1. Shamrock Company had net income of $30,000. On January 1, there were 8,000 shares of common stock outstanding. On April 1, the company issued an additional 2,000 shares of common stock. There were

1. Shamrock Company had net income of $30,000. On January 1, there were 8,000 shares of common stock outstanding. On April 1, the company issued an additional 2,000 shares of common stock. There were no other stock transactions. The company has an earnings per share of: (Points : 2)

$3.75

$3.00

$3.33

$15.00

$3.16

2. When a bond sells at a premium: (Points : 2)

The contract rate is above the market rate

The contract rate is equal to the market rate

The contract rate is below the market rate

It means that the bond is a zero coupon bond

The bond pays no interest

3. If an issuer sells a bond at any other date than the interest payment date: (Points : 2)

This means the bond sells at a premium

This means the bond sells at a discount

The issuing company will report a loss on the sale of the bond

The issuing company will report a gain on the sale of the bond

The buyer normally pays the issuer the purchase price plus any interest accrued since the prior interest payment date

4. The amount of income earned per share of a company’s common stock is known as: (Points : 2)

Restricted retained earnings per share

Earnings per share

Continuing operations per share

Dividends per share

Book value per share

5. To provide security to creditors and to reduce interest costs, bonds and notes payable can be secured by: (Points : 2)

Safe deposit boxes

Mortgages

Equity

The FASB

Debentures

6. Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are: (Points : 2)

Debentures

Discounted notes

Installment notes

Indentures

Investment notes

7. A company has net income of $850,000. It also has 125,000 weighted-average common shares outstanding and a market value per share of $115. The company’s price-earnings ratio is equal to: (Points : 2)

16.9

14.7

92.0

13.5

8.0

8. Which of the following statements is true? (Points : 2)

Interest on bonds is tax deductible

Interest on bonds is not tax deductible

Dividends to stockholders are tax deductible

Bonds do not have to be repaid

Bonds always decrease return on equity

9. A company purchased equipment and signed a 7-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value factor for an annuity for 7 years at 9% is 5.0330. The present value of the loan is: (Points : 2)

$9,000

$5,033

$63,000

$57,330

$45,297

10. A company’s board of directors’ votes to declare a cash dividend of $0.75 per share. The company has 15,000 shares authorized, 10,000 issued and 9,500 shares outstanding. The total amount of the cash dividend is: (Points : 2)

$375

$4,125

$7,125

$7,500

$11,250

11. Stock that was reacquired by the company and is still held by the issuing corporation is called: (Points : 2)

Capital stock

Treasury stock

Redeemed stock

Preferred stock

12. A corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 300 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation. The entry to record this transaction would include: (Points : 2)

A debit to Organization Expenses for $3,000

A debit to Organization Expenses for $5,000

A credit to Common Stock for $5,000

A credit to Contributed Capital in Excess of Par Value, Common Stock for $5,000

A debit to Contributed Capital in Excess of Par Value, Common Stock for $2,000

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