17· The total earnings of an employee for a payroll period is referred to as: ta

Question

17· The total earnings of an employee for a payroll period is referred to as: take-home pay a. b. pay net of taxes net pay gross pay c. d. 18. The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called: a. treasury stock b. issued stock c. outstanding stock d. authorized stock 19· The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding? a. 5,000 b. 35,000 c. 45,000 d. 55,000 20. The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to: a. Organizational Expenses b. Goodwill c. Common Stock d. Cash 21. A corporation has 40,000 shares of $25 par value stock outstanding. If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be: a. 160,000 shares b. 40,000 shares c. 120,000 shares d. 10,000 shares The liability for a dividend is recorded on which of the following dates? a· b. the date of payment c. the date of announcement d. the date of declaration In which section of the balance sheet would Treasury Stock be reported? a. Fixed assets b. Long-term liabilities c. Stockholders' equity d. Intangible assets For 2006, net income is $250,000, shares outstanding are 80,000, and the market price is $24. What is the price-earnings ratio on common stock (round to one decimal point?) a. 3.1 22· the date ofrecord 3. . 7.7 b. c. 34.9 d. 2.5

Explanation / Answer

Answer: 17(d) Gross Pay

Reasoning

Gross pay are the total amount before any taxes, deductions or withholding. It includes all the earning of an employee mentioned in their appointment letter.

Answer: 18(d) Authorized Stock

Reasoning

Authorized shares are the number of shares which a company is legally permitted to issue.

Answer: 19(b)35,000

Reasoning:

Outstanding shares are number of shares which a company has actually issued.(so 40,000-5000=35,000)

Answer:20(a) Organizational Expenses

Reasoning

Organizational Expenses are legal or promotional expenses mainly to establish a company.

Answer:21©120,000 shares

Reasoning:

Total no of shares-40,000,4 for 1 stock,so 40,000*4=120,000

Answer:22(d)the date of declaration

Reasoning:

The liability for dividend is recorded when dividends are declared and before they are paid out to a company's shareholders.

Answer:23©Shareholder’s equity

Reasoning: Treasury stock is recorded as Shareholders' Equity on the balance sheet. Treasury stock is shown as deduction from the amounts in Stockholders' Equity.

Answer:24(b) 7.7

Reasoning:

Given,net income-$250,000,share o/s-80,000,market rice o share-$24

So,PE ratio=Price per share/Earning per share

Here we do not have earning per share. The formula to calculate earnings per share is

EPS=Net income/Total shares outstanding

So,EPS=250,000/80000=3.125

So,PE ration=24/3.125=7.68or 7.7

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