Online Quiz 13a

Question 1

Gross payroll for the employees of Bannister Enterprises totals $100,000 per week. From this must be withheld Social Security taxes of 6.20% and Medicare taxes of 1.45%. In addition, federal and state income tax withholdings amount to 15% of gross payroll.
Compute the TOTAL employee COMPENSATION EXPENSE for one week.
$100,000
$115,000
$92,350
$77,350
$107,650

Answer 1

Answer: $107,650

Question 2

On January 1 of Year 1, Shay Dee Company established a stock option plan for its senior employees. A total of 600,000 options were granted that permit employees to purchase 600,000 shares of stock at $40 per share. Each option had a fair value of $3 on the grant date. The market price for Shay Dee stock on January 1 of Year 1 was $40. The employees are required to remain with Shay Dee for four years (Years 1 through 4) to exercise these options. Shay Dee’s net income for Year 1, before including any consideration of compensation expense, is $750,000.
Compute the COMPENSATION EXPENSE associated with these options for Year 1.
$600,000
$450,000
$300,000
$187,500
$1,800,000

Answer 2

Answer: $450,000

Question 3

Which ONE of the following is NOT one of the factors that must be considered by an actuary when computing a company’s defined benefit pension obligation?
How long the employees will live after they retire
How long the employees will work before retiring
The expected fair value of employee stock options on the retirement date
The highest salary of the employees during their working career

Answer 3

Answer: The expected fair value of employee stock options on the retirement date

Question 4

Which ONE of the following is NOT one of the types of control procedures?
Independent checks on performance
Adequate documentation and records
Segregation of duties
Fiduciary implementation of phrenological procedures
Proper authorization for transactions

Answer 4

Answer: Fiduciary implementation of phrenological procedures

Question 5

Which ONE of the following is a key element of the “the control environment”?
  Membership on the FASB
 Attitude of the top management
 Membership on the PCAOB
 Membership in WorldCom
 Attitude of customers and suppliers
 Attitude of the lenders and investors

Answer 5

Answer: Attitude of the top management