1. 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. Dividends are predominantly paid in
a. earnings.
b. property.
c. cash.
d. stock.
3. 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
4. If a corporation issued $3,000,000 in bonds which pay 5% annual interest, what is the annual net cash cost of this borrowing
if the income tax rate is 30%?
a. $3,000,000
b. $45,000
c. $150,000
d. $105,000
5. A bond with a face value of $200,000 and a quoted price of 102? has a selling price of
a. $240,225.
b. $204,025.
c. $200,225.
d. $204,250.
6. On January 1, 2014, Meeks Corporation issued $5,000,000, 10-year, 4% bonds at 102. Interest is payable semiannually on
January 1 and July 1. The journal entry to record this transaction on January 1, 2014 is
a. Cash.................................................................................................................... 5,000,000
Bonds Payable................................................................................. 5,000,000
b. Cash.................................................................................................................... 5,100,000
Bonds Payable................................................................................. 5,100,000
c. Premium on Bonds Payable............................................................... 100,000
Cash.................................................................................................................... 5,000,000
Bonds Payable................................................................................. 5,100,000
d. Cash.................................................................................................................... 5,100,000
Bonds Payable................................................................................. 5,000,000
Premium on Bonds Payable................................................... 100,000
7. Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1, 2014 for $60,000.
The journal entry to record this investment includes a debit to
a. Debt Investments for $64,800.
b. Debt Investments for $60,000.
c. Cash for $60,000.
d. Stock Investments for $60,000.
8. Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1, 2014 for $60,000.
Assume Community pays interest on January 1 and July 1, and the July 1 entry was done correctly. The journal entry at
December 31, 2014 would include a credit to
a. Interest Receivable for $2,400.
b. Interest Revenue for $4,800.
c. Accrued Expense for $4,800.
d. Interest Revenue for $2,400.
9. Mize Company owns 30% interest in the stock of Lyte Corporation. During the year, Lyte pays $20,000 in dividends to Mize,
and reports $300,000 in net income. Mize Company's investment in Lyte will increase Mize¢s net income by
a. $6,000.
b. $90,000.
c. $96,000.
d. $10,000.
10. In accounting for stock investments between 20% and 50%, the _______ method is used.
a. consolidated statements
b. controlling interest
c. cost
d. equity