Economics Essay

1166 words - 5 pages

Exam I AC202
Name Anthony Edwards

Multiple Choice: Chose the one best answer for each of the following (2 points each)

1. Which of the following does not impact the calculation of the cash interest payments to be made to bondholders?
a. Face value of the bond
b. Stated interest rate
c. Market interest rate
d. The length of time between payments

2. Which of the following is false when a bond is issued at a premium?
a. The bond will issue for an amount above its face value
b. Interest expense will exceed the cash interest payments
c. The market interest rate is lower than the stated interest rate
d. The issue price will be ...view middle of the document...

Callable preferred stock
c. Cumulative preferred stock
d. Convertible preferred stock
e. Noncommulative preferred stock

7. Reporting a net income of $95,000 will:
a. Increase retained earnings
b. Decrease retained earnings
c. Increase common stock
d. Decrease common stock
8. Stockholders’ equity can be described as claims of:
a. Creditors on total assets
b. Owners on total assets
c. Customers on total assets
d. Debtors on total assets

9. Dividends appear on:
a. The retained earnings statement only
b. The income statement only
c. Both the retained earnings statement and the balance sheet
d. The balance sheet only

10. Retained earnings is
a. The stockholders’ claim on total assets
b. Equal to cash
c. Equal to revenues
d. The amount of net income kept in the corporation for future use

11. Which feature is not applicable to common stock ownership?
a. Right to receive dividends before preferred stock holders
b. Right to vote on appointment of external auditor
c. Right to receive residual assets of the company should it cease operations
d. All of the above are applicable to common stock ownership

12. Which statement regarding treasury stock is false?
a. Treasury stock is considered to be issued but not outstanding
b. Treasury stock has no voting, dividend or liquidation rights
c. Treasury stock reduces total stockholders’ equity on the balance sheet
d. None of the above are false

13. The payment pattern for an installment note with equal total payments includes:
a. Increasing principal payments
b. Decreasing accrued interest
c. Constant cash payments
d. All of these

14. The total amount of stock that a corporation’s charter allows it to issue is referred to as:
a. Issued stock
b. Outstanding stock
c. Common stock
d. Preferred stock
e. Authorized stock

15. Buying stock in a corporation is attractive to investors because:
a. Stockholders are not liable for the corporation’s actions and debts
b. Stock is easily transferred
c. A corporation has unlimited life
d. Shareholders are not agents of the corporation
e. All of the above

16. On October 1, Classy Corporation incurs a 15-year $300,000 mortgage liability in conjunction with the acquisition of an office building. This mortgage is payable in monthly installments of $3,600 which includes interest computed at the rate of 12% per year. The first monthly payment is made on October 31. The portion of the...

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