1
Week 5 Study Plan Chapter 8
1. Describe how corporations finance their operations and its impact on
earnings per share.
Problem #1 - Correct
A _____ is a form of an interest-bearing note requiring periodic interest payments
with the face amount due at the maturity date.
a.reserve
b.credit note
c.bad debt
d.bond
Feedback
Correct. A bond is a form of an interest-bearing note requiring periodic interest
payments with the face amount due at the maturity date.
Problem #2 - Correct
Based on the following information, calculate the earnings per share of common
stock.
Net income $27,000
Preferred dividends $3,000
Number of common shares outstanding 12,000
a.$1.11
b.$2.00
c.$1.30
d.$2.25
Feedback
Correct. Earnings per share = (Net income – Preferred dividends) ÷ Number of
common shares outstanding = ($27,000 − $3,000) ÷ 12,000 shares = $2.00
Problem #9 - Correct
Which of the following is an example of equity?
a.Common stock
b.A contingent liability
c.Deferred tax
d.Commercial paper
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Week 5 Study Plan Chapter 8
Feedback
Correct. Common stock is an example of equity.
Problem #15 - Correct
_____ includes the purchasing of goods and services on account as well as issuing
notes payable which are due in one year.
a.A contingent liability
b.Short-term debt
c.Gross payroll
d.A cash equivalent
Feedback
Correct. Short-term debt includes the purchasing of goods and services on account
as well as issuing short-term notes payable.
2. Describe and illustrate the accounting for current liabilities, notes payable,
and payroll.
Problem #4 - Incorrect
Which of the following statements is true about gross pay?
a.It is the total earnings of an employee for a payroll period including bonuses and
overtime pay.
b.It is a variety of benefits provided to an employee in addition to salary and wages
earned.
c.It is calculated using the double-declining balance method.
d.It is the amount the employer must pay the employee.
Feedback
Incorrect. The term payroll refers to the amount paid to employees for the services
they provide during a period.
Problem #14 - Incorrect
Crimson Inc. had a gross payroll of $50,000. The FICA tax was 7.65% of the gross
payroll. Federal and state withholding was $2,485 and $420 respectively. Which of
the following amounts will be reported as a decrease on the statement of cash
flows of the company?
a.$50,000
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Week 5 Study Plan Chapter 8
b.$46,175
c.$43,270
d.$47,295
Feedback
Incorrect. Net pay is the amount the employer must pay the employee.
Problem #18 - Incorrect
The person or entity receiving the notes payable is called a _____.
a.debtor
b.borrower
c.lender
d.stockholder
Feedback
Incorrect. Notes payable are issued to satisfy an account payable and purchase
merchandise or other assets.
Problem #24 - Incorrect
When a company issues a note payable to satisfy an account payable, there will be:
a.a decrease in expenses.
b.an increase in liabilities.
c.an increase in revenue.
d.no change in net assets.
Feedback
Incorrect. If a note payable is issued to satisfy an account payable, the account
payable balance will decrease.
3. Describe the accounting for bonds payable.
Problem #3 - Incorrect
The _____ is determined by transactions between buyers and sellers of similar
bonds.
a.effective rate of interest
b.proportionate interest
c.nominal interest
d.coupon rate
Week 5 Study Plan Chapter 8
1. Describe how corporations finance their operations and its impact on
earnings per share.
Problem #1 - Correct
A _____ is a form of an interest-bearing note requiring periodic interest payments
with the face amount due at the maturity date.
a.reserve
b.credit note
c.bad debt
d.bond
Feedback
Correct. A bond is a form of an interest-bearing note requiring periodic interest
payments with the face amount due at the maturity date.
Problem #2 - Correct
Based on the following information, calculate the earnings per share of common
stock.
Net income $27,000
Preferred dividends $3,000
Number of common shares outstanding 12,000
a.$1.11
b.$2.00
c.$1.30
d.$2.25
Feedback
Correct. Earnings per share = (Net income – Preferred dividends) ÷ Number of
common shares outstanding = ($27,000 − $3,000) ÷ 12,000 shares = $2.00
Problem #9 - Correct
Which of the following is an example of equity?
a.Common stock
b.A contingent liability
c.Deferred tax
d.Commercial paper
, 2
Week 5 Study Plan Chapter 8
Feedback
Correct. Common stock is an example of equity.
Problem #15 - Correct
_____ includes the purchasing of goods and services on account as well as issuing
notes payable which are due in one year.
a.A contingent liability
b.Short-term debt
c.Gross payroll
d.A cash equivalent
Feedback
Correct. Short-term debt includes the purchasing of goods and services on account
as well as issuing short-term notes payable.
2. Describe and illustrate the accounting for current liabilities, notes payable,
and payroll.
Problem #4 - Incorrect
Which of the following statements is true about gross pay?
a.It is the total earnings of an employee for a payroll period including bonuses and
overtime pay.
b.It is a variety of benefits provided to an employee in addition to salary and wages
earned.
c.It is calculated using the double-declining balance method.
d.It is the amount the employer must pay the employee.
Feedback
Incorrect. The term payroll refers to the amount paid to employees for the services
they provide during a period.
Problem #14 - Incorrect
Crimson Inc. had a gross payroll of $50,000. The FICA tax was 7.65% of the gross
payroll. Federal and state withholding was $2,485 and $420 respectively. Which of
the following amounts will be reported as a decrease on the statement of cash
flows of the company?
a.$50,000
, 3
Week 5 Study Plan Chapter 8
b.$46,175
c.$43,270
d.$47,295
Feedback
Incorrect. Net pay is the amount the employer must pay the employee.
Problem #18 - Incorrect
The person or entity receiving the notes payable is called a _____.
a.debtor
b.borrower
c.lender
d.stockholder
Feedback
Incorrect. Notes payable are issued to satisfy an account payable and purchase
merchandise or other assets.
Problem #24 - Incorrect
When a company issues a note payable to satisfy an account payable, there will be:
a.a decrease in expenses.
b.an increase in liabilities.
c.an increase in revenue.
d.no change in net assets.
Feedback
Incorrect. If a note payable is issued to satisfy an account payable, the account
payable balance will decrease.
3. Describe the accounting for bonds payable.
Problem #3 - Incorrect
The _____ is determined by transactions between buyers and sellers of similar
bonds.
a.effective rate of interest
b.proportionate interest
c.nominal interest
d.coupon rate
