 is selling for a. $1,000 h c. d 3980 $908 598 15. If the market interest rate is greater than the contractual interest rate, bonds will sell Ma premium bat face value at a discount d. only after the stated interest rate is increased 16. Each of the following account is reported as long-term liabilities except a. Interest Payable. b. Bonds Payable. c. Discount on Bonds Payable. d Premium on Bonds Payable 17. The discount on bonds payable or premium on bonds payable is shown on the balance sheet as an adjustment to bonds payable to arrive at the carrying value of the bonds. Indicate the appropriate addition or subtraction to honds payable: Premium on Discount on Bonds Payable Bonds Payable Add Add Add b. c. d. Deduct Add Deduct Deduct Deduct 18. A lease where the intent is temporary use of the property by the lessee with continued ownership of the property by the lessor is called a. off-balance sheet financing. b. an operating lease. c a capital lease. d. a purchase of property. 19. Which of the following is not a condition which would require the recording of a lease contract as a capital leave a. The lease transfers ownership of the property to the lessee. b. The lease contains a bargain purchase option. c. The lease term is less than 75% of the economic life of the leased property d. The present value of the lease payments equals or exceeds 90% of the fair value of the leased property 20. Bond discount should be amortized to comply with a. the historical cost principle. b. the expense recognition principle. c. the revenue recognition principle. d. conservatism