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Which of the following is not an advantage of issuing bonds insteadof common stock?
Question 18 options:

Earnings per share on common stock may be lower.

Tax savings result.

Stockholder control is not affected.

Income to common shareholders may increase.

Stockholders of a company may be reluctant to finance expansionthrough issuing more equity because
Question 17 options:

dividends must be paid on a periodic basis.

their earnings per share may decrease.

the price of the stock will automatically decrease.

leveraging with debt is always a better idea.

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Casey Durgan
Casey DurganLv2
28 Sep 2019

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Related questions

1. The effect of a stock dividend is to

Question 17 options:

change the composition of stockholders' equity.

increase the book value per share of common stock.

decrease total assets and stockholders' equity.

decrease total assets and total liabilities

2. Regular dividends are declared out of:

Common Stock.

Treasury Stock.

Retained Earnings.

Paid-in Capital in Excess of Par.

3. Solaris, Inc. has 2,000 shares of 5%, $10 par value,cumulative preferred stock and 50,000 shares of $1 par value commonstock outstanding at December 31, 2014. What is the annual dividendon the preferred stock?

Question 20 options:

$5 per share

$10,000 in total

$1,000 in total

$.05 per share

4. Corporations generally issue stock dividends in order to

Question 21 options:

decrease the amount of capital in the corporation.

increase the market price per share.

exceed stockholders' dividend expectations.

increase the marketability of the stock.

5. A stockholder who receives a stock dividend would

Question 22 options:

expect the par value of the stock to change.

own more shares of stock.

expect retained earnings to increase.

expect the market price per share to increase.

6. When stock dividends are distributed,

Question 23 options:

Retained Earnings is decreased.

Common Stock Dividends Distributable is decreased.

no entry is necessary if it is a large stock dividend.

Paid-in Capital in Excess of Par is debited if it is a smallstock dividend.

Identify the effect the declaration and distribution of a stockdividend has on the par value per share.

Question 24 options:

No effect

Increase or decrease

Increase

Decrease

A stock split

Question 25 options:

will have no effect on the par value per share of stock.

will increase the total par value of the stock.

will increase total paid-in capital.

may occur in the absence of retained earnings.

On January 1, Sly Corporation had 120,000 shares of $10 parvalue common stock outstanding. On March 17, the company declared a15% stock dividend to stockholders of record on March 20. Marketvalue of the stock was $13 on March 17. The entry to record thetransaction of March 17 would include a

Question 26 options:

debit to Common Stock Dividends Distributable for $180,000.

credit to Cash for $234,000.

credit to Stock Dividends for $54,000.

credit to Common Stock Dividends Distributable for $180,000.

Bento, Inc. had 500,000 shares of common stock outstandingbefore a stock split occurred, and 1,500,000 shares outstandingafter the stock split. The stock split was

Question 27 options:

1-for-5.

2-for-5.

5-for-1.

3-for-1.

In the stockholders' equity section of the balance sheet,

Question 28 options:

Dividends in arrears will appear as a restriction of RetainedEarnings.

Common Stock Dividends Distributable will appear in its ownsubsection of the stock- holders' equity.

Common Stock Dividends Distributable will be classified as partof additional paid-in capital.

Additional Paid-in Capital appears under the subsection Paid-inCapital.

During 2014 Miami Inc. had sales revenue $1,328,000, grossprofit $728,000, operating expenses $398,000, cash dividends$90,000, other expenses and losses $40,000. Its corporate tax rateis 30%. What was Miami's income tax expense for the year?

Question 29 options:

$87,000

$398,400

$180,000

$60,000

Paiva Corporation splits its common stock 2 for 1, when themarket value is $80 per share. Prior to the split, Paiva had100,000 shares of $10 par value common stock issued andoutstanding. After the split, the par value of the stock

Question 30 options:

remains the same.

is reduced to $5 per share.

is reduced to $2 per share.

is reduced to $20 per share.

13. At the end of the first year of operations, the total costof the trading securities portfolio is $245,000. Total fair valueis $250,000. The financial statements should show

A. an addition to an asset of$5,000 in the current assets section and a realized gain of $5,000in "Other revenues and gains."

B. an addition to an asset of$5,000 and an unrealized gain of $5,000 in the stockholders' equitysection.

C. an addition to an asset of$5,000 in the current assets section and an unrealized gain of$5,000 in "Other revenues and gains."

D. an addition to an asset of$5,000 and a realized gain of $5,000.

14. Comanic Corp. has commonstock of $5,400,000, retained earnings of $2,000,000, unrealizedgains on trading securities of $100,000 and unrealized losses onavailable-for-sale securities of $200,000. What is the total amountof its stockholders' equity?

A. $7,400,000

B. $7,200,000

C. $7,500,000

D. $7,300,000

17. Stockholders of a company maybe reluctant to finance expansion through issuing more equitybecause

A. their earnings per share maydecrease.

B. the price of the stock willautomatically decrease.

C. dividends must be paid on aperiodic basis.

D. leveraging with debt is alwaysa better idea.

18. Which of the following is notan advantage of issuing bonds instead of common stock?

A. Income to common shareholdersmay increase.

B. Tax savings result.

C. Stockholder control is notaffected.

D. Earnings per share on commonstock may be lower.

19. A major disadvantageresulting from the use of bonds is that

A. earnings per share may belowered.

B. bondholders have votingrights.

C. interest must be paid on aperiodic basis.

D. taxes may increase.

21. If the market interest rateis 5%, a $10,000, 6%, 10-year bond, that pays interest semiannuallywould sell at an amount

A. less than facevalue.

B. equal to facevalue.

C. greater than facevalue.

D. that cannot bedetermined.

23. If bonds are issued at adiscount, it means that thE

A. bondholder will receiveeffectively less interest than the contractual interestrate.

B. market interest rate is higherthan the contractual interest rate.

C. market interest rate is lowerthan the contractual interest rate.

D. financial strength of theissuer is suspect.

24. In the balance sheet, theaccount, Premium on Bonds Payable, is

A. deducted from bondspayable.

B. classified as a revenueaccount.

C. added to bondspayable.

D. classified as a stockholders'equity account.

25. Bond interest paidis

A. higher when bonds sell at adiscount and lower when bonds sell at a premium.

B. the same whether bonds sell ata discount or a premium.

C. higher when bonds sell at adiscount.

D.lower when bonds sell at apremium.

27. Lowe Company has $1,500,000of bonds outstanding. The unamortized premium is $19,600. If thecompany redeemed the bonds at 101, what would be the gain or losson the redemption?

A. $15,000 loss

B. $4,600 loss

C. $15,000 gain

D. $4,600 gain

28. Robin Corporation retires its$800,000 face value bonds at 104 on January 1, following thepayment of annual interest. The carrying value of the bonds at theredemption date is $829,960. The entry to record the redemptionwill include a

A. debit of $2,040 to Loss onBond Redemption.

B. credit of $32,040 to Premiumon Bonds Payable.

C. credit of $2,040 to Loss onBond Redemption.

D. debit of $32,000 to Premium onBonds Payable.

29. If there is a loss on bondsredeemed early, the

A. loss is debited directly toRetained Earnings.

B. loss is debited to InterestExpense, as a cost of financing.

C. bonds' carrying value was lessthan the redemption price.

D. bonds' carrying value wasgreater than the redemption price.

30. Over the term of the bonds,the balance in the Discount on Bonds Payable accountwill

A. fluctuate up and down if themarket is volatile.

B. increase.

C. decrease.

D. be unaffected until the bondsmature.

7 Effect of issuing common stock on the balance sheet

Newly formed Electronics Services Corporation has 100,000 sharesof $10 par common stock authorized. On March 1, 2014, ElectronicsServices issued 20,000 shares of the stock for $12 per share. OnMay 2 the company issued an additional 30,000 shares for $15 pershare. Electronics Services was not affected by other events during2014.

Required

a.

Record the transactions in a horizontal statements model likethe following one. In the Cash Flow column, indicate whether theitem is an operating activity (OA), an investing activity (IA), ora financing activity (FA). Use NA to indicate that an element wasnot affected by the event. (Enter any decreases to accountbalances and cash outflows with a minus sign.)

ELECTRONIC SERVICES CORPORATION

HORIZONTAL STATEMENTS MODEL

DATE CASH=LIABILITIES+COMMON STOCK+PAID N CAPITALREV.-EXPENSE=NET STATEMENT

IN EXCESS INCOME OF CASH FLOW

March 1, 2014

May 1, 2014

b. Determine the amount Electronics Serviceswould report for common stock on the December 31, 2014, balancesheet. COMMON STOCK( )

.

c. Determine the amount Electronics Serviceswould report for paid-in capital in excess of par.

PAID IN CAPITAL EXCESS OF PAR( )


d. What is the total amount ofcapital contributed by the owners? TOTAL PAID IN CAPITAL ( )
e.

What amount of total assets would Electronics Services report onthe December 31, 2014, balance sheet? TOTAL ASSETS ( )

10 Effect of cash dividends on financial statements

On October 1, 2014, Daster Corporation declared a $59,600 cashdividend to be paid on December 15 to shareholders of record onNovember 1.

Required

Record the events occurring on October 1 and December 15 in ahorizontal statements model like the following one. In the CashFlow column, indicate whether the item is an operating activity(OA), an investing activity (IA), or a financing activity (FA). Theletters NA indicate that an element is not affected by the event.(Enter any decreases to account balances and cash outflowswith a minus sign.)

DASTER CORPORATION

HORIZONTAL STATEMENT MODEL

DATE ASSETS=LIABILITIES+COMMON+RETAINED REVENUE-EXPENSES=NETSTATEMENT

STOCK EARNINGS INCOME CASH FLOWS

10/01

11/01

12/15

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