Multiple choice

Multiple choice questions

Answer the following 24 multiple choice questions.

Please indicate your answer by either highlighting in green or Bolding the correct answer (if you don’t have the Highlight command on your Word menu, right click in the menu area and add a check mark next to either the Formatting or Drawing toolbars).

1. Which of the following is a macroeconomic concern?
a. The wage rates of electricians in Kansas City.
b. The effects of agricultural price supports on the income of farmers.
c. How profits are maximized by a firm.
d. The causes of unemployment in the United States.

2. Which of the following is a microeconomic concern?
a. Whether Microsoft is a monopoly or not.
b. Whether a new governmental policy is inflationary or not.
c. The effect that a new “police action” such as in Afganistan will have on national income.
d. Whether government can implement a policy that will eliminate unemployment.

3. Regarding tariffs and quotas:
a. domestic producers prefer quotas to tariffs because the quota raises the price of an imported good and tariffs do not.
b. quotas on imported automobiles cost jobs in the U.S. automobile industry, but result in lower prices for consumers.
c. a quota is a quantity limitation on imported goods but a tariff is a tax on imported goods.
d. governments prefer quotas to tariffs because quotas provide additional tax revenues to government.

4. A tariff or quota imposed by the U.S. on imported steel will:
a. increase the supply of steel and decrease its price in the U.S.
b. increase the quantity of steel imported in the U.S.
c. benefit U.S. consumers of steel but hurt U.S. steel producers and steel workers.
d. increase the demand for U.S.-made steel and increase its price.

5. Which of the following statements concerning business cycles is true?
a. When unemployment falls, inflation usually falls.
b. The target rate of unemployment is that associated with an accelerating rate of inflation.
c. Since the Great Depression, government has taken a more laissez-faire policy approach toward business cycles.
d. Officially, a recession exists only after there has been a 6-month or 2-quarter consecutive decline in real GDP.

6. The business cycle follows the following pattern:
a. expansion phase, trough, contraction phase, peak.
b. peak, expansion phase, contraction phase, trough.
c. contraction phase, expansion phase, peak, trough.
d. trough, expansion phase, peak, contraction phase.

7. The target rate of unemployment:
a. explains cyclical unemployment patterns.
b. is the rate of unemployment that the economy cannot go below without causing an increase in inflation.
c. has been a constant 6 to 7 percent for several decades.
d. is the rate of unemployment that exists when there is zero inflation.

8. GDP is:
a. the total market value of all final goods and services produced in an economy in a one-year period.
b. our only measure of a nation’s social well being.
c. a measure of the economic activity of the citizens and businesses of a country; GNP measures the economy activity that occurs within a nation’s borders.
d. equal to C + I + G + (M – X).

9. Which of the following would not cause America’s GDP to increase?
a. Japan buys more wheat from the U.S.
b. The federal government spends more on ships for the Navy.
c. Businesses spend more on capital.
d. Americans buy more Mercedes cars from Germany.

10. The amplification of initial changes in expenditures is called:
a. The wealth effect.
b. The interest rate effect.
c. The international effect.
d. The multiplier effect.

11. If an economy is at equilibrium at potential output and the AD curve shifts out, the economy will be in:
a. an inflationary gap and eventually the SAS curve will shift down.
b. a recessionary gap and the LAS curve will shift in.
c. a recessionary gap and the LAS curve will shift down.
d. an inflationary gap and eventually the SAS curve will shift up.

12. Which of the following would most likely cause a recession?
a. Government spending increases and taxes are reduced.
b. Imports rise and exports fall.
c. An increase in consumer confidence and expenditures spending rises.
d. Interest rates fall and investment spending increases.

13. The required reserves of a bank:
a. is calculated by multiplying the required reserve ratio by the bank’s demand deposit liabilities.
b. is determined by the Office of the President.
c. represents an amount of money that the bank can loan out.
d. would increase if the required reserve ratio decreased.

14. When a single bank:
a. makes a loan, it increases the money supply equal to the amount of the loan.
b. has a loan repaid, this will increase the money supply equal to the amount of the loan repayment.
c. is faced with a required reserve ratio of 0.15, then it can loan out 150 percent of its demand deposits.
d. has a reserve requirement of 10 percent, and a customer deposits $1000, the banks can lend out $1000 more.

15. According to the AS/AD model, which of the following describes the cause-effect relationships through which a change in money supply affects the level of economic activity?
a. An increase in the money supply will reduce interest rates, increase investment spending, and increase the level of economic activity.
b. An increase in the money supply will reduce interest rates, decrease investment spending, and decrease the level of economic activity.
c. An increase in interest rates will increase the money supply, decrease investment spending, and decrease the level of economic activity.
d. An increase in aggregate expenditures will decrease the money supply, increase inflation, and decrease the level of economic activity.

16. Which of the following statement is false?
a. An increase in the discount rate signals that the Fed wants the money supply tightened.
b. When the economy is below full employment, expansionary monetary policy will help boost output.
c. The Fed targets interest rates in setting monetary policy.
d. Banks earn more profits when they hold more reserves than are required by law.

17. Which of the following statements concerning fiscal policy is true?
a. Fiscal policy is the manipulation of government spending and taxes in an effort to smooth out the business cycle.
b. Expansionary fiscal policy is designed to reduce the income level in the economy.
c. Contractionary fiscal policy will shift the AE curve upward.
d. The automatic stabilizers destabilize the business cycle.

18. An advantage of expansionary monetary policy is that:
a. inflation may worsen.
b. it decreases unemployment.
c. capital outflow will worsen.
d. the trade deficit may increase.

19. A disadvantage of a contractionary fiscal policy is that:
a. it may help fight inflation.
b. the trade deficit may decrease.
c. it may allow a better monetary/fiscal mix.
d. it risks a recession.

20. The federal budget deficit:
a. is defined as a shortfall of incoming revenues under outgoing payments.
b. is defined as the amount by which the government is taxing more than it is spending.
c. is defined as accumulated deficits minus accumulated surpluses.
d. reduces the amount of government debt.

21. Which of the following statements concerning government debt is true?
a. To make judgments about a nation’s debt, you must look at its debt in relation to its assets.
b. Debt is the current annual amount by which the government is spending more than it collects as revenue.
c. Nominal U.S. government debt has been decreasing since World War II.
d. Paying interest on external debt involves a net increase in domestic income.

22. Which of the following statements concerning the deficit and debt is false?
a. Deficits and the debt are often measured relative to GDP because the government’s ability to service the debt and to repay the debt depends on GDP.
b. The larger GDP grows, the greater the ability of the government to handle debt.
c. Government debt is different from an individual’s debt because much of the government’s debt is external and can therefore be reneged on at any time without adverse consequences.
d. A constant debt/GDP ratio in a growing economy is consistent with a continual deficit.

23. Which of the following statements is true?
a. If the U.S. economy moves into a recession, this calls for expansionary monetary policy, which will unfortunately increase the U.S. trade deficit.
b. In order to pay foreigners interest on U.S. debt, the U.S. must eventually import more than it exports.
c. A nation can run a trade surplus for as long as it can borrow from, or sell assets to, foreigners.
d. If some nations are running trade deficits then all other nations are also running trade deficits.

24. If a nation wanted to fix its exchange rate at a level that is higher than the market rate, it would:
a. Increase the private supply of its currency.
b. increase the private demand for its currency by introducing a contractionary monetary policy.
c. try to achieve both an interest rate target and an exchange rate target.
d. deliberately try to cause a recession in its own country.

Multiple choice

Need assistance once again, answered 6 questions incorrectly. Need to know what the correct answer should have been.
Homework Review:

In my homework, I got six wrong answers. I have highlighted my answers. Please review these questions and tell me what the correct answers should have been.

1. Which of the following is true.

(a) As the price of common stock increases, the market price of a convertible bond and the conversion premium increase
(b) As the price of common stock increases, the market price of a convertible bond and the conversion value increase
(c) As the price of common stock increases, the conversion value and the floor price increase.
(d) Two of the above are true

2. If the price of common stock associated with a convertible bond is less than the conversion price:

(a) The bond will sell as its pure bond value
(b) The bond will sell at its par value
(c) The bond will sell at its conversion value
(d) There is not enough information to tell what the bond price will be

3. Options contracts contrast with futures because:

(a) Options are not traded on organized exchanges
(b) Options do create an obligation for the owner of the instrument
(c) Options are derivatives
(d) None of the above

4. Which of the following is not a characteristic of convertible bond issues?

(a) The average size of the offering is small
(b) A 15-20% conversion premium at time of issue is common
(c) Large companies will billions of dollars in sales and assets are the primary issuers
(d) Primary issuers tend not to have less than AAA credit ratings

5. A disadvantage to the investor of a convertible bond is that:

(a) The stock price may never rise above conversion price
(b) If interest rate rise, the pure bond value (floor price) will decline
(c) The interest rate on convertibles is generally one-third below the coupon rate on straight bonds of similar risk
(d) All of these are disadvantages

6. What of the following is true about warrants?

(a) At high prices, the warrant premium is high
(b) A rising stock price is usually followed by an increase in the price of the warrant
(c) (a) and (b) are true
(d) None of these are true

Multiple Choice

Hello,

I need help with the following sample assignment we received.

———-

Which of the following describes an opportunity cost?
A) The largest net benefit given up by choosing one action that precludes taking other actions.
B) The costs associated with taking advantage of a business opportunity.
C) The costs that appear in the cost of goods sold section of the income statement.
D) The revenues that a company will earn when it takes advantage of a business opportunity.

Use the following to answer questions 2-3:

Petersen Company has gathered the following data related to its production
process of two of its products for the week ended April 30:

Model #100 B #250C
Quantity produced 60 100
Unit level material cost $ 42,000 $ 100,000
Variable conversion cost 72,000 300,000
Total direct costs $114,000 $ 400,000
Indirect costs
Indirect production cost 163,200 272,000
Indirect operating cost 255,000 425,000
Total indirect costs 418,200 697,000
Total costs $532,200 $1,097,000

2. If the cost behaviors exhibited in this chart continue and the company produces 80 units of product 100B during May, the expected total unit level material cost of product 100 B would be:
A) $72,000
B) $56,000
C) $42,000
D) $96,000

3. The absorption cost per unit for product 250C was:
A) $1,900
B) $6,720
C) $6,970
D) $9,052

4. Under variable costing, operating income is measured by:
A) Gross margin minus operating expenses.
B) Throughput minus operating expenses.
C) Contribution margin minus indirect production and operating costs.
D) Sales minus variable costs.

5. Given the following: Transfers In $12,000; Transfers Out: $15,000; Ending Inventory: $3000.
What was the beginning balance?
A) $6,000
B) $ 0
C) $5,000
D) $9,000

6. Use the following information for Darose Manufacturing for the next three questions:

Work in Process Finished Goods
Beginning Balance $ 5,000 $ 8,000
Transfers In 25,000 ?
Transfers Out 22,000 ?
Ending Balance ? $15,000

The cost of goods sold for the period was:
A) $8,000
B) $29,000
C) $12,000
D) $15,000

7. The ending Balance in Work in Process was:
A) $ 2,000
B) $30,000
C) $ 8,000
D) $ 7,000

8. The cost of goods manufactured for the period was:
A) $22,000
B) $15,000
C) $8,000
D) Cannot be determined from the information given

9. Manufacturing overhead applied was $60,000, while actual overhead incurred was $62,000. Which of the following is always true of this situation?
A) Overhead was overapplied by $2,000
B) Overhead was underapplied by $2,000
C) Direct labor activity was overestimated
D) This difference must be reported as a loss for the period.

Use the following to answer questions 10-13:

A bottle cap manufacturer produces custom bottle caps and jar covers for large cosmetic companies. Each cosmetic company owns the custom made molds that are used for the caps and jar covers, so caps are produced only to customer order.
Each order requires the setting of molds in molding machines. Two full time mechanics, whose annual salary and benefits total $120,000 per year, are employed setting up and breaking down the molding machines. An order consists of anywhere from 50,000 to 200,000 units.

Assume 40 orders were received during the year 2000 for individual custom production runs. The total number of units produced in these orders was 5 million.

10. The activity described above would be an example of:
A) Facility level
B) Product level
C) Batch level
D) Customer level

11. The most appropriate cost driver base to allocate the salaries of the two mechanics would be:
A) Number of bottlecaps and jar covers produced.
B) Hours spent on each setup
C) Number of setups
D) Number of people employed in setup

12. The setup costs to be allocated to an order of 50,000 Nurturing Face Cream jar covers for Avalana Cosmetics using Activity Based Costing would be:
A) $1,500
B) $3,000
C) $2,400
D) $0, since this is an indirect cost and cannot be traced to the product in question

13. The per unit cost of setup under Activity Based Costing for each Nurturing Face Cream jar cover would be:
A) $0.03 per unit
B) $0.06 per unit
C) $0.05 per unit
D) $0.02 per unit

14. In determining customer profitability, it is important to include:
A) Selling costs
B) Marketing costs
C) Research and development costs
D) All of the above

15. When an unprofitable customer is discovered, managers may want to keep the customer but
A) Find ways to reduce the design activities related to the customer’s product
B) Find ways to reduce the administrative costs of the customer
C) Both of the above
D) None of the above

16. As part of customer profitability analysis, the relative use of certain activities by customers is compared to a norm. When the comparison shows excessive use of an activity by a customer, which of the following questions might be asked?
A) Is the problem a recent one?
B) Is the problem an ongoing one?
C) Is the problem getting worse?
D) All are possible questions.

Use the following to answer questions 17-18:

Matthew Company has a process costing system using the weighted average cost flow method. All materials are introduced at the beginning of the process in Department 1. The following information is available for the month of January:

Units
Work in Process, January 1 (40% complete as to conversion cost) 2,000
Started in January 12,000
Transferred to Department 2 during January 11,000
Work in Process, January (20% complete as to conversion cost) 3,000

17. The number of equivalent units of production for material costs for the month of January are:
A) 14,000
B) 11,600
C) 12,000
D) 11,000

18. The number of equivalent units of production for conversion costs for the month of January are:
A) 10,800
B) 12,000
C) 11,000
D) 11,600

19. Which of the following is not a method of allocating joint costs?
A) Sales value at split off
B) net realizable value
C) byproduct method
D) physical measures method

20. Which of the following would be an appropriate cost allocation base for allocating the cost of the company cafeteria?
A) Square footage occupied by departments
B) Number of hours of use
C) Number of meals served
D) Salaries of personnel purchasing meals

Use the following to answer questions 21-24:

Quick Credit Checks produces two styles of credit reports: personal and corporate. The difference between the two is the amount of background information and data collection required. The corporate report uses more skilled personnel because additional checking and data are required. The relevant figures for the year just completed follow: Total support service costs to be allocated are $3,200,000.

Allocation base Individual Corporate
Data purchased $40,000 $80,000
Research hours 24,000 30,000
Interview hours 1,000 10,000
Number of reports 16,000 3,000

21. If service costs are allocated according to the number of reports, the service department cost to be allocated to the Individual report department will be:
A) $2,694,737
B) $505,263
C) $1,066,667
D) $290,909

22. The manager of the Individual Department would most prefer which method of allocation?
A) Data purchased
B) Research hours
C) Interview hours
D) Number of reports

23. The manager of the Corporate Report Department would least prefer which method of allocation?
A) Data purchased
B) Research hours
C) Interview hours
D) Number of reports

24. If service department costs are allocated by data purchased, the Corporate report department will receive an allocation of:
A) $1,777,778
B) $1,066,667
C) $505,263
D) $2,133,333

25. Break-even analysis assumes that:
A) total revenue is constant.
B) unit variable cost is constant.
C) unit fixed cost is constant.
D) all of the above.

26. Beilen and Sons has fixed costs of $80,000. Its contribution margin ratio is 40% and its one product sells for $50. What is its break-even point in sales dollars?
A) $ 80,000.
B) $120,000.
C) $140,000.
D) $200,000.

27. Which of the following costs are relevant in the decision to drop a business unit?
A) Unavoidable Costs
B) Avoidable Costs
C) Both of the above
D) None of the above

28. Relevant costs exclude
A) fixed costs
B) costs that change from year to year
C) costs that do not changes based upon the alternative choices
D) all of the above

29. Which of the following is not a reason for padding a budget with slack?
A) People often perceive their performance will look better in their superior’s eyes if they can “beat the budget”.
B) The budget was developed by top management who have no idea of what goes
on in the various units of the company.
C) Budgetary slack is often used to cope with uncertainty.
D) Budgetary cost projections often are cut in the resource allocation process.

30. Generally a variance should be investigated if:
A) benefits of investigation are greater than zero.
B) the variance is unfavorable.
C) the benefits of investigation exceed the cost of investigation.
D) the variance is favorable

31. The objective(s) of transfer pricing is / are
A) to motivate managers.
B) to provide an incentive for managers to make decisions consistent with the firm’s goals.
C) to provide a basis for fairly rewarding the managers.
D) All of the above.
E) b and c

32. The Balanced Scorecard is a
A) causal model of lead indicators of performance.
B) causal model of lag indicators of performance.
C) causal model of lead and lag indicators of performance.
D) cause-and-effect relationship model of financial indicators of performance.
E) None of the above.
33. AAA Company produced a product which had a selling price of $20 and a variable cost which amounted to 40% of sales. The company wants a profit before tax of $15,000. The tax rate is 20% and fixed costs amount to $60,000. AAA must sell
A) 6,250
B) 7,396
C) 9,375
D) 9,844
E) None of the above

34. The five steps in process costing include
A) beginning inventory, costs added, units completed, ending inventory, and spoilage.
B) <!–[endif]–>units to account for, units accounted for, equivalent number of units, costs to account for, and unit costs.
C) unit reconciliation, equivalent number of units, cost of work in process beginning, costs added during the period, and unit cost.
D) unit reconciliation, equivalent number of units, costs to account for, cost per unit, and costs accounted for.
E) None of the above.

Multiple Choice

Many traditional costing systems:

A. trace manufacturing overhead to individual activities and require the development of numerous activity-costing rates

B. write off manufacturing overhead as an expense of the current period

C. combine widely varying elements of overhead into a single cost pool.

D. use a host of different cost drivers to improve the accuracy of product costing.

E. produce results far superior to those achieved with activity-based costing.

Multiple Choice

A company has fixed costs of $900 and a per-unit contribution margin of $3. Which of the following statements is (are) true?

A. Each unit “contributes” $3 toward covering the fixed costs of $900.
B. The situation described is not possible and there must be an error.
C. Once the break-even point is reached, the company will make money at the rate of $3 per unit.
D. The firm will definately lose money in this situation.
E. Statements “A” and “C” are true.

Multiple choice

An income statement should list expenses in what order?

a) descending order by amount

b) in order of importance to the company’s primary mission.

c) alphabetical order.

d) ascending order by amount

2) Steps that begin with analyzing source documents that concludes with the post -closing trail balance are called the

a) adjusting entries

b) posting process

c) closing process

d) accounting cycle

3) which of the following accounts will appear in the balance sheet credit column?

a) depreciation expense

b) Unearned service revenue

c) service revenue

d) pre-paid insurance

4) which account has a balance equal to net income immediately before it closed?

a) the net income account

b) withdrawal account

c) capital account

d) income summary account

Multiple Choice

See attached file.

Emmy Company had beginning raw materials inventory of $7,000. During the period, the company purchased $47,000 of raw materials on account. If the ending balance in raw materials was $6,000, the amount of raw materials transferred to work in process inventory is:
a. $42,000.
b. $45,000.
c. $50,000.
d. $48,000.

Nubian Company employs material handling employees who move materials between production divisions at a labor cost of $160,000 a year. It is estimated that these employees move 75,000 pounds of material per year. If 6,000 pounds are moved in March, how much of the labor cost should be assigned to products made in March?
a. $12,000.
b. $12,800.
c. $26,666.
d. $75,000.

The statement of cash flows classifies cash flows into operating, investing, and financing activities.
True
False

Activity-based-costing would be most appropriate in which of the following circumstances?
a. When a company makes multiple products, all of which place an equal demand on the consumption of overhead costs.
b. When a company makes the same quantity of a single product on a monthly basis.
c. When a company produces multiple products that require the consumption of an equal amount of materials and labor, but different amounts of overhead.
d. When a company makes different quantities of single product on a monthly basis.

The three costs of producing a product include all of the following except:
a. Direct material costs.
b. Direct labor costs.
c. R&D costs.
d. Overhead costs.

The operating activities section of the cash flow statement is essentially a cash-basis income statement.
True
False

A banker may perform a financial ratio analysis to assess a firm’s ability to repay debt in a timely manner.
True
False

The entry to record depreciation expense on manufacturing equipment will:
a. Decrease net assets, equity, and net income.
b. Not affect assets, decrease net income, and not affect cash flow.
c. Decrease net assets, decrease net income, and increase equity.
d. Not affect assets, net income, or cash flow.

Four purposes often claimed for budgeting involve planning, coordination, performance measurement, and corrective action.
True
False

Coley Company estimates that its production workers will work 125,000 direct labor hours during the upcoming period. If the predetermined overhead rate is $4 per direct labor hour, what is the total amount of overhead costs?
a. $4 per unit.
b. $400,000.
c. $500,000.
d. None of the above.

Target pricing begins with determining the price at which a product will sell and then focusing on developing ways to produce the product at a cost that will enable the company to achieved its desired profit margin.
True
False

Strategic planning deals with the establishment of a master budget that will direct the firm’s activities over the next budget period.
True
False

The Salary and Wages Expense account is debited when production workers are paid.
True
False

A static budget is one that shows estimated revenues and costs at multiple activity levels.
True
False

HipBags Company makes two types of women’s handbags. Making a standard handbag requires 2 hours of labor while making a deluxe handbag requires 5 hours of labor. During the most recent accounting period the company made 2,000 standard handbags and 500 deluxe handbags. Indirect manufacturing costs amounted to $52,000. Based on this information:
a. $8 of overhead cost should be allocated to each handbag regardless of the type of handbag made.
b. $2.08 of overhead cost should be allocated to each handbag regardless of the type of handbag made.
c. $16 of overhead cost should be assigned to each standard handbag and $40 of overhead cost should be assigned to each deluxe bag.
d. None of the above.

Multiple Choice

Mark the correct answer or fill in the answer sheet at the end

1. Which of the following statements best represents what finance is about?
a. How political, social, and economic forces affect corporations
b. Maximizing profits
c. Creation and maintenance of economic wealth
d. Reducing risk

2. Which of the following is not an advantage of the sole proprietorship?
a. Limited liability
b. No time limit imposed on its existence
c. No legal requirements for starting the business
d. None of the above

3. Which of the following would be included in the calculation of net operating working capital?
a. Accounts payable
b. Accruals
c. Fixed Assets
d. Both a and b
e. All of the above

4. Free cash flow will increase with a decrease in __________.
a. tax rate
b. accruals
c. depreciation expense
d. both a and c

5. Skrit Corporation has a net profit margin of 15% and a total asset turnover of 1.7. What is Skrit’s return on total assets?
a. 12.3%
b. 25.5%
c. 8.8%
d. 11.1%

6. Which of the following is not a limitation related to the usage of ratios when reviewing a firm’s performance?
a. Many firms experience seasonality in their operations.
b. Ratios cannot be used to compare firms that are in the same industry if one firm’s sales are higher than another firm’s.
c. Some firms operate in a variety of business lines, which makes it difficult to make comparisons.
d. Accounting practices differ widely among firms.

7. Which of the following are considered to be spontaneous sources of financing (i.e., they arise naturally during the course of doing business)?
a. Notes payable and common stock
b. Accounts receivable and bonds
c. Fixed assets and inventory
d. Accounts payable and accrued expenses

8. Use the following information to Answer the questions. As of December 31, Budget, Inc. had a
cash balance of $50,000. December sales were $150,000 and are expected to be $100,000 in
January. 20% of sales in any month are cash sales, and 80% of sales are collected during the
following month. In January, Budget is expected to have total cash disbursements of $120,000, and
Budget requires a minimum cash balance of $50,000.

Budget’s expected cash receipts for January are:
a. $80,000.
b. $100,000.
c. $110,000.
d. $140,000.

9. What is the present value of $250 received at the beginning of each year for 21 years? Assume that the first payment is received today. Use a discount rate of 12%.

a. $1,870
b. $2,090
c. $2,117
d. $3,243

10. Which of the following statements is false?
a. Quarterly compounding has a higher annual percentage yield than monthly compounding.
b. On monthly compounding loans, the annual percentage yield will be less than the nominal or quoted rate of interest.
c. Compounding essentially means earning interest on interest on an initial balance.
d. Perpetuities pay an equal payment forever.

11. The IRR is:
a. the discount rate that makes the NPV positive.
b. the discount rate that equates the present value of the cash inflows with the cost of the project.
c. the discount rate that makes the NPV negative and the profitability index greater than one.
d. the rate of return that makes the NPV positive.

12. Which of the following is NOT a criticism of the payback period criteria?
a. Time value of money is not accounted for.
b.Returns occurring after the payback are ignored.
c. It deals with accounting profits as opposed to cash flows.
d. Both a & c

13. Which of the following is NOT true concerning NPV method of evaluating projects?
a. Time value of money is not accounted for.
b. It is difficult to understand for the average person.
c. It does not address a payback period.
d. Both a & c

14. Jefferson Corporation is considering an expansion project. The necessary equipment could be purchased for $15 million and shipping and installation costs are another $500,000. The project will also require an initial $2 million investment in net working capital. The company’s tax rate is 40%. What is the project’s initial investment outlay (in millions)?
a. $15.0
b. $15.5
c. $16.5
d. $17.0
e. $17.5

15. Which of the following is NOT used to calculate the cost of debt?
a. Maturity value of the debt
b. Market price of the debt
c. Number of years to maturity
d. Risk-free rate

16. The cost of newly issued common stock is greater than the cost of retained earnings due to:
a. flotation costs.
b. taxes.
c. higher risk.
d. both a and c.
e. all of the above.

17. As fixed costs increase, ___________ increases.
a. degree of operating leverage
b. degree of financial leverage
c. earnings per share
d. leverage

18. Fixed costs include all of the following EXCEPT:
a. administrative salaries.
b. property taxes.
c. sales commissions.
d. insurance.

19. Which two ratios would be most helpful in managing a firm’s capital structure?
a. Balance sheet leverage ratios and profitability ratios
b. Leverage ratios and coverage ratios
c. Coverage ratios and liquidity ratios
d. Coverage ratios and profitability ratios

20. The net income approach to valuation relates to what theory on capital structure?
a. The independence theory
b. The moderate position theory
c. The dependence theory
d. The capital accumulation theory

21. The focus of current asset management is on:
a. property, plant, and equipment acquisition.
b. cash, accounts receivable, and inventory levels.
c. investments in marketable securities.
d. both a and c.
e. all of the above.
22. Disadvantages of using current liabilities as opposed to long-term debt include:
a. greater risk of illiquidity.
b. uncertainty of interest costs.
c. higher cash flow exposure.
d. both a and b.
e. all of the above.
23. A company is technically insolvent when:
a. cash outflows in a given period are greater than cash inflows.
b. earnings before interest payments are less than the interest payments.
c. it lacks the necessary liquidity to promptly pay its current debt obligations.
d. the current ratio is less than 1.0.

24. The preauthorized check system is used often by:
a. automobile dealers.
b. insurance companies.
c. jewelers.
d. appliance stores

25. Determining how low inventory should be depleted before it is reordered is called the:
a. order point problem.
b.economic order quality.
c.stockout minimization issue.
d.ordering cost dilemma.

26. An aging schedule of accounts receivable aids the financial manager in determining the:
a. amount of receivables that are past due.
b. average age of the customers.
c. receivables turnover.
d. average length of the discount period.

27. Elimination of all foreign exchange risk:
a. should be the objective of a prudent financial manager.
b. should be analyzed on a cost benefit basis.
c. is possible through diversification.
d. both a and c.
e. all of the above.

28. _________ risk is generally considered only a paper gain or loss.
a. Transaction
b. Translation
c. Economic
d. Financial

29. Which of the following types of merger is most likely to foster diversification benefits?
a. A horizontal merger
b. A vertical merger
c. A conglomerate merger
d. A pooling of interests merger

30. Which of the following is an example of a horizontal merger?
a. A merger between Intel and Target
b. A merger between McDonalds and Tyson Chicken
c. A merger between Coca-Cola and General Electric
d. A merger between Chrysler and Daimler-Benz

Multiple choice

1) In a typical chart of accounts, liabilities start with a _______ and expenses start with a _____

Possible answers are (a) 2,4 (b) 1,3 (c) 2,5 (d) 1,4

2) A business makes a principle payment of cash on a note payable. The note payable was originally issued for the purchase of equipment. Which of the following occurs?

a) an asset is credited and a liability is debited

b) an asset is debited and an asset is credited.

c) an asset is debited and a liability is credited.

d) a liability is debited and a liability is credited

3) which of the following is first step in the normal flow of accounting data from the journal to the ledger?

a) journalizing

b) posting

c) transaction analysis

d) preparation of trial balance

4) a payment on an account was posted as a debit to cash and a credit to accounts payable. Which of the following conditions will exist?

a) cash would be overstated

b) accounts payable would be understated

c) accounts receivable would be overstated

d) stockholders equity would be overstated.

5) which of the following accounts would be adjusted at the end of the accounting period?

a) cash

b) accounts receivable

c) accounts payable

d) prepaid insurance

Multiple Choice

See attached file for full problem description.

1. “Generally accepted” in the phrase generally accepted accounting principles means that the principles
a. are proven theories of accounting.
b. have substantial authoritative support.
c. have been approved by the Internal Revenue Service.
d. have been approved for use by the managements of business firms.

2. Which one of the following is not an objective of financial reporting according to the conceptual framework?
a. to provide information that will increase the value of the company.
b. To provide information in assessing future cash flows.
c. To provide information that is useful for making investment and credit
decisions.
d. To provide information that identifies economic resources, the claims to those
resources and the changes in those resources and claims.

3. The going concern assumption assumes that the business
a. will be liquidated in the near future.
b. will be purchased by another business.
c is in a growth industry.
d. will continue in operation long enough to carry out objectives and
commitments.

4. It is assumed that the activities of Chrysler Corporation can be distinguished from
those of General Motors because of the
a. going concern assumption.
b. economic entity assumption .
c. monetary unit assumption.
d. time period assumption.

5. The revenue recognition principle dictates that revenue should be recognized in
the accounting period in which it is
a. collected.
b. earned.
c. most likely to be collected.
d. earned and collected.

6. The cost principle requires that when assets are acquired, they be recorded at
a. appraisal value.
b. exchange price paid.
c. selling price .
d. list price.

7. A basic assumption of accounting assumes that the dollar is
a. unrelated to business transactions.
b. a poor measure of economic activities.
c. the common unit of measure for all business transactions
d. useless in measuring an economic event.

8. The left side of an account is
a. blank.
b. a description of the account.
c. the debit side.
d. the balance of the account.

9. T-account is
a. a way of depicting the basic form of an account.
b. what the computer uses to organize bytes of information.
c. a special account used instead of a trial balance.
d. used for accounts that have both a debit and credit balance.

10. A debit is not the normal balance for which account listed below?
a. Dividends.
b. Cash.
c. Accounts Receivable.
d. Service Fees Earned.

11. An awareness of the normal balances of accounts would help you spot which of
the following as an error in recording?
a. A debit balance in the Dividends account.
b. A credit balance in an expense account.
c. A credit balance in a liabilities account.
d. A credit balance in a revenue account.

12. A journal is not useful for
a. disclosing in one place the complete effect of a transaction.
b. preparing financial statements .
c. providing a record of transactions.
d. locating and preventing errors.

13. Which of the following is not a common time period chosen by businesses as their accounting period?
a. Daily.
b. Monthly.
c. Quarterly.
d. Annually.

14. Jim’s Tune-up Shop follows the revenue recognition principle. Jim services a car
on July 31. The customer picks up the vehicle on August 1 and mails the payment
to Jim on August 5. Jim receives the check in the mail on August 6. When should
Jim show that the revenue was earned?
a. July 31
b. August 1
c. August 5
d. August 6

15. An asset–expense relationship exists with
a. liability accounts.
b. revenue accounts.
c. prepaid expense adjusting entries.
d. accrued expense adjusting entries.

16. A law firm received $2,000 cash for legal services to be rendered in the future.
The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause
a. expenses to be overstated.
b. net income to be overstated.
c. liabilities to be understated.
d. revenues to be understated.

17. The matching principle matches
a. customers with businesses.
b. expenses with revenues.
c. assets with liabilities.
d. creditors with businesses.

18. If the total debit column exceeds the total credit column of the income statement
columns on a work sheet, then the company has
a. earned net income for the period.
b: an error because debits do not equal credits.
c. suffered a net loss for the period.
d. to make an adjusting entry.

19. Closing entries are made
a. in order to terminate the business as an operating entity.
b. so that all assets, liabilities, and stockholders’ equity accounts will have zero
balances when the next accounting period starts.
c. in order to transfer net income (or loss) and dividends to the Retained Earnings
account.
d. so that financial statements can be prepared.

20. In preparing closing entries
a. each revenue account will be credited.
b.each expense account will be credited.
c. the Retained Earnings account will be debited if there is net income for the
period.
d. the Dividends account will be debited.

21. .The closing entry process consists of closing
a. all asset and liability accounts.
b. out the Retained Earnings account.
c. all permanent accounts.
d. all temporary accounts .

22. An enterprise that sells goods to customers is known as a
a. proprietorship.
b. corporation.
c. retailer.
d. service firm.

23. Sales revenue less cost of goods sold is called
a. gross profit.
b. net profit.
c. net income.
d. marginal income.

24. After gross profit is calculated, operating expenses are deducted to determine
a. gross margin.
b. net income .
c. gross profit on sales.
d. net margin.

25. Gross profit does not appear
a. on a multiple-step income statement.
b. on a single-step income statement.
c. to be relevant in analyzing the operation of a merchandising company.
d. on the income statement if the periodic inventory system is used because it
cannot be calculated.

26. Income from operations appears on
a. both a multiple-step and a single-step income statement.
b. neither a multiple-step nor a single-step income statement.
c. a single-step income statement.
d. multiple-step income statement.

27. If goods in transit are shipped FOB destination
a. the seller has legal title to the goods until they are delivered.
b. the buyer has legal title to the goods until they are delivered.
c. the transportation company has legal title to the goods while the goods are in
transit.
d. no one has legal title to the goods until they are delivered.

28. Wagner Company’s goods in transit at December 31 include sales made
(1) FOB destination.
(2) FOB shipping point and purchases made FOB shipping point.
(3) FOB destination and purchases made FOB shipping point.
(4) FOB shipping point.

Which items should be included in Wagner’s inventory at December 31?
a. (2) and (3).
b. (1) and (4).
c. (1) and (3).
d. ( 2 ) and ( 4 ).

29. Net purchases plus freight-in determines
a. cost of goods sold.
b. cost of goods available for sale.
c. cost of goods purchased.
d. total goods available for sale.

30. The LIFO inventory method assumes that the cost of the latest units purchased are
a. the last to be allocated to cost of goods sold.
b the first to be allocated to ending inventory.
c. the first to be allocated to cost of goods sold.
d. not allocated to cost of goods sold or ending inventory.

31. The selection of an appropriate inventory cost flow assumption for an individual
company is made by
a. the external auditors.
b. the SEC.
c. the internal auditors.
d. management .

32. Which of the following is not a common cost flow assumption used in costing
inventory?
a. First-in, first-out.
b. Middle-in, first-out.
c. Last-in, first-out.
d. Average cost.

33. Which one of the following is not an objective of a system of internal controls?
a. safeguard company assets.
b. overstate liabilities in order to be conservative.
c. Enhance the accuracy and reliability of accounting records.
d. Reduce the risks of errors.

34. Journalize the following business transactions in general journal form. Identify
each transaction by number. You may omit the explanation of the transactions.

1. Stockholders invest $25,000 in cash in starting a real estate office
operating as a corporation.
2. Purchased $400 of office supplies on credit.
3. Purchased office equipment for $8,000, paying $2,500 in cash and signed a 30-day, $5,500, note payable.
4. Real estate commissions billed to clients amount to $4,000.
5. Paid $700 in cash for current month’s rent.
6. Paid $200 cash on account for office supplies purchased in transaction 2.
7. Received a bill for $500 for advertising for the current month.
8. Paid $2,200 cash for office salaries.
9. Paid $1,200 cash dividends to stockholders.
10. Received a check for $3,000 from a client in payment on account for commissions billed in transaction 4.

35. The work sheet for the Terry Rental Company appears at the end of the packet. Using the adjustment data below, complete the work sheet. Add any accounts that are necessary. You may use the work sheet itself or do this in Excel.

Adjustment data:
a. Prepaid rent expired during August, $3.
b. Depreciation expense on office equipment for the month of August, $8.
c. Supplies on hand on August 31 amounted to $4.
d. Salaries expense incurred at August 31 but not yet paid amounted to $12.

36. The financial statement columns of the work sheet for Video Concepts at
December 31, 2003 are as follows:

Video Concepts
Work Sheet
For the Year Ended December 31, 2003

Income Statement Balance Sheet

Accounts
Debit Credit Debit Credit
Cash 14,000
Accounts Receivable 11,000
Supplies 4,000
Prepaid Insurance 6,000
Video Equipment 210,000
Acc. Depreciation – Equipment 26,000
Accounts Payable 24,000
Note Payable 60,000
Salaries Payable 3,000
Common Stock 90,000
Retained Earnings 22,000
Dividends 15,000
Video Rental Revenue 138,000
Advertising Expense 21,000
Depreciation Expense 12,000
Insurance Expense 3,000
Rent Expense 17,000
Salaries Expense 44,000
Supplies Expense
6,000

Totals 103,000 138,000 260,000 225,000
Net Income
35,000
35,000
138,000 138,000 260,000 260,000

INSTRUCTIONS
a. Calculate the balance of Retained Earnings that would appear on a balance sheet at December 31, 2003. Show it below.
b. Prepare a classified balance sheet for Video Concepts at December 31, 2003 assuming the note payable is a long-term liability.

Multiple choice

Which of the following is true about both process costing systems and job costing systems?

1. Either one can be easily implemented in any type of manufacturing situation.
2. The use of finished goods accounts is unnecessary in either method.
3. None of the other answers
4. Both utilize work in process accounts to accumulate costs

Gomez Industries makes high definition screens for use in flat panel monitors. This week they began work on 1400 27 inch screens and had 300 unfinished remaining at the end of the week which also coincided with the month end. All remaining monitors were 90% completed in regard to direct materials and 65% completed in regard to direct labor and overhead.
Considering the concept of equivalent units, how many units are incomplete in regard to conversion costs?

1. 300
2. 270
3. None of the other answers
4. 195

The cost of goods completed and ready for sale are normally transferred from work in process to _______.

1. Sales of Goods in Process
2. Finished Goods Inventory
3. Raw Materials Inventory
4. Cost of Goods Sold
5. None of the other answers

Which of the following indicates the typical flow of costs in either a job costing or process costing system?

1. Cost of goods sold, raw materials inventory, work in process inventory, finished goods inventory
2. Raw materials inventory, cost of goods sold, work in process inventory, finished goods inventory
3. Raw materials inventory, work in process inventory, cost of goods sold, finished goods inventory
4. Raw materials inventory, work in process inventory, finished goods inventory, cost of goods sold
5. None of the other answers

The accounting system that records manufacturing activities using a periodic inventory system is known as a ____________.

1. General accounting system
2. None of the other answers
3. Periodic accounting system
4. Cost accounting system
5. Perpetual accounting system

Multiple choice

1. Which of the following is not a characteristic of Managerial Accounting?

a. Emphasis on individual projects within the organization.
b. Doesn’t conform to GAAP
c. Uses projections and estimates as well as historical information.
d. Assists managers in making planning and controlling decisions
e. None of the other answers

2. Taggart Industries spend $475,000 to pour a concrete pad near their largest factory location in the hopes of settling a new air compressor but the contract for the cmpressor fell though and the piece of equipment wasn’t purchased.

Two months later Taggart decided to use the pad for a new group of refuse containers. The cost of the concrete pad in consideration of the new refuse containers is a ____________.

a. Sunk Cost
b. Opportunity Cost
c. Out-of-Pocket Cost.
d. None of the other answers

3. Which of the following items would be included in the Investing section of the Statement of Cash Flows?

a. Cash inflows received from the issuance of common stock by the company
b. Cash inflows resulting from the sale of property, plant, and equipment
c. Cash receipts from sales of goods or services
d. Cash outflows to other suppliers/vendors for goods or services
e. None of the other answers

4. Which of the following manufacturers is most likely to operate a job cost shop as opposed to a processs costing facility?

a. An assembly line for Ford Motor Company
b. A small architectural firm with two owner/operators who thorougly evaluate each assignment before taking it on for profitability
c. A food processing plant that purchases, processes, and packages frozen school lunches for the city of Meridian Mississippi.
d. None of the other answers

5. Livingston/Stone Outdoorwear reported on their most current financial statement a wonderful year with Total Sales of $9.8 million dollars and Sales Returns and allowances of $1 million even. Cost of good sold for the company was $5.4 million and net income for the period was $3.5 million. What would have been the profit margin for Livingston/Stone during this period?

a. 39.77 %
b. 35.71%
c. 97.14%
d. None of the other answers

Multiple Choice

1. Management accounting
A. focuses on estimating future revenues, costs, and other measures to forecast activities and their results.
B. provides information about the company as a whole.
C. reports information that has occurred in the past that is verifiable and reliable.
D. provides information that is generally available only on a quarterly or annual basis.

2. Cost behavior refers to
A. how costs react to a change in the level of activity.
B. whether a cost is incurred in a manufacturing, merchandising, or service company.
C. classifying costs as either inventoriable or period costs.
D. whether a particular expense has been ethically incurred.

3. Which of the following is NOT an assumption of CVP analysis?
A. Costs may be separated into separate fixed and variable components.
B. Total revenues and total costs are linear in relation to output units.
C. Unit selling price, unit variable costs, and unit fixed costs are known and remain constant.
D. Proportion of different products will remain constant when multiple products are sold.

4. Job costing
A. can only be used in manufacturing.
B. records the flow of costs for each customer.
C. allocates an equal amount of cost to each unit made during a time period.
D. is commonly used when each unit of output is identical.

5. The UNIQUE feature of an ABC system is the emphasis on
A. costing individual jobs.
B. department indirect-cost rates.
C. multiple-cost pools.
D. individual activities.

6. An unfavorable variance indicates that
A. actual costs are less than budgeted costs.
B. actual revenues exceed budgeted revenues.
C. the actual amount decreased operating income relative to the budgeted amount.
D. all of the above are true.

7. The flexible budget contains
A. budgeted amounts for actual output.
B. budgeted amounts for planned output.
C. actual costs for actual output.
D. actual costs for planned output

8. Which of the following is an equation of a variable cost function?
A. y = b
B. y = a + bX
C. y = bX
D. y = a

9. Operating budgets include all of the following EXCEPT:
A. the revenues budget
B. the budgeted income statement
C. the administrative costs budget
D. the budgeted balance sheet

10. For decision making, a listing of the relevant costs:
A. will help the decision maker concentrate on the pertinent data.
B. will only include future costs.
C. will only include costs that differ among alternatives.
D. All of these answers are correct.

Multiple Choice

Can someone please help me with the following practice questions?

1. Most business enterprises in the United States are
A) proprietorships and partnerships.
B) partnerships.
C) corporations.
D) government units.

2. Which of the following would not be classified as a long-term liability?
A) Current maturities of long-term debt
B) Bonds payable
C) Mortgage payable
D) Lease liabilities

3. An intangible asset
A) derives its value from the rights and privileges it provides the owner.
B) is worthless because it has no physical substance.
C) is converted into a tangible asset during the operating cycle.
D) cannot be classified on the balance sheet because it lacks physical substance.

4. A current asset is
A) the last asset purchased by a business.
B) an asset which is currently being used to produce a product or service.
C) usually found as a separate classification in the income statement.
D) expected to be converted to cash or used in the business within a relatively short period of time.

5. One of the accounting concepts upon which adjustments for prepayments and accruals are based is
A) matching.
B) cost.
C) monetary unit.
D) economic entity.

6. Which is not an application of revenue recognition?
A) Recording revenue as an adjusting entry on the last day of the accounting period.
B) Accepting cash from an established customer for services to be performed over the next three months.
C) Billing customers on June 30 for services completed during June.
D) Receiving cash for services performed.

7. The custodian of a company asset should
A) have access to the accounting records for that asset.
B) be someone outside the company.
C) not have access to the accounting records for that asset.
D) be an accountant.

8. Internal auditors
A) are hired by CPA firms to audit business firms.
B) are employees of the IRS who evaluate the internal controls of companies filing tax returns.
C) evaluate the system of internal controls for the companies that employ them.
D) cannot evaluate the system of internal controls of the company that employs them because they are not independent.

9. The principle of establishing responsibility does not include
A) one person being responsible for one task.
B) authorization of transactions.
C) independent internal verification.
D) approval of transactions.

10. Which of the following statements is true?
A) Due to its liquid nature, cash is the easiest asset to steal.
B) A good system of internal control will ensure that employees will not be able to steal cash.
C) It takes two or more employees working together to be able to steal cash.
D) All statements are true.

11. The use of prenumbered checks is an example of
A) documentation procedures.
B) independent internal verification.
C) establishment of responsibility.
D) segregation of duties.

12. Which of the following income statement figures would probably be the best indicator of a company’s future performance?
A) Total revenues
B) Income from operations
C) Net income
D) Gross profit

13. Which of the following would not be considered a change in accounting principle?
A) Changing the estimated percentage used in calculating bad debt expense.
B) Changing the inventory costing method used from FIFO to LIFO.
C) Changing from straight-line depreciation to double-declining balance depreciation.
D) Changing from the cost method of accounting for investments to the equity method.

Multiple choice

1. Dane, Inc., owns 35% of Marin Corporation. During the calendar year 2007, Marin had net earnings of $300,000 and paid dividends of $30,000. Dane mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and retained earnings, respectively?
a. Understate, overstate, overstate
b. Overstate, understate, understate
c. Overstate, overstate, overstate
d. Understate, understate, understate

2. Compensation expense resulting from a compensatory stock option plan is generally
a. recognized in the period of exercise.
b. recognized in the period of the grant.
c. allocated to the periods benefited by the employee’s required service.
d. allocated over the periods of the employee’s service life to retirement.

3. An example of a correction of an error in previously issued financial statements is a change
a. from the FIFO method of inventory valuation to the LIFO method.
b. in the service life of plant assets, based on changes in the economic environment.
c. from the cash basis of accounting to the accrual basis of accounting.
d. in the tax assessment related to a prior period.

Use the following information for questions 18 and 19.

Waeglein Corporation purchased machinery on January 1, 2006 for $630,000. The company used the straight-line method and no salvage value to depreciate the asset for the first two years of its estimated six-year life. In 2008, Waeglein changed to the sum-of-the-years’-digits depreciation method for this asset. The following facts pertain:

2006 2007
Straight-line $105,000 $105,000
Sum-of-the-years’-digits $180,000 $150,000

4. Waeglein is subject to a 40% tax rate. The cumulative effect of this accounting change on beginning retained earnings is
a. $135,000.
b. $120,000.
c. $72,000.
d. $0.

5. The amount that Waeglein should report for depreciation expense on its 2008 income statement is
a. $168,000.
b. $105,000.
c. $75,000.
d. none of the above.

6. Rensing Company’s December 31 year-end financial statements contained the following errors:
Dec. 31, 2007 Dec. 31, 2008
Ending inventory $7,500 understated $11,000 overstated
Depreciation expense $2,000 understated

An insurance premium of $18,000 was prepaid in 2007 covering the years 2007, 2008, and 2009. The prepayment was recorded with a debit to insurance expense. In addition, on December 31, 2008, fully depreciated machinery was sold for $9,500 cash, but the sale was not recorded until 2009. There were no other errors during 2008 or 2009 and no corrections have been made for any of the errors. Ignore income tax considerations.

What is the total net effect of the errors on Rensing’s 2008 net income?
a. Net income understated by $14,500.
b. Net income overstated by $7,500.
c. Net income overstated by $13,000.
d. Net income overstated by $15,000.

7. The deferred tax expense is the
a. increase in balance of deferred tax asset minus the increase in balance of deferred tax liability.
b. increase in balance of deferred tax liability minus the increase in balance of deferred tax asset.
c. increase in balance of deferred tax asset plus the increase in balance of deferred tax liability.
d. decrease in balance of deferred tax asset minus the increase in balance of deferred tax liability.

Use the following information for questions 27 and 28

McGee Company deducts insurance expense of $84,000 for tax purposes in 2008, but the expense is not yet recognized for accounting purposes. In 2009, 2010, and 2011, no insurance expense will be deducted for tax purposes, but $28,000 of insurance expense will be reported for accounting purposes in each of these years. McGee Company has a tax rate of 40% and income taxes payable of $72,000 at the end of 2008. There were no deferred taxes at the beginning of 2008.

8. What is the amount of the deferred tax liability at the end of 2008?
a. $33,600
b. $28,800
c. $12,000
d. $0

9. Assuming that income tax payable for 2009 is $96,000; the income tax expense for 2009 would be what amount?
a. $129,600
b. $107,200
c. $96,000
d. $84,800

10. Koble, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2008.
Service cost $ 200,000
Contributions to the plan $ 220,000
Actual return on plan assets $ 180,000
Projected benefit obligation (beginning of year) $2,400,000
Market-related and fair value of plan assets (beginning of year) $1,600,000

The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2008 is
a. $200,000.
b. $260,000.
c. $280,000.
d. $440,000.

34. On July 1, 2007, an interest payment date, $60,000 of Risen Co. bonds were converted into 1,200 shares of Risen Co. common stock each having a par value of $45 and a market value of $54. There is $2,400 unamortized discount on the bonds. Using the book value method, Risen would record
a. no change in paid-in capital in excess of par.
b. a $3,600 increase in paid-in capital in excess of par.
c. a $7,200 increase in paid-in capital in excess of par.
d. a $4,800 increase in paid-in capital in excess of par.

35. When investments in debt securities are purchased between interest payment dates, preferably the
a. securities account should include accrued interest.
b. accrued interest is debited to Interest Expense.
c. accrued interest is debited to Interest Revenue.
d. accrued interest is debited to Interest Receivable.

36. If, at the end of a period, a company erroneously excluded some goods from its ending inventory and also erroneously did not record the purchase of these goods in its accounting records, these errors would cause
a. the ending inventory and retained earnings to be understated.
b. the ending inventory, cost of goods sold, and retained earnings to be understated.
c. no effect on net income, working capital, and retained earnings.
d. cost of goods sold and net income to be understated.

38. Yunger Corp. on January 1, 2004, granted stock options for 40,000 shares of its $10 par value common stock to its key employees. The market price of the common stock on that date was $23 per share and the option price was $20. The Black-Scholes option pricing model determines total compensation expense to be $240,000. The options are exercisable beginning January 1, 2007, provided those key employees are still in Yunger’s employ at the time the options are exercised. The options expire on January 1, 2008. On January 1, 2007, when the market price of the stock was $29 per share, all 40,000 options were exercised. The amount of compensation expense Yunger should record for 2006 under the fair value method is
a. $0.
b. $40,000.
c. $80,000.
d. $120,000.

39. All of the following are procedures for the computation of deferred income taxes except to
a. identify the types and amounts of existing temporary differences.
b. measure the total deferred tax liability for taxable temporary differences.
c. measure the total deferred tax asset for deductible temporary differences and operating loss carrybacks.
d. All of these are procedures in computing deferred income taxes.

45. In 2006, Berger, Inc., issued for $103 per share, 60,000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Berger’s $25 par value common stock at the option of the preferred stockholder. In August 2007, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $30 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock?
a. $1,020,000.
b. $780,000.
c. $1,500,000.
d. $1,680,000.

46. Investments in debt securities should be recorded on the date of acquisition at
a. lower of cost or market.
b. market value.
c. market value plus brokerage fees and other costs incident to the purchase.
d. face value plus brokerage fees and other costs incident to the purchase.

47. A company changes from straight-line to an accelerated method of calculating depreciation, which will be similar to the method used for tax purposes. The entry to record this change should include a
a. credit to Accumulated Depreciation.
b. debit to Retained Earnings in the amount of the difference on prior years.
c. debit to Deferred Tax Asset.
d. credit to Deferred Tax Liability.

48. On May 1, 2007, Kent Corp. declared and issued a 10% common stock dividend. Prior to this dividend, Kent had 100,000 shares of $1 par value common stock issued and outstanding. The fair value of Kent ‘s common stock was $20 per share on May 1, 2007. As a result of this stock dividend, Kent’s total stockholders’ equity
a. increased by $200,000.
b. decreased by $200,000.
c. decreased by $10,000.
d. did not change.

Multiple Choice

#1. At the end of an accounting period, the amount of net income earned by a company is transferred to the balance sheet and reported under which one of the following categories?
a. owner’s equity
b. liabilities
c. assets
d. all of the above

#2. Shari started a computer software firm by investin $20,000 of her own money. She spent 3/4 of it on office furniture, fixtures for the business. After borrowing $8,000 from the First National Bank, she spent 1/2 of these funds on computer hardware. At this point, what balances should be recorded in her accounting system for total assets and total expenses?
a. Total assets $28,000 Total Expenses $16,000
b. Total Assets $12,000 Total Expenses $16,000
c. Total Assets $16,000 total Expenses $0
d. Total Assets $28,000 Total Expenses $0

#3. Net cash flow is generally NOT thought to be a valid measure of an organization’s performance for a period because it:
a. is usually smaller than the amount of net income
b. includes the results of activites not related to operations
c. focuses only on the net change in owners equity
d. violates the periodic measurement concept

#4. Which of the following is an operating activity?
a. purchases of $10,000 of inventory from the suppliers
b. payoff of a bank loan of $6,000
c. sale of fully depreciated assets for $1500 previously used in operations
d. purchase of new equipment for $80,000 to be used in operations

#5. Net income can be expressed as
a. the excess of revenues over expenses that a business records during a period
b. the excess of expenses over revenue that a business records during a period
c. the amount of sales that a business reports during a period
d. the amount of resources created by a business during a period

#6. Which of the following shows a typical order of the types of activities in the transformation process that takes place in the organizations?
a. operating, investing, financing
b. financing, investing, operating
c. investing, operating, financing
d. operating, financing, investing

#7. A transaction is an event that will causee changes in a firm’s resources:
a. True
b. False

#8. At the end of April 2007 the Clean Water Company received $270,000 from customers for water used during March 2007. Clean Water’s employees were paid $70,000 during April and the company paid $10,000 in rent on their building and $4,000 in utility cost during the month. Determine profit from operations for the month of April 2007?
NET PROFIT
a. $200,000
b. $210,000
c. $186,000
d. $190,000

9. A balance among the elements of the accounting equation must maintained at all times:
True or False

#10. Merchandise inventory costing $20,000 was sold to customers for $28,000 cash. What amount of revenue and cash flow resulted from this transaction?
a. REVENUE $20,000 CASH FLOW $28,000
b. REVENUE $28,000 CASH FLOW $28,000
c. REVENUE $28,000 CASH FLOW $8,000
d. REVENUE $8,000 CASH FLOW $20,000
e. REVENUE $0 CASH FLOW $0

Multiple choice

1. Which of the following statements is CORRECT?
a. One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a partnership.
b. Corporations face fewer regulations than sole proprietorships.
c. One disadvantage of operating a business as a sole proprietor is that the firm is subject to double taxation, at both the firm level and the owner level.
d. It is generally less expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required.
e. If a partnership goes bankrupt, each partner is exposed to liabilities only up the amount of his or her investment in the business.

____ 2. Which of the following statements is CORRECT?
a. One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than partners.
b. Relative to sole proprietorships, corporations generally face fewer regulations, and they also find it easier to raise capital.
c. Bondholders should generally be more willing than stockholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns.
d. Stockholders should generally be more willing than bondholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns.
e. There is no good reason to expect its stockholders and bondholders to react differently to the types of assets that a firm invests in.

____ 3. Which of the following statements is CORRECT?
a. Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of U.S. businesses (in terms of number of businesses) are organized as corporations.
b. Most businesses (by number and total dollar sales) are organized as proprietorships or partnerships because it is easier to set up and operate in one of these forms rather than as a corporation. However, if the business gets very large, it becomes advantageous to convert to a corporation, primarily because corporations have important tax advantages over proprietorships and partnerships.
c. Due to legal considerations related to ownership transfers and limited liability, most business (measured by dollar sales) is conducted by corporations in spite of large corporations’ less favorable tax treatment.
d. Large corporations are taxed more favorably than sole proprietorships.
e. Corporate stockholders are exposed to unlimited liability.

4 . Which of the following statements is CORRECT?

a. The term “IPO” stand for Introductory Price Offered, and it is the price at which shares of a new company are offered to the public.
b. IPO prices are generally established by the market, and buyers of the new stock must pay the price that prevails at the close of trading on the day the stock is offered to the public.
c. In a “Dutch auction,” investors who want to buy shares in an IPO submit bids indicating how many shares they want to buy and the price they are willing to pay. The company determines how many shares it wants to sell. The highest price that enables the company to sell the desired number of shares is the price that all buyers will pay.
d. It is possible that the price set in an IPO is so high that investors will refuse to buy the number of shares that the company wants to sell. In that case, the company is said to have “left money on the table.”
e. It is possible that the price set in an IPO is so low that investors will want to buy more shares than the company wants to sell. In that case, the company will have to issue more shares than it wants to sell.

____ 5. You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following best describes this transaction?
a. This is an example of a direct transfer of capital.
b. This is an example of a primary market transaction.
c. This is an example of an exchange of physical assets.
d. This is an example of a money-market transaction.
e. This is an example of a derivative market transaction.

____6. Which of the following statements is CORRECT?
a. If the stock market is weak-form efficient, then information about recent trends in stock prices would be very useful when it comes to selecting stocks.
b. If the stock market is semistrong-form efficient, stocks and bonds should have the same expected return.
c. If the stock market is semistrong-form efficient, all stocks should have the same expected return.
d. Because of increased globalization, all of the world’s stock markets are equally efficient.
e. Even if the stock market is semistrong-form efficient, insider information may not be reflected in current market prices.

Multiple choice

Out of 250 questions, I am unsure of the following:

1.For a given substance that exhibits liquid-crystalline properties, the transition from solid to liquid-crystal state occurs:
a.over a range of temperatures that includes the melting point of the soild.
b. at a well defined temperture above the melting point of the solid.
c. over a range of temps between the melting point of the solid and the boiling point of the liquid.

2. For a given substance that exhibits liquid-crystaline properties, the liquid-crystalline state exists:
a. at one perticular temp above the melting point of the solid.
b. in a range of temps above the melting point of the solid.

3. The empirical formula of an addition polymer:
a. is the same as that of the monomer from which it is formed.
b. is the same as that of the monomer from which it is formed except that 2 H and 1 O have been added _or- subtracted.

4. Which statement about polyethylene is false?
a. it can be amorphous
b. it is used to manufacture bottles

5. The monomer that is polymerized to make natural rubber is?

6. Photoionization processes (eg..N2 + hv–> N2+ + e-) remove UV of <150 nm. Which photoreaction is the prinicipal absorber of UV in the 150-200 nm range in the upper atmosphere?
a. N2 + hv –> 2N
b. O2 + hv –> 2O
c. O3 + hv –> O2 + O
d. N2 + O2 + hv –> 2NO
e. NO + O2 + hv –> NO3

7. The C-Cl and C-F bond dissociation energies in CF3Cl arw 339 kj/mol and 482 kj/mol, respectively. The max wavelength of radiation required to rupture these bonds are ________ and _____, respectively:
a. 45.0 nm , 207 nm
b. 742 nm, 654 nm
c. 482 nm, 248 nm
d. 353 nm, 248 nm
e. 979 nm,, 953 nm

8. Why does ozone not form in high concentrations in the atmosphere above 50 km?
a. insufficient oxygen is available
b. Atomic oxygen concentyration is too low at high altutudes.

9. Why are CFC’s so damaging to the ozone layer when they are such stable molecules?
a. the radiation in the stratosphere dissociates them producing chlorine atoms that catalytically destraoy the ozone.
b. they are greenhouse gases that raise the temp above the disociation temp of ozone.

10 Cl atoms formed via phtolysis of C-Cl bonds of CFC’s in the stratsphere are particularly effective in destroying ozone at these altitudes because:
a. Ci atoms catalytically convert O3 to O2
b. Cl atoms stoichiometrically convert O3 to O2.
c. Cl atoms absorb UV, which generate O atoms to react with the O2 to produce ozone.
Cl atoms react with H or N atoms, which catalyze conversion of O2 to O3.

11. How many grams of sodium chloride are present in a 1-L sample of seawater that is 0.55 M in chloride and 0.47 M in sodium ion?
a. 47
b. 27
c. 32
d. 100
e. 60

12. Gasoline and water do not mix because gasoline is:
a. less dense than water
b. less viscous than water
c. nonpolar and water is polar

13.Which sunstance would be the MODT soluble in gasoline?
a. NaNO3
b. HCl
c. hexane
d. NaCl
e. water

14. Which statement about hydrocarbons is false?
a. cyclic alkanes are structural isomers of alkanes
b. alkanes are more reactive than alkenes
c. alkanes can be produced by hydrogenating alkenes
d. alkenes can be polymerized
e. the smallest alkane ti have structural isomers has 4 carbon atoms.

15. Benzene behaves diefferently from a hydrocarbon wich simply contains three C=C bonds in that the latter would be expected to react much more readily with:
a. H2
b. Cl2
c. Br2
d. HCl
e. all of the above

16. The general formula of an aldehyde is:
a. R – CO – OH
b. R – CHO
c. R – CO – OR
d. R – CO – R
e. R – O – R

Please help….Thanks…

Multiple choice

1.) Which of the following situations would require interperiod income tax allocation procedures?

a.An excess of percentage depletion over cost depletion
b.Interest received on municipal bonds
c.A temporary difference exists at the balance sheet date because the tax basis of an asset or liability and its reported amount in the financial statements differ
d.Proceeds from a life insurance policy on an officer

2.) Interperiod tax allocation would not be required when

a. costs are written off in the year of the expenditure for tax purposes but capitalized for accounting purposes.
b. statutory (or percentage) depletion exceeds cost depletion for the period.
c. different methods of revenue recognition arise for tax purposes and accounting purposes.
d. different depreciable lives are used for machinery for tax and accounting purposes.

3.) Machinery was acquired at the beginning of the year. Depreciation recorded during the life of the machinery could result in
Future Taxable Amounts Future Deductible Amounts
a. Yes Yes
b. Yes No
c. No Yes
d. No No

4.) Accounting changes are often made and the monetary impact is reflected in the financial statements of a company even though, in theory, this may be a violation of the accounting concept of

a. materiality.
b. consistency.
c. conservatism.
d. objectivity.

5.)Which of the following is accounted for as a change in accounting principle?

a.A change in the estimated useful life of plant assets.
b.A change from the cash basis of accounting to the accrual basis of accounting.
c.A change from expensing immaterial expenditures to deferring and amortizing them as they become material.
d.A change in inventory valuation from average cost to FIFO.

6.) A company changes from straight-line to an accelerated method of calculating depreciation, which will be similar to the method used for tax purposes. The entry to record this change should include a

a.credit to Accumulated Depreciation.
b.debit to Retained Earnings in the amount of the difference on prior years.
c.debit to Deferred Tax Asset.
d.credit to Deferred Tax Liability.

7.)Which of the following disclosures is required for a change from sum-of-the-years-digits to straight-line?

a.The cumulative effect on prior years, net of tax, in the current retained earnings statement
b.Restatement of prior years’ income statements
c.Recomputation of current and future years’ depreciation
d.All of these are required.

8.)A company changes from percentage-of-completion to completed-contract, which is the method used for tax purposes. The entry to record this change should include a

a.debit to Construction in Process.
b.debit to Loss on Long-term Contracts in the amount of the difference on prior years, net of tax.
c.debit to Retained Earnings in the amount of the difference on prior years, net of tax.
d.credit to Deferred Tax Liability.

9.) Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate?

a.Current period and prospectively
b.Current period and retrospectively
c.Retrospectively only
d.Current period only

Multiple choice

Below is the 2004 year-end balance sheet for Banner, Inc. Sales for 2004 were $1,600,000 and are expected to be $2,000,000 during 2005. In addition, we know that Banner plans to pay $90,000 in 2005 dividends and expects projected net income of 4% of sales. (For consistency with the Answer selections provided, round your forecast percentages to two decimals.)
Banner, Inc. Balance Sheet
December 31, 2004
Assets
Current assets $890,000
Net fixed assets 1,000,000
Total $1,890,000
Liabilities and Owners’ Equity
Accounts payable $160,000
Accrued expenses 100,000
Notes payable 700,000
Long-term debt 300,000
Total liabilities 1,260,000
Common stock (plus paid-in capital) 360,000
Retained earnings 270,000
Common equity 630,000
Total $1,890,000

1. Banner’s projected current assets for 2005 are:
a. $1,000,000.
b. $1,120,000.
c. $1,500,000.
d. $1,260,000.

2. Banner’s projected accounts payable balance for 2005 is:
a. $160,000.
b. $120,000.
c. $200,000.
d. $300,000.

3. Banner’s projected fixed assets for 2005 are:
a. $1,120,000.
b. $1,260,000.
c. $1,000,000.
d. $2,380,000.

4. ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.)
a. $1,056
b. $4,568
c. $7,621
d. $6,577

5. Suppose you determine that the NPV of a project is $1,525,855. What does that mean?
a. In all cases, investing in this project would be better than investing in a project that has an NPV of $850,000.
b. The project would add value to the firm.
c. Under all conditions, the project’s payback would be less than the profitability index.
d. The project’s IRR would have to be less that the firm’s discount rate.

6. Table 1
Average selling price per unit $16.00
Variable cost per unit $11.00
Units sold 200,000
Fixed costs $800,000
Interest expense $ 50,000

Based on the data in Table 1, what is the break-even point in units produced and sold?
a. $130,000
b. $140,000
c. $150,000
d. $160,000

Based on the data contained in Table 1, what is the degree of operating leverage?
a. 1.00 times
b. 2.00 times
c. 3.00 times
d. 4.00 times
e. 5.00 times

Based on the data contained in Table 1, what is the contribution margin?
a. $5.00
b. $4.00
c. $3.00
d. $2.00

Based on the data contained in Table 1, what is the degree of financial leverage?
a. 3.33 times
b. 2.50 times
c. 1.50 times
d. 1.33 times

Based on the data contained in Table 1, what is the degree of combined leverage?
a. 6.33
b. 6.67
c. 7.33
d. 7.67

Multiple Choice

Please see the attached file.

1. Dane, Inc., owns 35% of Marin Corporation. During the calendar year 2007, Marin had net earnings of $300,000 and paid dividends of $30,000. Dane mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and retained earnings, respectively?
a. Understate, overstate, overstate
b. Overstate, understate, understate
c. Overstate, overstate, overstate
d. Understate, understate, understate

2. At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the
a. declaration of a stock split.
b. declaration of a stock dividend.
c. purchase of treasury stock.
d. payment in full of subscribed stock.

Use the following information for questions 3 and 4.

Waeglein Corporation purchased machinery on January 1, 2006 for $630,000. The company used the straight-line method and no salvage value to depreciate the asset for the first two years of its estimated six-year life. In 2008, Waeglein changed to the sum-of-the-years’-digits depreciation method for this asset. The following facts pertain:

2006 2007
Straight-line $105,000 $105,000
Sum-of-the-years’-digits $180,000 $150,000

3. Waeglein is subject to a 40% tax rate. The cumulative effect of this accounting change on beginning retained earnings is
a. $135,000.
b. $120,000.
c. $72,000.
d. $0.

4. The amount that Waeglein should report for depreciation expense on its 2008 income statement is
a. $168,000.
b. $105,000.
c. $75,000.
d. none of the above.

5. Rensing Company’s December 31 year-end financial statements contained the following errors:
Dec. 31, 2007 Dec. 31, 2008
Ending inventory $7,500 understated $11,000 overstated
Depreciation expense $2,000 understated

An insurance premium of $18,000 was prepaid in 2007 covering the years 2007, 2008, and 2009. The prepayment was recorded with a debit to insurance expense. In addition, on December 31, 2008, fully depreciated machinery was sold for $9,500 cash, but the sale was not recorded until 2009. There were no other errors during 2008 or 2009 and no corrections have been made for any of the errors. Ignore income tax considerations. What is the total net effect of the errors on Rensing’s 2008 net income?
a. Net income understated by $14,500.
b. Net income overstated by $7,500.
c. Net income overstated by $13,000.
d. Net income overstated by $15,000.

6. Which of the following is accounted for as a change in accounting principle?
a. A change in the estimated useful life of plant assets.
b. A change from the cash basis of accounting to the accrual basis of accounting.
c. A change from expensing immaterial expenditures to deferring and amortizing them, as they become material.
d. A change in inventory valuation from average cost to FIFO.

7. Taxable income of a corporation
a. differs from accounting income due to differences in intra-period allocation between the two methods of income determination.
b. differs from accounting income due to differences in inter-period allocation and permanent differences between the two methods of income determination.
c. is based on generally accepted accounting principles.
d. is reported on the corporation’s income statement.

Use the following information for questions 8 and 9

McGee Company deducts insurance expense of $84,000 for tax purposes in 2008, but the expense is not yet recognized for accounting purposes. In 2009, 2010, and 2011, no insurance expense will be deducted for tax purposes, but $28,000 of insurance expense will be reported for accounting purposes in each of these years. McGee Company has a tax rate of 40% and income taxes payable of $72,000 at the end of 2008. There were no deferred taxes at the beginning of 2008.

8. What is the amount of the deferred tax liability at the end of 2008?
a. $33,600
b. $28,800
c. $12,000
d. $0

9. Assuming that income tax payable for 2009 is $96,000; the income tax expense for 2009 would be what amount?
a. $129,600
b. $107,200
c. $96,000
d. $84,800

10. Koble, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2008.
Service cost $ 200,000
Contributions to the plan $ 220,000
Actual return on plan assets $ 180,000
Projected benefit obligation (beginning of year) $2,400,000
Market-related and fair value of plan assets (beginning of year) $1,600,000

The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2008 is
a. $200,000.
b. $260,000.
c. $280,000.
d. $440,000.

Multiple choice

Which of the following statements is most correct?

a. If new debt is used to refund old debt, the correct discount rate to use in discounting cash flows is the before-tax cost of new debt.

b. The key benefit associated with refunding debt is the reduction in the firm’s debt ratio and creation of reserve borrowing capacity.

c. The mechanics of analyzing the NPV of a refunding decision are fairly straightforward. However, the decision of when to refund is not as clear because it requires a forecast of future interest rates.

d. If a firm with a positive NPV refunding project delays refunding and interest rates rise, the firm can still claim the entire interest savings by locking in a low coupon rate when the rates are low, even though it refunds the debt after rates rise.

e. If a firm is considering refunding and interest rates rise, this would tend to lower the expected price of the new bonds which will make them cheaper to the firm and increase the expected interest savings.

Discuss fully the reason for your choice to earn full credit.

Multiple Choice

11. Which of the following is not an advantage of a private placement (as compared to a public offering)?
a. Greater financing flexibility
b. Lower flotation costs
c. Lower interest costs
d. Quicker availability of funds

12. The demand for funds by the federal government puts upward pressure on interest rates causing private investors to be pushed out of the financial markets. This is called:
a. the big squeeze.
b. the efficient market hypothesis.
c. the crowding out effect.
d. liquidity preference.
e. government intervention.

13. The opportunity cost is defined as the:
a. rate of return based on historical costs.
b. rate of return available to an investor for a given level of risk.
c. cost associated with the acquisition of investments.
d. future value of the purchase price.

14. The percent-of-sales method can be used to forecast:
a. expenses.
b. assets.
c. liabilities.
d. all of the above.

15. Which of the following statements about the percent-of-sales method of financial forecasting is true?
a. It is the least commonly used method of financial forecasting.
b. It is a much more precise method of financial forecasting than a cash budget would be.
c. It involves estimating the level of an expense, asset, or liability for a future period as a percent of the forecast for sales revenues.
d. It projects all liabilities as a fixed percentage of sales.

16. Which of the following will increase cumulative borrowing in the cash budget?
a. Decreasing the average collection period
b. Increasing purchases
c. Decreasing depreciation expense
d. Both a and c
e. All of the above

17. A company collects 60% of its sales during the month of the sale, 30% one month after the sale, and 10% two months after the sale. The company expects sales of $10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in November. How much money is expected to be collected in October?
a. $25,000
b. $15,000
c. $35,000
d. None of the above

18. The present value of a perpetuity decreases when the _______ decreases.
a. number of investment periods
b. annual discount rate
c. perpetuity payment
d. both b and c

19. Which of the following would decrease free cash flows? A decrease in:
a. depreciation expense.
b. interest expense.
c. incremental sales.
d. both a & c.
e. all of the above.

20. Exchange rate risk:
a. arises from the fact that the spot exchange rate on a future date is a random variable.
b. applies only to certain types of international businesses.
c. has been phased out due to recent international legislation.
d. both a and b.

Problems (Please remember to show your calculations)

21. The treasurer for Brookdale Clothing must decide how much money the company needs to borrow in July. The balance sheet for June 30, 2004 is presented below:

Brookdale Clothing Balance Sheet
June 30, 2004
Cash $75,000 Accounts payable $ 400,000
Marketable securities 100,000 Long-term debt 300,000
Accounts receivable 300,000 Common stock 100,000
Inventory 250,000 Retained earnings 200,000
Total current assets 725,000 Total liabilities and
Fixed assets 275,000 stockholder’s equity $1,000,000
Total assets $1,000,000

The company expects sales of $250,000 for July. The company has observed that 25% of its sales is for cash and that the remaining 75% is collected in the following month. The company plans to purchase $400,000 of new clothing. Usually 40% of purchases is for cash and the remaining 60% of purchases is paid in the following month. Salaries are $100,000 per month, lease payments are $50,000 per month, and depreciation charges are $20,000 per month. The company plans to purchase a new building for $200,000 in July and sell its marketable securities for $100,000. If the company must maintain a minimum cash balance of $50,000, how much money must the company borrow in July?

22. How does the risk-return tradeoff relate to the time value of money and the multinational firm?

23. You are planning to deposit $10,000 today into a bank account. Five years from today you expect to withdraw $7,500. If the account pays 5% interest per year, how much will remain in the account eight years from today?

24. What is the value (price) of a bond that pays $400 semiannually for 10 years and returns $10,000 at the end of 10 years? The market discount rate is 10% paid semiannually.

25. Frank Zanca is considering three different investments that his broker has offered to him. The different cash flows are as follows:

End of Year A B C
1 300 400
2 300
3 300
4 300 300 600
5 300
6 300
7 300
8 300 600

Because Frank has enough savings for only one investment, his broker has proposed the third alternative to be, according to his expertise, the best in town. However, Frank questions his broker and wants to eliminate the present value of each investment. Assuming a 15% discount rate, what is Frank’s best alternative?

26. Combs, Inc. is issuing new common stock at a market price of $22. Dividends last year were $1.15 per share and are expected to grow at a rate of 7%. Flotation costs will be 5% of the market price. What is Combs, Inc.’s cost of external equity?

27. Company K is considering two mutually exclusive projects. The cash flows of the projects are as follows:
Year Project A Project B
0 -$2,000 -$2,000
1 $500
2 $500
3 $500
4 $500
5 $500
6 $500
7 $500 $5,650
a. Compute the NPV and IRR for the above two projects, assuming a 13%
required rate of return.
b. Discuss the ranking conflict.
c. Which of these two projects should be chosen?

Multiple Choice

Please, help me and show how to calculate.

1. Eleanor Spryzak has endowed her alma mater with a scholarship that is designed to pay out a sum of money to a worthy student every year forever. The scholarship amount increased in value by 3% every year. Which terms most accurately describe these assets?
a. annuity
b. perpetuity
c. growth perpetuity
d. assets with single cash flow

2. What is the value of a share of a firm’s stock when the firm is expected to pay a $2.8 per share dividend at the end of each year and the annual discount rate is $7.5%
a. $448
b. $37.33
c. $39.61
d. $33.67

3. What is the present value of a lease on a warehouse, where the tenants have a lease that goes into perpetuity and have agree to pay $300 at the end of each month of the lease with an annual discount rate of 8%.
a. $3,750
b. $540,000
c. $45,000
d. $38,899

4. Your company just signed a 20 years lease for a new office. The lease requires that your firm pay to $1,000 of the end of each month over the life of the lease. If the current annual rate is 9% what is the present value of this annuity stream?
a. 11,111
b. 9,129
c. 111,145
d. 109,543

5. Peter Lord’s financial advisor has suggest ed that he purchase a piece of land in an area of town that is being target for development. Peter’s plan is to purchase the land and then sell it for a profit when demand in the area increases. Which terms most accurately describe these assets?
a. annuity
b. perpetuity
c. growth perpetuity
d. assets with single cash flow

6. An annuity due is an annuity in which the first payment occur immediately. Knowing that, which of the following statements is true?
a. The future value of a 10 year ordinary annuity exceeds the future value of a 10 year annuity due.
b. The present value of a 10-year ordinary annuity is equal to that of a 10-years annuity due.
c. The present value of a 10-year annuity due exceeds the present value of a 10-year ordinary annuity.
d. More information is needed to solve this problem.
7. For perpetuity is needed to solve this problem at a constant rate (g). What will the present value of the perpetuity approach as g approaches zero?
a. 0
b. 1
c. cash flow/r
d. infinity
8. A bond issued by the British government pays a coupon of 100 pounds on January1 of every year for 20 years. Which term most accurately describes these assets?
a. annuity
b. Growing perpetuity
c. Perpetuity
d. Assets with single cash flow
9. Suppose you invest $800 in a mutual fund at the end of each year for the next 30 years and the fund earns an annual rate of return of 10%. What will be the value of your retirement fund after 30 years?
a. $131,595
b. $151,791
c. $291,235
d. $161,582

10. You want to invest $200 at the end of each month until you have reached your goal of a total balance of $100,000. You plan to invest in an account that earns an annual rate of 8%. How many years will it take to earn the $100,000
a. 48.25 years
b. 7.14 year
c. 38.81 year
d. 18.39 years

Multiple Choice

Which of the following represents the normal sequence in which the indicated budgets are prepared?

A. Direct Materials, Cash Sales
B. Production, Cash, Income Statement
C. Sales, Balance Sheet, Direct Labor
D. Production, Manufacturing Overhead, Sales

Over an extended period of time in which the final ending inventories are zero, the accumulated net operating income figures reported under absorption costing will be:
A. greater than those reported under variable costing
B. less than those reported under variable costing
C. the same as those reported under variable costing
D. higher or lower since no generalization can be made

Multiple Choice

Assuming that the current ratio is currently 2, which of the following actions will increase it?
1. Purchasing inventory with cash.
2. Purchasing inventory on short-term credit.
3. Paying off a short-term bank loan with long-term debt.
4. None of the above increase the current ratio.
5. All of the above increase the current ratio.

In future value problems, the discount rate is adjusted:
upward to reflect higher risk and to increase the future cash flows.
upward to reflect higher risk and to reduce the future cash flows.
downward to reflect higher risk and to increase the future cash flows.
downward to reflect higher risk and to reduce the future cash flows.
None of the above.

Multiple Choice

1. In the corporate form, the separated structure creates the potential for __________ between owners and managers.
a. A conflict of interest
b. Increased transactions costs
c. Stability in relations
d. None of the above
2. Incentive problems take a variety of forms. They include
a. Moral hazard
b. Adverse selection.
c. Principal agent problems
d. All of the above
e. None of the above
3. Suppose the risk-free nominal interest rate on a one-year Canadian Treasury bill is 6% per year, and the expected rate of the inflation is 4% per year. What is the expected real rate of the return on the T-bill?
a. 2.91%
b. -1.92%
c. 1.92%
d. 1.89%
e. None of the above
4. The value of goodwill is the difference between ______________of the acquisition and its prior __________.
a. Market price; book value
b. Book value; market price
c. Historical value; market price
d. Market price; after tax value
e. None of the above
5. ___________ is the process of going from present value to future value; whereas _________ is finding the present value of some future amount.
a. Discounting; compounding
b. Compounding; annualizing
c. Compounding; discounting
d. Discounting; leasing
e. None of the above
6. What is the effective rate on a certificate of deposit that has a nominal rate of 11.5% with interest compounded quarterly?
a. 11.50%
b. 10.90%
c. 12.01%
d. 13.13%
e. None of the above
7. Consider the problem of calculating a loan amortization schedule. The portion of the payment that goes toward the payment of interest is __________________than the previous period’s interest payment and the portion going toward repayment of principal is _____________ than that of the previous period.
a. Greater; lower
b. Lower; lower
c. Greater; greater
d. Lower; greater
e. None of the above
8. A major problem with using the internal rate of return is that
a. There may be multiple cash outflows and multiple cash inflows.
b. The internal rate of return may not exist.
c. The internal rate of return may not be unique.
d. All of the above
e. None of the above
9. If the exchange rate between the U.S. dollar and the French Franc is $0.17 per French Franc, the dollar interest rate is 5.5% per year, and the French Franc interest rate is 4.5% per year, what is the break-even value of the future dollar/ French Franc exchange rate one year from now?
a. $5.827 per FF
b. $5.888 per FF
c. $0.172 per FF
d. $0.189 per FF
e. None of the above
10. You have determined the present value of an expected cash flow stream. Which of the following would cause the stream to have a higher present value
a. The discount rate increases
b. The cash flows are paid over a shorter period of time
c. The discount rate decreases
d. Statements b and c are both correct.
e. Statement a and b are both correct.
11. Lucinda is currently 30 years old and she plans to retire at age 60. She is expected to live to age 85. Her labour income is $45,000 per year and she intends to maintain a constant level of consumption, with real interest rate of 4% per year, no taxes, and no growth in real labour income. What is the value of Lucinda`s human capital
a. $35,196
b. $40,005
c. $994,888
d. $778,141
e. None of the above
12. The relationship between NPV and IRR is such that
a. Both approaches always provide the same ranking of alternative investment projects.
b. The IRR of a project is equal to the firm`s cost of capital if the NPV of a project is $0.
c. If the NPV of a project is negative, the IRR must be greater than the cost of capital.
d. None of the above.
13. Which of the following statements is most correct?
a. Sunk costs must be included in the project’s cash flow.
b. R&D expenditures cannot be a part of the initial cost of a project.
c. Opportunity costs are sunk costs and therefore should not be included in the cost of the project.
d. Depreciation is not a cash expense.
e. All of the above statements are false.
14. The __________ states that in a competitive market, if two assets are equivalent, they will tend to have the same market price.
a. Law of Real Interest Rates
b. Law of One Price
c. Law of Price Equivalency
d. Law of Futures
e. None of the above
15. The ______________ is the proposition that an asset’s current price fully reflects all publicly available information about future economic fundamentals affecting the asset’s value.
a. Public Markets Hypothesis
b. Efficient Markets Exchange Rates
c. Fundamental Value Proposition
d. Efficient Markets Hypothesis
e. None of the above
16. Compute the current price of Walsingham bonds based on the following information: Walsingham bonds have a $1,000 per value, have 20 years remaining until maturity, have a 12% coupon rate, are paid semi-annually, and have a yield to maturity of 10.5%.
a. $858.42
b. $982.47
c. $1,119.52
d. $1,124.41
e. None of the above
17. In the DDM model, if D and k are held constant, what will happen to the price of a stock as the constant growth rate gets higher?
a. The price of the stock will be higher.
b. The price of the stock will not change.
c. The price of the stock will be lower.
d. The model will reduce to zero.
e. None of the above.
18. _________ is a measure of willingness to pay to reduce one’s exposure to risk. In evaluating trade-offs between the costs and benefits of reducing risk, ___________ people prefer the lower risk alternatives for the same cost.
a. Risk aversion; risk averse
b. Risk aversion; risk loving
c. Risk love; risk loving
d. Risk neutrality; risk neutral
e. None of the above.
19. When you _________ you pay a premium to eliminate the risk of loss and retain the potential for gain.
a. Insure
b. Diversify
c. Hedge
d. All of the above
e. None of the above
20. The ________ a stock’s volatility, the ________ the range of possible outcomes and the ___________ the probabilities of those returns at the extremes of the range.
a. Larger; narrower; larger
b. Larger; narrower; smaller
c. Larger; wider; larger
d. Smaller; wider; larger
e. None of the above
21. Consider the probability distribution of rate of return on RayFran Inc. stock:
Rate of Return Probability
40% 0.25
15% 0.55
-8% 0.20
a. 15.50 %
b. 16.65%
c. 28.65%
d. 19.85%
e. none of the above

22. _________ is a contract that obliges the guarantor to make the promised payment on a loan if the borrower fails to do so.
a. An exclusion
b. A loan guarantee
c. A copayment
d. An interest rate cap
e. None of the above
23. The primary goal of corporate management is to _________ shareholder wealth.
a. Minimize
b. Maximize
c. Leverage
d. Mitigate
24. A disadvantage of sole proprietorship is the fact that the sole proprietor has
a. Limited liability for the firm’s debts.
b. Unlimited liability for the firm’s debts.
c. Expensive costs to establish the firm.
d. Limited authority over the firm’s day-to-day business decisions.
25. __________instruments are also called fixed-income instruments.
a. Debt
b. Equity
c. Derivative
d. All of the above
26. The ________ curve depicts the relation between interest rates on fixed-income instruments issued by the U.S. Treasury and the maturity of the instrument.
a. Long-term
b. Short-term
c. Yield
d. Exchange rate
27. If the average inventory for a firm is $17 million and inventory turnover is 0.9 times, what is its cost of goods sold?
a. $15.3 million
b. $18.89 million
c. $153 million
d. $188.9 million
28. The CFO of CyberChain Inc. plans to unleash a media campaign that is expected to cost $15 million four years from today. How much cash should she set aside to pay for this if the current interest rate is 13%?
a. $9.2 million
b. $13.3 million
c. $14.4 million
d. $16.9 million
29. As one gets older, the ______ declines, so ________falls steadily until it reaches zero at age 65.
a. Future value of remaining labour income; human capital
b. Future value of remaining labour income; initial wealth
c. Present value of remaining labour income; human capital
d. Present value of initial wealth; optimization
30. A project’s IRR is _______ its scale, which makes IRR not a good measure for ranking mutually exclusive projects.
a. Contingent on
b. Independent of
c. Inversely proportional to
d. Half of
31. You are travelling in FarOut where you can buy 130 kranes (a krane being the unit of currency of FarOut) with a U.S. dollar at official FarOut banks. Your tour guide has a relative who dabbles in the black market and this particular relative will sell you kranes for just $0.00833 each on the black market. How much will you lose or gain by exchanging $200 on the black market instead of going to the bank?
a. You would gain approximately 1,660 kranes
b. You would lose approximately 1,660 kranes
c. You would gain approximately 1,990 kranes
d. You would lose approximately 1,990 kranes
32. What happens to the value of a four-year fixed-income security promising $100 per year if the market interest rate falls from 6% to 5% per year?
a. A fall of 1% causes a drop of $4.87 in market value
b. A fall of 1% causes a rise of $4.87 in market value
c. A fall of 1% causes a drop of $8.09 in market value
d. A fall of 1% causes a rise of $8.09 in market value
33. The relation between earnings and dividends in any period, assuming no shares are issued or repurchased, is
a. Dividends = earnings/ net new investment
b. Dividends = earnings x net new investment
c. Dividends = earnings + net new investment
d. Dividends = earnings – net new investment
34. By definition, ________ are investors who take positions to reduce their exposures.
a. Operations insurers
b. Foreign exporters
c. Hedgers
d. Speculators
35. You are interested in taking a vacation to Yemen next year, but you are worried about the price of the trip. Over the past three years, the price of a trip to Yemen has ranged between $3,500 and $4,500. The current price is $4,000. You wish to maintain the possibility of a lower price. How would you eliminate the possibility of rising prices, but still maintain the possibility of a gain from lower prices?
a. Purchase an option today from the sponsor, which would allow you to pay the lower of $4,000 or the market price at the time you take your Yemen vacation.
b. Purchase an option today from the sponsor, which would allow you to pay the higher of $4,000 or the market price at the time you take your vacation to Yemen.
c. Leave it to the market
d. Arrange a futures contract through the newspaper.

Multiple Choice

1. You have just purchased vacant lot for $8,000. After clearing it, you expect sell it for $12,000 two years from today. What is the net present value of this investment if you expected to earn a 12% return
a. $9,917.36
b. $2,909.09
c. $10,909.09
d. $1,566.33

2. What is the net present value of a project that required an initial investment of $11,600 and starting a year from now produce four annual payments of $3,000 each, followed by two annual payments of $2,600 each. When the periodic discount rate is 10%?
a. $992
b. $12,592
c. $15,636
d. $4,036

3. If the net present value of a project is positive, then which is following is true?
a. The present value of investment return exceeds the amount of the investment.
b. The present value of investment return is equal to amount of the investment.
c. The present value of the investment return is less than the amount of the investment.
d. More information is needed to solve the problem.

4. A firm should consider investing in a project. When its cost of capital is which of the following?
A. Greater than the IRR for the project.
B. Less than the IRR for the project.
C. Zero, but the net present value is positive.
D. This decision depends on the project itself.

5. What is the IRR on a project that cost $21,000 initially, and is followed by 12% cash flow of $3,000?
a. 9.00%
b. 6.75%
c. 22.29%
d. 10.25%

6. Which of the following items is not part of the capital budgeting process?
a. Forecasting cash flow
b. Developing an advertising campaign
c. Determining the present value of cash flow.
d. Estimating the cost of a project.

7. Which of the following items can significantly affect the project’s evaluated in a company’s capital project?
a. The timing of future cash flows.
b. Sales projections for the project.
c. The estimate for the total cost of the project
d. All of the above.

8. In making capital budgeting decisions for a corporation, you should look for projects with the highest profit to benefit which of the following?
a. You and your colleagues.
b. The accounting department
c. The CEO
d. The shareholders of the corporation.

9. Assume that you have an asset that requires an initial investment of $26,700. At the end of the first three years, it has cash inflow of $7,000. This is followed by cash outflow of $8,000 at the end of the fourth year for maintenance. Finally, there are cash inflows of $7,500 at the end of year 5 trough 8. Assuming a cost of capital of 8%, what is the net present value of this asset?
a. $29,832
b. $3,718
c. $14,678
d. $41,378

10. As a firm’s cost of capital increases, which of the following is true of the net present value of the projects the firm evaluates?
a. It should decrease.
b. It should increase.
c. It should remain the same.
d. It depends on the payback period.

11. If the net present value of a project is negative, then which is following is true?
a. The present value of the investment return exceeds the amount of the investment.
b. The future value of the investment return is equal to the amount of the investment
c. The present value of the investment return is less than the amount of the investment
d. More information is needed to solve this problem.

12. Diversification provides no benefit when the two assets have which of the following correlation coefficients?
a. 1
b. 0
c. -1
d. None of the above.

13. Which of the following is a type of systematic, or nondiversitiable risk?
a. Increase in the cost of wheat
b. Union walkouts
c. Increase inflation
d. New product introduction to competitors.

14. Bet is a measure of which type of risk?
a. Non-systematic
b. Firm-specific
c. Diversifiable
d. Systematic

15. Which of the following statements correctly describes the benefit of diversifying your portfolio by owning more than one type of assets?
a. The expected return of the portfolio will be higher
b. Depending on the correlation between assets, the expected return will be higher.
c. Depending on the correlation between assets, the trade off of expected return to risk will be improved.

16. When does most of the effect of diversification happen?
a. when you buy both stock and bonds
b. when you have 100 or more securities
c. when going from one to five investments
d. When you invest in real estate.

17. what are the mean and the variance in the following series of numbers: 7,12,8,9,10,8
a. M=9,V=1.78
b. M=8 V=3.20
c. M=9, V=3.20
d. M=8, V=1.78

18. When diversifying investments, what should you strive for?
a. Mix of assets
b. To own investments that react differently to economic changes
c. To project yourself against future uncertainly.
d. All of the above.

19. Consider an asset that has an expected return of 12%, and the standard deviation of the expected return is 12%. What is the range of likely outcomes for the return 68% of the time?
a. 10-14%
b. 8-16%
c. 10-16%
d. 8-14%

Multiple Choice

Please help me with these so I can make sure to study the right info.

1. Rensing Company’s December 31 year-end financial statements contained the following errors:
Dec. 31, 2007 Dec. 31, 2008
Ending inventory $7,500 understated $11,000 overstated
Depreciation expense $2,000 understated

An insurance premium of $18,000 was prepaid in 2007 covering the years 2007, 2008, and 2009. The prepayment was recorded with a debit to insurance expense. In addition, on December 31, 2008, fully depreciated machinery was sold for $9,500 cash, but the sale was not recorded until 2009. There were no other errors during 2008 or 2009 and no corrections have been made for any of the errors. Ignore income tax considerations. 57. What is the total net effect of the errors on Rensing’s 2008 net income?
a. Net income understated by $14,500.
b. Net income overstated by $7,500.
c. Net income overstated by $13,000.
d. Net income overstated by $15,000.

2. Which of the following is accounted for as a change in accounting principle?
a. A change in the estimated useful life of plant assets.
b. A change from the cash basis of accounting to the accrual basis of accounting.
c. A change from expensing immaterial expenditures to deferring and amortizing them, as they become material.
d. A change in inventory valuation from average cost to FIFO.

3. Taxable income of a corporation
a. differs from accounting income due to differences in intra-period allocation between the two methods of income determination.
b. differs from accounting income due to differences in inter-period allocation and permanent differences between the two methods of income determination.
c. is based on generally accepted accounting principles.
d. is reported on the corporation’s income statement.

4. The deferred tax expense is the
a. increase in balance of deferred tax asset minus the increase in balance of deferred tax liability.
b. increase in balance of deferred tax liability minus the increase in balance of deferred tax asset.
c. increase in balance of deferred tax asset plus the increase in balance of deferred tax liability.
d. decrease in balance of deferred tax asset minus the increase in balance of deferred tax liability.

5. Renner Corporation’s taxable income differed from its accounting income computed for this past year. An item that would create a permanent difference in accounting and taxable incomes for Renner would be
a. a balance in the Unearned Rent account at year-end.
b. using accelerated depreciation for tax purposes and straight-line depreciation for book purposes.
c. a fine resulting from violations of OSHA regulations.
d. making installment sales during the year.

6. Recognition of tax benefits in the loss year due to a loss carryforward requires
a. the establishment of a deferred tax liability.
b. the establishment of a deferred tax asset.
c. the establishment of an income tax refund receivable.
d. only a note to the financial statements.

Use the following information for questions 27 and 28

McGee Company deducts insurance expense of $84,000 for tax purposes in 2008, but the expense is not yet recognized for accounting purposes. In 2009, 2010, and 2011, no insurance expense will be deducted for tax purposes, but $28,000 of insurance expense will be reported for accounting purposes in each of these years. McGee Company has a tax rate of 40% and income taxes payable of $72,000 at the end of 2008. There were no deferred taxes at the beginning of 2008.

7. What is the amount of the deferred tax liability at the end of 2008?
a. $33,600
b. $28,800
c. $12,000
d. $0

8. Assuming that income tax payable for 2009 is $96,000; the income tax expense for 2009 would be what amount?
a. $129,600
b. $107,200
c. $96,000
d. $84,800

9. In all pension plans, the accounting problems include all the following except
a. measuring the amount of pension obligation.
b. disclosing the status and effects of the plan in the financial statements.
c. allocating the cost of the plan to the proper periods.
d. determining the level of individual premiums.

10. Koble, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2008.
Service cost $ 200,000
Contributions to the plan $ 220,000
Actual return on plan assets $ 180,000
Projected benefit obligation (beginning of year) $2,400,000
Market-related and fair value of plan assets (beginning of year) $1,600,000

The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2008 is
a. $200,000.
b. $260,000.
c. $280,000.
d. $440,000.

Multiple choice

1. Paying a stock dividend ________ the retained earnings account.

1. 1. increases
2. 2. has no effect on
3. 3. reorganizes
4. 4. decreases

2. Firms are usually prohibited by state law from distributing

1. 1. retained earnings as dividends.
2. 2. dividends in a year the firm has a net loss.
3. 3. assets as dividends.
4. 4. paid-in capital as dividends.

3. Tangshan Mining has common stock at par of $200,000, paid in capital in excess of par of $400,000, and retained earnings of $280,000. In states where the firm’s legal capital is defined as the total of par value and paid-in-capital of common stock, the firm could pay out ________ in cash dividends without impairing its capital.

1. 1. $480,000
2. 2. $600,000
3. 3. $400,000
4. 4. $280,000

4. A firm has current after-tax earnings of $1,000,000 and has declared a cash dividend of $400,000. The firm’s dividend payout ratio is

1. 1. 4.0 percent.
2. 2. 2.5 percent.
3. 3. 40 percent.
4. 4. 2.0 percent.

5. A dividend reinvestment plan enables stockholders to

1. 1. reinvest all dividends in the firm with no accompanying increase in equity.
2. 2. acquire shares at little or no transaction costs.
3. 3. reinvest the dividends in money market instruments which are risk free.
4. 4. acquire additional dividends through redemption of stock.

6.An excess earnings accumulation tax is levied when

1. 1. firms do not pay dividends in order to delay the owner’s tax liability.
2. 2. firms do not pay dividends to reinvest in the firm.
3. 3. shareholders receive dividends which exceed the firm’s earnings.
4. 4. earnings exceed dividends.

7. Which type of dividend payment policy has the disadvantage that if the firm’s earnings drop or if a loss occurs in a given period, dividends may be low or nonexistent?

1. 1. Low-regular-and-extra dividend policy.
2. 2. Regular dividend policy.
3. 3. Constant-payout-ratio policy.
4. 4. none of these.

8. A dividend reinvestment plan ________ on the security.

1. 1. decreases the return
2. 2. has no effect on the return
3. 3. has an undetermined effect
4. 4. increases the return

9. The capital impairment restrictions are established to

1. 1. protect the shareholder.
2. 2. constrain the firm to paying dividends which do not require additional borrowing.
3. 3. provide a sufficient base to protect creditors’ claims.
4. 4. reduce dividends equal to or below the current earnings level.

10. At a firm’s quarterly dividend meeting held April 9, the directors declared a $0.50 per share cash dividend for the holders of record on Monday, May 1. The firm’s stock will sell ex-dividends on

1. 1. May 1.
2. 2. April 25.
3. 3. April 9.
4. 4. April 27.

Multiple choice

Please complete the attached 50 multiple choice practice problems

1 Finance can be defined as
A) The system of debits and credits.
B) The science of the production, distribution, and consumption of wealth.
C) The art and science of managing money.
D) The art of merchandising products and services.
Answer:

2 Which of the following legal forms of organizations’ income is NOT taxed under
individual income tax rates?
A) Sole proprietorships.
B) Partnerships.
C) Limited partnership.
D) Corporation.
Answer:

3 The true owner(s) of the corporation is (are) the ________________
A) board of directors
B) chief executive officer
C) stockholders
D) creditors
Answer:

4 Managerial finance
A) involves tasks such as budgeting, financial forecasting, cash management,
and funds procurement.
B) involves the design and delivery of advice and financial products.
C) recognizes funds on an accrual basis
D) devotes the majority of its attention to the collection and presentation of financial data.
Answer:

5 Which of the following legal forms of organization is characterized by limited liability?
A) Sole proprietorship
B) Partnership
C) Corporation
D) Professional partnership
Answer:

6 Two approaches for dealing with project risk to capture the variability of cash inflows and NPV’s are
A) sensitivity analysis and simulation
B) scenario analysis and simulation
C) sensitivity analysis and scenario analysis
D) none of the above
Answer:

7 Breakeven cash inflow refers to
A) the minimum level of cash inflow for a project to be acceptable, that is, NPV < $0
B) the minimum level of cash inflow for a project to be acceptable, that is, NPV > $0
C) the minimum level of cash inflow for a project to be acceptable, that is,
IRR < the cost of capital
D) none of the above is correct.
Answer:

8 The ___________ reflects the return that must be earned on the given project to compensate the
firm’s owners adequately according to the project’s variability of cash flows.
A) internal rate of return
B) cost of capital
C) risk-adjusted discount rate
D) average rate of return
Answer:

9 If a person requires greater return when risk increases, that person is said to be
A) risk seeking
B) risk indifferent
C) risk averse
D) risk aware
Answer:

10 _____________ is the chance of loss or the variability of returnsassociated with a given asset.
A) Return
B) Value
C) Risk
D) Probability
Answer:

11 The ____________ measures the dispersion around the expected value
A) coefficient of variation
B) chi square
C) mean
D) standard deviation
Answer:

12 An inefficient portfolio is one that
A) maximizes risk for a given level of return
B) maximizes return for a given level of risk
C) minimizes return for a given level of risk
D) maximizes return at all risk levels
Answer:

13 An efficient portfolio is one that
A) maximizes risk for a given level of return
B) maximizes return for a given level of risk
C) minimizes return for a given level of risk
D) maximizes return at all risk levels
Answer:

14 Combining two assets having perfectly positively correlated returns will result in the creation of a
portfolio with an overall risk that
A) remains unchanged
B) decreases to a level below that of either asset
C) increases to a level above that of either asset
D) lies between the asset with the higher risk and the asset with the lower risk
Answer:

15 Risk that affects all firms is called
A) total risk
B) management risk
C) nondiversifiable risk
D) diversifiable risk
Answer:

16 If the interest rate is zero, the future value interest factor equals ___________
A) -1
B) 0
C) 1
D) 2
Answer:

17 As the interest rate increases for any given period, the future value interest factor will
A) decrease
B) increase
C) remain unchanged
D) move toward 1
Answer:

18 The future value of $100 received today and deposited at 6 percent for four years is
A) $126
B) $79
C) $124
D) $116
Answer:

19 The future value of an ordinary annuity of $1,000 each year for 10 years, deposited at 3 percent is
A) $11,808
B) $11,464
C) $8,530
D) $10,000
Answer:

20 A collection of assets is called a(n)
A) grouping
B) portfolio
C) investment
D) diversity
Answer:

21 The future value of $100 received today and deposited in an account for four years paying
semi-annual interest of 8 percent is
A) $450
B) $126
C) $889
D) $134
Answer:

22 The nominal rate of interest is composed of
A) the real rate plus an inflationary expectation
B) the real rate plus a risk premium
C) the risk free rate plus an inflationary expectation
D) the risk free rate plus a risk premium
Answer:

23 Generally, long term loans have higher interest rates than short term loans because of
A) the general expectation of higher future rates of inflation
B) lender preferences for shorter term, more liquid loans
such loans
C) greater demand for long-term rather than short term loans relative to the supply of
D) all of the above
Answer:

24 The yield curve in an economic period where higher future inflation is expected would most likely be
A) upward sloping
B) flat
C) downward sloping
D) linear
Answer:

25 ___________ of all future cash flows an asset is expected to provide over a relevant time period is
the market value of the asset.
A) The future value
B) the present value
C) the stated value
D) the sum
Answer:

26 The return expected from an asset is fully defined by its
A) risk and cash flow
B) cash flow and timing
C) discount rate
D) beta
Answer:

27 Shares of stock currently owned by the firm’s shareholders are called
A) authorized
B) issued
C) outstanding
D) treasury shares
Answer:

28 The disadvantages of issuing common stock versus long term debt include all of the
following EXCEPT
A) the potential dilution of earnings
B) high cost
C) no maturity date on which the par value of the issues must be repaid
D) the market perception that management thinks the firm is overvalued causing
a decline in the stock price.
Answer:

29 A firm issued 5,000 shares of $1 par value common stock, receiving proceeds of $20 per share.
The accounting entry for the paid-in-capital in excess of par account is
A) $5,000
B) $95,000
C) $100,000
D) $0
Answer:

30 Generally, an increase in risk will result in ____________ required return or interest rate.
A) a lower
B) a higher
C) an unchanged
D) an undetermined
Answer:

31 The portion of a firm’s current assets financed with long term funds may be called
A) working capital
B) accounts receivable
C) net working capital
D) inventory
Answer:

32 The goal of working capital management is to
A) balance current assets against current liabilities
B) pay off short term debts
C) achieve a balance between risk and return in order to maximize the firms value
D) achieve a balance between short term and long tern assets so that they add to the
acheivment of the firm’s overall goals.
Answer:

33 Current liabilities can be viewed as
A) debts that mature in one year or less
B) debts that mature in more than one year
C) sources of cash inflows
D) none of the above
Answer:

34 In general, the more working capital a firm has
A) the greater its risk
B) the lower its risk
C) the less likely are creditors to lend to the firm
D) the lower its level of long term funds
Answer:

35 When a portion of the firm’s fixed assets are financed with current liabilities, the firm
A) has positive net working capital
B) has negative net working capital
C) has excessive amounts of current assets
D) is in a low risk position
Answer:

36 A firm has an average age of inventory of 101 days, an average collection period of 49 days, and
an average payment period of 60 days. The firm’s inventory turnover is ____________
A) 3.2
B) 4
C) 2.5
D) 3.6
Answer:

37 An increase in the curent liabilities to total assets ratio has the effects of __________ on profits
and _________ on risk
A) an increase, an increase
B) anincrease, a decrease
C) a decrease, a decrease
D) a decrease, an increase
Answer:

38 The _________ is an inventory management technique that compares production needs to available
inventory balances and determines when orders should be placed for various material inputs.
A) ABC system
B) EOQ model
C) MRP system
D) JIT system
Answer:

39 Because managing inventory is just like managing any other investment, decisions about the level
of inventory should be guided by
A) the value of the inventory
B) the effect of inventory levels on sales
C) a cost benefit analysis
D) the effect of inventory levels on customer relations.
Answer:

40 If the firm decides to take the cash discount that is offered on goods purchased on credit,
the firm should
A) pay as soon as possible
B) pay on the last day of the credit period
C) take the discount no matter when the firm actually pays
D) pay on the last day of the discount period
Answer:

41 If a firm gives up the cash discount on goods purchased on credit, the firm should pay the bill
A) as late as possible
B) as soon as possible
C) before the credit period ends
D) on the last day of the credit period
Answer:

42 Earnings before interest and taxes (EBIT) is a descriptive label for
A) operating profits
B) net profits before taxes
C) earnings per share
D) gross profits
Answer:

43 Which of the following is NOT a variable cost?
A) Materials used
B) Rent
C) Delivery Costs
D) Direct labor
Answer:

44 At the operating breakeven point, ___________ equals zero.
A) sales revenue
B) fixed operating costs
C) variable operating costs
D) earnings before interest and taxes.
Answer:

45 A firm has fixed operating costs of $150,000, total sales of $1,500,000, and total variable costs
of $1,275,000. The firm’s operating breakeven point in dollars is
A) $150,000
B) $176,471
C) $1,000,000
D) $1,425,000
Answer:

46 In a __________, the lessor acts as an equity participant suppplying part of the necessary capital
while a lender supplies the remaining balance
A) direct lease
B) leveraged lease
C) sale-leaseback
D) capital lease
Answer:

47 Advantages of leasing from the lessee’s perspective include all of the following EXCEPT
A) capability of effectively depreciating land.
B) ability to avoid restrictive covenants that are normally part of a long term loan
C) benefit of the salvage value at the end of the term of the lease reverts to the lessor
D) 100 percent financing
Answer:

48 All of the following must be considered when making a lease-versus purchase decision EXCEPT
A) the after tax cash flows for each year under the lease alternative
B) the after tax cash flows for each year under the purchase alternative
C) the present value of all cash flows
D) the depreciation expense under the lease
Answer:

49 Foreign exchange risk refers to the risk created by _____________
A) the potential seizure of an MNC’s operations in a host country.
B) the varying exchange rate between two currencies
C) the fixed exchange rate between two currencies
D) the potential nationalization of the MNC’s operations by a host government.
Answer:

50 A a foreign exchange hedging tool, options have all of the following characteristics EXCEPT
A) the right to buy or sell an amount of foreign curreny.
B) specifies price
C) specifies time period
D) represents an obligation to buy or sell.
Answer:

Multiple Choice

Need to understand the reason behind each questions. Please explain.

1. Corporate level decisions are typically made by which of the following
a. Low-level employees
b. The CEO and/or board of directs
c. Functional managers
d. Department heads

2. The higher the entry barriers, the more intense the competition in an industry
a. True
b. False

3. Which of the following may lead a firm to conclude that an industry is attractive to enter?
a. Strong Supplier power
b. Strong customer power
c. No close substitutes
d. Many strong competitors

4. In examining the metal can industry, plastic bottles would be considered which of the following?
a. Suppliers
b. Customer
c. Substitutes
d. Plastic bottles have no bearing on the metal can industry

5. Which of the following is not one of Michael Porter’s five forces?
a. Substitutes
b. Complements
c. Existing competitors
d. Potential competitors
e. Supplies

6. Industries may be defined as a group of organizations that compete directly with each other to win orders and sales in the marketplace.
a. True
b. False

7. A mission statement often contains a statement of vision.
a. True
b. False

8. In the breakfast cereal industry, companies such as Kellogg, Quaker Oats, and General Mills sell their cereals to grocery chains, discount stores, and independent grocers. Chain retailers, such as Wal-Mart, Kroger, Safeway, Costco, and Albertson’s, purchase the majority of breakfast Cereal. Of there, Wal-Mart accounts for more than 10 percent of cereal sales in the United States. What does this say about the cereal industry?
a. Supplier power is strong in this industry
b. Buyer power is low in this industry
c. Supplier power is low in this industry
d. Buyer power is strong in this industry

9. One important responsibility of the board of directors is to monitor and prevent the potential for agency problems.
a. True
b. False

10. The bowling equipment industry is dominated by two competitors, Brunswick and AMF. What kind of industry structure does this represent?
a. Monopoly
b. Oligopoly
c. Perfect Competition
d. Emerging

11. External stakeholders are groups or individual outside the organization that are significantly influenced by the organization or who have a major impact on the organization.
a. True
b. False

12. The VCR industry is in what stage of its life cycle?
a. Emerging
b. Growing
c. Maturing
d. Declining

13. What of the following is not a major component of social responsibility?
a. Economic responsibility
b. Legal responsibility
c. Political obligations
d. Moral obligations
e. Discretionary responsibility

14. Which of the following is an example of a barrier entry?
a. High fixed costs
b. Brand loyalty
c. Switching costs
d. All of the above

15. Suppliers tend to exhibit greater power if which of the following is true?
a. There are few suppliers of the raw material, product, or service
b. There are many substitute for the product or service that supplies sell
c. Suppliers are small businesses with regards to total sales volume
d. The suppliers’ products are undifferentiated and plentiful.

16. Which of the following is not a component of the vertical chain?
a. Supplies
b. Distributions
c. Consumers
d. Substitutes

17. The can-making industry serves three major markets, beverages, food, and general packaging. The beverage industry is the largest market for metal cans, suing more than 100 billion can annually. Of this total, about two thirds are used for nonalcoholic beverages, especially beer. What does this tell you about the can-making industry?
a. Supplier power is strong in this industry
b. Buyer power is low in this industry
c. Supplier power is low in this industry
d. Buyer power is strong in this industry

18. It is important that a firm’s strategy fits with its corporate culture.
a. True
b. False

19. Which of the following is the first step in developing a strategic plan?
a. Monitoring day-to-day activities
b. Developing a mission statement
c. Implementation and control
d. Executing the strategy

20. Strategic management includes a process by which organizations analyze and external environments
a. True
b. False

21. The lawn mowing industry is an example of which of the following?
a. Monopoly
b. Oligopoly
c. Perfect competition
d. Substitute

22. The influence of potential competitors on industry competition is determined primarily by which of the following?
a. Buyer power
b. Supplier power
c. Strength of entry barriers
d. Strength of exit barriers
e. Threat of substitutes

23. What is Southwest Airline’s relationship to American Airlines?
a. Potential competitor
b. Existing competitor
c. Substitute
d. Indirect competitor

24. If an industry’s products are standard and undifferentiated, which of the following results?
a. The industry will have many competitors
b. The industry will have low profits
c. All of the above
d. None of the above

25. The cellular telephone industry is in what state of its lifecycle?
a. Emerging
b. Growing
c. Maturing
d. Declining

Multiple choice

2. The market price of a bond issued at a discount is calculated by taking the present value of its principal amount using the market (effective) rate of interest
a. plus the present value of all future interest payments using the market (effective) rate of interest.
b. plus the present value of all future interest payments using the rate of interest stated on the bond.
c. minus the present value of all future interest payments using the market (effective) rate of interest.
d. minus the present value of all future interest payments using the rate of interest stated on the bond.

3. When the interest payment dates of a bond are May 1 and November 1, and the bond is issued on June 1, the amount of interest expense at December 31 of the year of issuance would be for
a. two months.
b. six months.
c. seven months.
d. eight months.

4. For a bond issue that sells for more than its face value, the market rate of interest is
a. dependent on the rate stated on the bond.
b. equal to the rate stated on the bond.
c. less than the rate stated on the bond.
d. higher than the rate stated on the bond.

6. When interest expense is calculated using the effective-interest amortization method, interest expense (assuming that interest is paid annually) always equals the
a. actual amount of interest paid.
b. book value of the bonds multiplied by the stated interest rate.
c. book value of the bonds multiplied by the effective interest rate.
d. maturity value of the bonds multiplied by the effective interest rate.

Multiple Choice

See attachment.

Stephanie must decide between two alternatives for the weekend: babysitting or yard work. If she baby sits, she will receive $40 and will incur $15 in food and snack costs. If she does yard work, she will receive $40 and will incur $3 in lawn mower gas and oil costs and $5 in snack costs. The amount to be received is relevant for deciding which alternative to select.
True
False

The following information is provided by the Atlantic Company:

Actual direct material cost $24,000
Standard direct material cost $20,000
Direct material quantity variance $1,000 unfavorable

What is the direct material price variance?
a. $4,000 favorable.
b. $5,000 favorable.
c. $3,000 unfavorable.
d. Not enough information is provided.

A vertical analysis uses percentages to compare each of the parts of an individual statement to the whole. For example, on an income statement each item would be shown as a percentage of sales.
True
False

Denise was questioned recently about her department’s spending in excess of the budget. This is an example of using the budget for coordination.
True
False

Volume based cost drivers (e.g., labor hours or machine hours) are most likely to serve as an effective allocation base for which of the following costs?
a. Setup costs.
b. The cost of the filing patent papers for a new product.
c. Research and development costs.
d. Maintenance costs.

Coffee Cafe operates a chain of coffee shops. The company pays rent of $24,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $3,000 per month and all other employees are paid on an hourly basis. Relative to the number of customers, the cost of rent is which kind of cost?
a. Fixed cost.
b. Variable cost.
c. Mixed cost.
d. Relevant cost.

Spring Company sets the selling price for its product by adding a markup to the product’s variable manufacturing costs. This approach to pricing is referred to as:
a. Target pricing.
b. Cost-plus pricing.
c. Target costing.
d. Contribution margin pricing.

A budget prepared at a single volume of activity is referred to as a:
a. Strategic budget.
b. Static budget.
c. Standard budget.
d. Flexible budget

The area of business planning that is associated with financial matters is commonly called:
a. Master planning.
b. Strategic planning.
c. Budgeting.
d. Operational planning.

Performance evaluation should be based on the actual volume of activity rather than the planned volume of activity.
True
False

Baltazar Company reported revenue of $1,000 on its income statement. During the same period its accounts receivable balance decreased by $400. How much cash was collected during the period?
a. $600.
b. $1,000.
c. $1,400.
d. None of the above.

Costs that are not related to any specific product, batch, or unit of production are referred to as facility-level costs.
True
False

Alan’s Lawn Care incurs significant gasoline costs. This cost would be classified as a variable cost if the total cost:
a. Varies inversely with the number of hours the lawn equipment is operated.
b. Varies directly with the number of hours the lawn equipment is operated.
c. Is not affected by the number of hours the lawn equipment is operated.
d. Both A and B.

The managerial accounting system includes economic and non-financial data as well as financial statement data.
True
False

A process cost system would be appropriate for all of the following except:
a. Gasoline.
b. VCR machines.
c. G.E. light bulbs.
d. A law firm.

A cash flow that only occurs once is referred to as:
a. An annuity.
b. A lump sum.
c. A principal sum.
d. None of the above.

Multiple Choice

I need help with the attached.

1. Securities which could be classified as held-to-maturity are
a. redeemable preferred stock.
b. warrants.
c. municipal bonds.
d. treasury stock.
2. Unrealized holding gains or losses which are recognized in income are from securities classified as
a. held-to-maturity.
b. available-for-sale.
c. trading.
d. none of these.
3. When computing diluted earnings per share, convertible bonds are
a. ignored.
b. assumed converted whether they are dilutive or antidilutive.
c. assumed converted only if they are antidilutive.
d. assumed converted only if they are dilutive.

4. When an investor’s accounting period ends on a date that does not coincide with an interest receipt date for bonds held as an investment, the investor must
a. make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the amount of interest accrued since the last interest receipt date.
b. notify the issuer and request that a special payment be made for the appropriate portion of the interest period.
c. make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the total amount of interest to be received at the next interest receipt date.
d. do nothing special and ignore the fact that the accounting period does not coincide with the bond’s interest period.

5. Held-to-maturity securities are reported at
a. acquisition cost.
b. acquisition cost plus amortization of a discount.
c. acquisition cost plus amortization of a premium.
d. fair value.
6. Dane, Inc., owns 35% of Marin Corporation. During the calendar year 2007, Marin had net earnings of $300,000 and paid dividends of $30,000. Dane mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and retained earnings, respectively?
a. Understate, overstate, overstate
b. Overstate, understate, understate
c. Overstate, overstate, overstate
d. Understate, understate, understate
7. The date on which total compensation expense is computed in a stock option plan is the date
a. of grant.
b. of exercise.
c. that the market price coincides with the option price.
d. that the market price exceeds the option price.

8. Compensation expense resulting from a compensatory stock option plan is generally
a. recognized in the period of exercise.
b. recognized in the period of the grant.
c. allocated to the periods benefited by the employee’s required service.
d. allocated over the periods of the employee’s service life to retirement.

9. Which type of accounting change should always be accounted for in current and future periods?
a. Change in accounting principle
b. Change in reporting entity
c. Change in accounting estimate
d. Correction of an error

10. When computing diluted earnings per share, convertible bonds are
a. ignored.
b. assumed converted whether they are dilutive or antidilutive.
c. assumed converted only if they are antidilutive.
d. assumed converted only if they are dilutive.

Multiple choice

1. Under which of the following legal forms of organization, is ownership readily transferable?
A) Sole proprietorships.
B) Partnerships.
C) Limited partnership.
D) Corporation.

2. The true owner(s) of the corporation is (are) the ________.
A) Board of directors
B) Chief executive officer
C) Stockholders
D) Creditors

3. A major weakness of a partnership is
A) Limited liability.
B) Difficulty liquidating or transferring ownership.
C) Access to capital markets.
D) Low organizational costs.

4. Wealth maximization as the goal of the firm implies enhancing the wealth of
A) The Board of Directors.
B) The firm’s employees.
C) The federal government.
D) The firm’s stockholders.

5. The agency problem may result from a manager’s concerns about any of the following EXCEPT
A) Job security.
B) Personal wealth.
C) Corporate goals.
D) Company-provided perquisites.

6. The Sarbanes-Oxley Act of 2002 did all of the following EXCEPT
A) Tighten audit regulations and controls.
B) Toughen penalties against overcompensated executives.
C) Toughen penalties against executives who commit corporate fraud.
D) All of the above are true.

7. If a person’s required return does not change when risk increases, that person is said to be
A) risk-seeking.
B) risk-indifferent.
C) risk-averse.
D) risk-aware.

8. The ________ of an asset is the change in value plus any cash distributions expressed as a percentage of the initial price or amount invested.
A) Return
B) Value
C) Risk
D) Probability

9. Last year Mike bought 100 shares of Dallas Corporation common stock for $53 per share. During the year he received dividends of $1.45 per share. The stock is currently selling for $60 per share. What rate of return did Mike earn over the year?
A) 11.7 percent.
B) 13.2 percent.
C) 14.1 percent.
D) 15.9 percent.

10. The ________ is the extent of an asset’s risk. It is found by subtracting the pessimistic outcome from the optimistic outcome.
A) Return
B) Standard deviation
C) Probability distribution
D) Range

11. Which asset would the risk-averse financial manager prefer? (See below.)

Asset A B C D
Initial investment $15,000 $15,000 $15,000 $15,000
Annual rate of return
Pessimistic 8% 5% 3% 11%
Most likely 12% 12% 12% 12%
Optimistic 14% 13% 15% 14%

A) Asset A.
B) Asset B.
C) Asset C.
D) Asset D.

12. An investment advisor has recommended a $50,000 portfolio containing assets R, J, and K; $25,000 will be invested in asset R, with an expected annual return of 12 percent; $10,000 will be invested in asset J, with an expected annual return of 18 percent; and $15,000 will be invested in asset K, with an expected annual return of 8 percent. The expected annual return of this portfolio is
A) 12.67%.
B) 12.00%.
C) 10.00%.
D) Unable to be determined from the information provided.

13. The present value of $200 to be received 10 years from today, assuming an opportunity cost of
10 percent, is
A) $ 50.
B) $200.
C) $518.
D) $ 77.

14. The future value of a dollar ________ as the interest rate increases and ________ the farther in the future an initial deposit is to be received.
A) Decreases; decreases
B) Decreases; increases
C) Increases; increases
D) Increases; decreases

15. The ________ is the annual rate of interest earned on a security purchased on a given date and held to maturity.
A) Term structure
B) Yield curve
C) Risk-free rate
D) Yield to maturity

16. Generally, an increase in risk will result in ________ required return or interest rate.
A) A lower
B) A higher
C) An unchanged
D) An undetermined

17. Generally, long-term loans have higher interest rates than short-term loans because of
A) The general expectation of higher future rates of inflation.
B) Lender preferences for shorter-term, more liquid loans.
C) Greater demand for long-term rather than short-term loans relative to the supply of such loans.
D) All of the above.

18. A type of long-term financing used by both corporations and government entities is
A) Common stock.
B) Bonds.
C) Preferred stock.
D) Retained earnings.

19. A behavioral approach for dealing with project risk that uses several possible values for a given variable such as cash inflows to assess that variable’s impact on NPV is called
A) Sensitivity analysis.
B) Scenario analysis.
C) Simulation analysis.
D) None of the above.

20. A behavioral approach that evaluates the impact on the firm’s return of simultaneous changes in a number of project variables is called
A) Sensitivity analysis.
B) Scenario analysis.
C) Simulation analysis.
D) None of the above.

21. Yong Importers, an Asian import company, is evaluating two mutually exclusive projects, A and B. The relevant cash flows for each project are given in the table below. The cost of capital for use in evaluating each of these equally risky projects is 10 percent.
Project A Project B
Initial Investment $350,000 $425,000
Year Cash Inflows (CF)
1 $140,000 $175,000
2 165,000 150,000
3 190,000 125,000
4 100,000
5 75,000
6 50,000

The NPVs of projects A and B are ________:
A) $95,066 and $56,386, respectively.
B) $56,386 and $95,066, respectively.
C) -$56,386 and -$95,066, respectively.
D) None of the above.

22. The investment banker does all of the following EXCEPT
A) Make long-term investments for banking institutions.
B) Bear the risk of selling a security issue.
C) Act as a middleman between the issuer and buyer of a new security.
D) Advise clients.

23. A firm has an expected dividend next year of $1.20 per share, a zero growth rate of dividends, and a required return of 10 percent. The value of a share of the firm’s common stock is
________.
A) $120
B) $10
C) $12
D) $100

24. A firm has experienced a constant annual rate of dividend growth of 9 percent on its common stock and expects the dividend per share in the coming year to be $2.70. The firm can earn 12 percent on similar risk involvements. The value of the firm’s common stock is ________.
A) $22.50/share
B) $9/share
C) $90/share
D) $30/share

25. A common stock currently has a beta of 1.3, the risk-free rate is an annual rate of 6 percent, and the market return is an annual rate of 12 percent. The stock is expected to generate a constant dividend of $5.20 per share. A toxic spill results in a lawsuit and potential fines, and the beta of the stock jumps to 1.6. The new equilibrium price of the stock
A) Will be $37.68.
B) Will be $43.33.
C) Will be $33.33.
D) Cannot be determined from the information given.

26. The goal of working capital management is to
A) Balance current assets against current liabilities.
B) Pay off short-term debts.
C) Achieve a balance between risk and return in order to maximize the firm&#697;s value.
D) Achieve a balance between short-term and long-term assets so that they add to the achievement of the firm’s overall goals.

27. One major risk a firm assumes in an aggressive financing strategy is
A) The possibility that collections will be slower than expected.
B) The possibility that long-term funds may not be available when needed.
C) The possibility that short-term funds may not be available when needed.
D) The possibility that it will run out of cash.

28. A firm with highly unpredictable sales revenue would best choose ________ financing strategy to minimize risk.
A) The aggressive
B) The conservative
C) The trade-off
D) A seasonal

29. Earnings before interest and taxes (EBIT) is a descriptive label for
A) Operating profits.
B) Net profits before taxes.
C) Earnings per share.
D) Gross profits.

30. The three basic types of leverage are
A) Operating, production, and financial.
B) Operating, production, and total.
C) Production, financial, and total.
D) Operating, financial, and total.

31. An increase in fixed operating costs will result in ________ in the degree of operating leverage.
A) A decrease
B) An increase
C) No change
D) An undetermined change

32. Because the degree of total leverage is multiplicative and not additive, when a firm has very high operating leverage it can moderate its total risk by
A) Increasing sales.
B) Using more financial leverage.
C) Increasing EBIT.
D) Using a lower level of financial leverage.

33. Total leverage measures the effect of fixed costs on the relationship between
A) Sales and EBIT.
B) Sales and EPS.
C) EBIT and EPS.
D) None of the above.

Multiple choice

1. In computing the earnings per share of common stock,
noncumulative preferred dividends not declared should be
A. deducted from the net income for the year.
B. added to the net income for the year.
C. ignored.
D. deducted from the net income for the year, net of tax.

2. When using the if-converted method to compute diluted
earnings per share, convertible securities should
A. be included only if antidilutive.
B. be included only if dilutive.
C. be included whether dilutive or not.
D. not be included.

3. Effective January 2, 2007, Kincaid Co. adopted the accounting principle of expensing
advertising and promotion costs as they’re incurred. Previously, advertising and promotion
costs applicable to future periods were recorded in prepaid expenses. Kincaid can justify
the change, which was made for both financial statement and income tax reporting
purposes. Kincaid’s prepaid advertising and promotion costs totaled $250,000 at
December 31, 2006. Assume that the income tax rate is 40 percent for 2006 and 2007.
The adjustment for the effect of the change in accounting principle should result in a net
charge against income in the 2007 income statement of
A. $0. C. $150,000.
B. $100,000. D. $250,000.

4. What is the correct treatment of a stock dividend issued in mid-year when computing the
weighted average number of common shares outstanding for earnings per share purposes?
A. The stock dividend should be weighted by the length of time that the additional
number of shares are outstanding during the period.
B. The stock dividend should be included in the weighted average number of common
shares outstanding only if the additional shares result in a decrease of 3 percent or
more in earnings per share.
C. The stock dividend should be weighted as if the additional shares were issued at the
beginning of the year.
D. The stock dividend should be ignored since no additional capital was received.

5. Barker, Inc. receives subscription payments for annual (one year) subscriptions to its
magazine. Payments are recorded as revenue when received. Amounts received but
unearned at the end of each of the last three years are shown below:
2005 2006 2007
Unearned revenues $120,000 $150,000 $176,000
Barker failed to record the unearned revenues in each of the three years. As a result of
the omission, 2007 income was
A. overstated by $146,000. C. understated by $26,000.
B. understated by $146,000. D. overstated by $26,000.

6. Selected information for Henry Company is as follows:
December 31
2006 2007
Common stock $600,000 $600,000
Additional paid-in capital 250,000 250,000
Retained earnings 170,000 370,000
Net income for year 120,000 240,000
Henry’s return on common stockholder’s equity, rounded to the nearest percentage point,
for 2007 is
A. 20 percent. C. 28 percent.
B. 21 percent. D. 40 percent.

7. On December 31, 2006, Superior, Inc. had 600,000 shares of common stock issued and
outstanding. Superior issued a 10 percent stock dividend on July 1, 2007. On October 1,
2006, Superior reacquired 48,000 shares of its common stock and recorded the purchase
using the cost method of accounting for treasury stock. What number of shares should be
used in computing basic earnings per share for the year ended December 31, 2007?
A. 612,000 C. 648,000
B. 618,000 D. 660,000

8. Koppell Co. made the following errors in counting its year-end physical inventories:
2000 $ 60,000 overstatement
2001 108,000 understatement
2002 90,000 overstatement
The entry to correct the accounts at the end of 2002 is
A. Retained Earnings $ 48,000
Cost of Goods Sold $ 42,000
Inventory 90,000
B. Retained Earnings 18,000
Cost of Goods Sold 72,000
Inventory 90,000
C. Inventory 90,000
Cost of Goods Sold 18,000
Retained Earnings 72,000
D. Cost of Goods Sold 198,000
Retained Earnings 108,000
Inventory 90,000

9. A company changes from an accounting principle that’s not generally accepted to one
that’s generally accepted. The effect of the change should be reported, net of applicable
income taxes, in the current
A. income statement after income from continuing operations and before extraordinary
items.
B. income statement after extraordinary items.
C. retained earnings statement as an adjustment of the opening balance.
D. retained earnings statement after net income but before dividends.

10. At December 31, 2006, the Murdock Company had 150,000 shares of common stock
issued and outstanding. On April 1, 2007, an additional 30,000 shares of common stock
were issued. Murdock’s net income for the year ended December 31, 2007, was
$517,500. During 2007, Murdock declared and paid $300,000 in cash dividends on its
nonconvertible preferred stock. The basic earnings per common share, rounded to the
nearest penny, for the year ended December 31, 2006, should be
A. $3.00. C. $1.45.
B. $2.00. D. $1.26.

11. Selected information from the accounting records of Thorne Company is as follows:
Net sales for 2004 $900,000
Cost of goods sold for 2004 600,000
Inventory at December 31, 2003 180,000
Inventory at December 31, 2004 156,000
Thorne’s inventory turnover for 2004 is
A. 5.36 times. C. 3.67 times.
B. 3.85 times. D. 3.57 times.

12. An example of an item that should be reported as a prior-period adjustment is the
A. collection of previously written-off accounts receivable.
B. payment of taxes resulting from examination of prior years’ income tax returns.
C. correction of an error in financial statements of a prior year.
D. receipt of insurance proceeds for damage to a building sustained in a prior year

13. Landrover, Inc. had 150,000 shares of common stock issued and outstanding at
December 31, 2005. On July 1, 2006, an additional 25,000 shares of common stock were
issued for cash. Landrover also had unexercised stock options to purchase 20,000 shares
of common stock at $15 per share outstanding at the beginning and end of 2006. The
market price of Landrover’s common stock was $20 throughout 2006. What number of
shares should be used in computing diluted earnings per share for the year ended
December 31, 2006?
A. 182,500 C. 177,500
B. 180,000 D. 167,500

14. Which of the following transactions would increase a firm’s current ratio?
A. Purchase of inventory on account
B. Payment of accounts payable
C. Collection of accounts receivable
D. Purchase of temporary investments for cash

15. An accounting change that requires that the cumulative effect of the adjustment be
presented in the income statement is a change in
A. the life of equipment from five to seven years.
B. depreciation method from straight-line to double-declining-balance.
C. the specific subsidiaries included in consolidated financial statements.
D. percentage used to determine the allowance for bad debts.

16. At December 31, 2005, the Roberts Company had 700,000 shares of common stock
outstanding. On September 1, 2006, an additional 300,000 shares of common stock were
issued. In addition, Beck had $20,000,000 of 8 percent convertible bonds outstanding at
December 31, 2005, which are convertible into 400,000 shares of common stock. No
bonds were converted into common stock in 2006. The net income for the year ended
December 31, 2006, was $6,000,000. Assuming the income tax rate was 40 percent,
what should be the diluted earnings per share for the year ended December 31, 2006?
A. $5.00 C. $5.80
B. $5.53 D. $8.30

17. In comparing the current ratios of two companies, why is it invalid to assume that the
company with the higher current ratio is the better company?
A. A high current ratio may indicate inadequate inventory on hand.
B. A high current ratio may indicate inefficient use of various assets and liabilities.
C. The two companies may define working capital in different terms.
D. The two companies may be different sizes.

18. On January 1, 2004, Carnival Shipping bought a machine for $1,500,000. At that time,
this machine had an estimated useful life of six years, with no salvage value. As a result of
additional information, Carnival determined on January 1, 2007, that the machine had an
estimated useful life of eight years from the date it was acquired, with no salvage value.
Accordingly, the appropriate accounting change was made in 2007. How much depreciation
expense for this machine should Carnival record for the year ended December 31, 2007,
assuming Carnival uses the straight-line method of depreciation?
A. $125,000 C. $187,500
B. $150,000 D. $250,000

19. The 2006 net income of Atwater Inc. was $200,000, and 100,000 shares of its common
stock were outstanding during the entire year. In addition, there were outstanding options
to purchase 10,000 shares of common stock at $10 per share. These options were granted
in 2003, and none had been exercised by December 31, 2006. Market prices of Atwater’s
common stock during 2006 were
January 1 $20 per share
December 31 $40 per share
Average Price $25 per share
The amount that should be shown as Atwater’s diluted earnings per share for 2006
(rounded to the nearest cent) is
A. $2.00. C. $1.89.
B. $1.95. D. $1.86.

20. On December 31, 2006, Prince Company appropriately changed to the FIFO cost method
from the weighted-average cost method for financial statement and income tax purposes.
The change will result in a $700,000 increase in the beginning inventory at January 1,
2006. Assuming a 40 percent income tax rate, the cumulative effect of this accounting
change reported for the year ended December 31, 2006, is
A. $700,000. C. $350,000.
B. $420,000. D. $280,000.

Multiple choice

Ref: Fundamental Managerial Accounting Concepts. Fifth Edition. EDMONDS
Multiple Questions such as:

If a company misclassifies a general, selling and administrative cost as a product cost in a period when production exceeds sales
A) net income will be understated.
B) total assets will be understated.
C) cash flow will be unaffected.
D) All of the above.

Some Questions already answered.

Multiple choice

See attached file.

Ref: Fundamental Managerial Accounting Concepts. Fifth Edition. EDMONDS

25 Multiple Choice Questions.

1. During the year Leyland Company completed 1,300 units of product. Ending inventory consisted of 400 units that were 50% complete. The total dollar cost associated with production of inventory was $45,000. The cost per equivalent whole unit would be which of the following? (Round all answers to the nearest whole penny.)
A) $26.00
B) $30.00
C) $34.61
D) $41.91

2. What is the name of the method of analyzing beginning and ending balances on the balance sheet and inferring the period’s transactions from the income statement?
A) Cash method
B) Liability method
C) Accrual method
D) T-Account method

3. In a job-order cost system, as goods are produced, product costs (direct material, direct labor, and overhead) are accumulated in the:
A) Materials account.
B) Work in Process account.
C) Finished Goods account.
D) Cost of Goods Sold account.

4. The Work in Process account for Monty’s Company contained the following entries: Work in Process Account Debit of $40,000 for direct raw materials Debit of $60,000 for direct labor Debit of $30,000 for manufacturing overhead Ending balance, $42,000, associated with Job #2 The company uses a job-order cost system. Work was only performed on two jobs during the period. What was the cost of Job # 1, which was started and completed during the period?
A) $88,000
B) $74,000
C) $66,000
D) $90,000

5. Congress Manufacturing is currently working on two jobs. The job order cost sheets for Job 101 and Job 102 showed the following information:

If overhead is applied to jobs at $.80 per direct labor dollar, the total manufacturing cost for the two jobs would be:
A) $ 96,000.
B) $151,200.
C) $ 55,200.
D) $162,000.

6. Assume that a statement of cash flows has been prepared. The sum of the three major components (operating activities, investing activities, financing activities) adds up to the:
A) change in the cash account balance between the beginning and end of the period.
B) net income for the period.
C) ending cash balance.
D) amount of cash inflow for the period.

7. A hybrid cost system contains:
A) features of a job-order cost system.
B) features of a process cost system.
C) features of both job-order and process cost systems.
D) none of the above

8. The Ragan Corporation uses a process cost system. The company started March with 2,300 units in Work in Process-Dept. A. During the month 4,000 units were started. At the end of the month there were 3,200 units in ending Work in Process-Dept. A inventory that were 30% complete. The beginning work in process balance was $240,540 and total manufacturing cost for the period was $608,000. Based on this information, the amount of cost transferred from Work in Process-Dept. A to Work in Process-Dept. B was:
A) $200,640.
B) $254,562.
C) $543,233.
D) $647,900.

9. Alton Company experienced an event that affected its financial statements as indicated below:

What type of product costing system is being used by this company?
A) Job-order cost system
B) Process cost system
C) Hybrid cost system
D) None of the above

10. During the 2007 accounting period the XYZ Company earned $55,000 of sales revenue on account and accrued $32,500 of operating expenses. The company also earned $6,400 of service revenue that had previously been recorded as unearned revenue. In addition, a $2,200 stock dividend was issued to the stockholders. What can be said about cash flows considering these transactions?
A) Cash outflows from financing activities are $2,200
B) Cash inflows from operating activities are $28,900.
C) Cash inflows from operating activities are $22,500.
D) There are no cash effects from these transactions.

11. In preparing the statement of cash flows by the indirect method, which of the following is an incorrect statement of one of the general rules to convert net income to a cash-basis equivalent?
A) Increases in current assets are subtracted from net income.
B) Non-cash revenue and gains are added to net income.
C) Decreases in current assets are added to net income.
D) Increases in current liabilities are added to net income.

12. Evelyn Company began the accounting period with $13,500 in accounts receivable. The ending balance in accounts receivable was $5,000. If the credit sales during the period were $22,000, what is the amount of cash received from customers?
A) $13,500
B) $22,000
C) $30,500
D) $40,500

13. Hatcher Company uses a process cost system. The following data applies to January 2007.

The ending work in process inventory is 90% complete. The total number of equivalent units for January was:
A) 51,200
B) 53,000
C) 54,800
D) 55,000

14. In a job-order cost system, the subsidiary accounts for the Work in Process account are the:
A) job cost sheets.
B) standard cost cards.
C) individual accounts payable accounts.
D) cost of production report.

15. On January 1, 2008, the ABC Company purchased equipment for $26,000 cash. On December 31, 2008, depreciation of $8,000 was recorded. Which of the following correctly shows the combined effect of these two events on the income statement and statement of cash flows?

ABC uses the direct method to prepare the statement of cash flows.
A) A Above.
B) B Above.
C) C Above.
D) D Above.

16. Port Corporation reported a $1,800 balance in accounts receivable on January 1, 2006. During the year, $12,400 of sales on account were made. During the year, Port wrote off as uncollectible, accounts receivable of $850. If the ending balance of accounts receivable is $1,000, what is the amount of cash received from customers?
A) $10,600
B) $10,750
C) $12,350
D) $14,200

17. Select the correct formula for computing the cost to be assigned to ending inventory in a process costing system.
A) Ending inventory units x cost per equivalent units
B) Ending inventory equivalent units x cost per equivalent units
C) Beginning inventory cost + Transferred-in costs
D) Beginning inventory units + units transferred in – units transferred out

18. The entry to dispose of underapplied manufacturing overhead will include a:
A) debit to Cost of Goods Sold and a credit to Manufacturing Overhead.
B) debit to Cost of Goods Sold and a credit to Finished Goods.
C) debit to Manufacturing Overhead and a credit to Cost of Goods Sold.
D) debit to Finished Goods and a credit to Manufacturing Overhead.

19. The following income statement was drawn from the annual report of Hurricane Company:

The amount of cash flow from operating activities is:
A) $18,600
B) $18,000
C) $13,000
D) $12,400

20. The Lemmon Corporation reported a beginning balance of $600 in its Prepaid Insurance Account for 2008. During the year, a total of $8,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $800. How much cash did Lemmon pay for insurance during 2008?
A) $8,600
B) $8,200
C) $8,000
D) $7,400

21. What effect will recording depreciation expense have on net income and cash flows?

A) A Above
B) B Above
C) C Above
D) D Above

22. Which of the following is not a component of process cost systems?
A) Job cost sheet
B) Cost of production report
C) Multiple Work in Process accounts
D) All of the above are components of process cost systems.

23. Which of the following cash flows would be included under the operating activities section of the cash flow statement? Assume the direct method.
A) Cash receipts from dividends.
B) Cash paid to purchase equipment.
C) Cash received from issuing bonds payable.
D) Gains and losses from the sale of operational assets.

24. Which of the following transactions is a use of cash?
A) Short-term borrowing of cash
B) Acquisition of land by issuing a short-term note payable.
C) Issuance of a stock dividend.
D) Purchase of treasury stock

25. Which of the following would NOT be represented in the financing activities section of the statement of cash flows?
A) Purchased a new office building.
B) Purchased treasury stock.
C) Made installment payment on long-term note payable.
D) Issued preferred stock.

Multiple Choice

Question 21
GoodBuy stock has a beta of 1.75. The expected return on GoodBuy is 20%, while the expected return on the market portfolio is only 13%. The risk-free rate is 3%. Because GoodBuy lies __________ the SML, it is considered __________.

a. below; overpriced
b. below; underpriced
c. above; underpriced
d. above; overpriced
e. on; correctly priced

Question 22
Typically when valuing an asset, adjustments for risk are made by adjusting:

a. the number of time periods
b. the asset’s expected cash flows
c. the asset’s required return
d. the asset’s terminal value
e. none of the above

Question 23
The value of long-term bonds is __________ sensitive to changes in __________ than short-term bonds.

a. more; interest rates
b. more; GDP growth
c. not; interest rates
d. less; GDP growth
e. less; interest rates

Question 24
Zoomers Inc. paid an annual dividend of $1.20 yesterday. If future dividends are expected to grow at a rate of 4 percent, and the required rate of return on this stock is 14 percent, the fair price of this stock today is:

a. $8.57
b. $12.00
c. $12.48
d. $13.68
e. None of the above

Question 25
Free cash flow represents the cash amount that a firm could distribute to __________.

a. bondholders
b. common stockholders
c. preferred shareholders
d. all of the above
e. none of the above

Multiple choice

Value of acquisition and NPV of mergers.
loatation costs and refunding NPV.
NAL and Lessee’s analysis.
Conversion price, bonds with warrants, and convertibles.
Please see the attachment.
1. The “preferred” feature of preferred stock means that it normally will generate a higher total return for the stockholder than common stock.

a. True
b. False

2. Which of the following statements concerning preferred stock is most correct?

a. Preferred stock generally has a higher component cost to the firm than does common
stock.
b. By law in most states, all preferred stock issues must be cumulative, meaning that the
cumulative, compounded total of all unpaid preferred dividends must be paid before
dividends can be paid on the firm’s common stock.
c. From the issuer’s point of view, preferred stock is less risky than bonds.
d. Preferred stock, because of the current tax treatment of dividends, is bought mostly by
individuals in high tax brackets.
e. Unlike bonds, preferred stock cannot have a convertible feature.

3. Which of the following statements about warrants and convertibles is false?

a. Both warrants and convertibles are types of option securities.
b. One primary difference between warrants and convertibles is that warrants bring in
additional funds when exercised, while convertibles do not.
c. The coupon rate on convertible debt is lower than the coupon rate on similar straight
debt because convertibles are less risky.
d. The value of a warrant depends on its exercise price, its term, and the underlying
stock price.
e. Warrants usually can be detached and traded separately from their associated debt.

4. Which of the following statements about convertibles is true?

a. The coupon interest rate on convertibles is generally higher than on straight debt.
b. New equity funds are raised by the issuer when convertibles are converted.
c. Investors are willing to accept lower interest rates on convertibles because they are
less risky than straight debt.
d. At issue, a convertible’s conversion (exercise) price is often set equal to the current
underlying stock price.
e. None of the above statements is true.

5. The lease analysis should compare the cost of leasing to the

a. Cost of owning using debt.
b. Cost of owning using equity.
c. After-tax cost of debt to measure the effect of leasing on the cost of equity.
d. Average cost of all fixed charges.
e. Cost of owning using the weighted average cost of capital for the firm.
6. Operating leases usually have terms that include

a. Maintenance of the equipment.
b. Only partial amortization.
c. Cancellation clauses.
d. All of the above.
e. Only answers a and c above.

7. Heavy use of off-balance sheet lease financing will tend to

a. Make a company appear more risky than it actually is because its stated debt ratio will
appear higher.
b. Make a company appear less risky than it actually is because its stated debt ratio will
appear lower.
c. Affect a company’s cash flows but not its degree of risk.
d. Have no effect on either cash flows or risk because the cash flows are already
reflected in the income statement.

8. In the lease versus buy decision, leasing is often preferable

a. Since it does not limit the firm’s ability to borrow to make other investments.
b. Because, generally, no down payment is required, and there are no indirect interest
costs.
c. Because lease obligations do not affect the riskiness of the firm.
d. All of the above are correct statements.
e. None of the above are correct statements.

9. Which of the following statements concerning common stock and the investment banking process is false?

a. The preemptive right gives each existing common stockholder the right to purchase
his or her proportionate share of a new stock issue.
b. If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the
primary market.
c. Listing a large firm’s stock is often considered to be beneficial to stockholders
because the increases in liqui¬dity and status probably outweigh the additional costs
to the firm.
d. Stockholders have the right to elect the firm’s direc-tors, who in turn select the
officers who manage the business. If stockholders are dissatisfied with management’s
performance, an outside group may ask the stockholders to vote for it in an effort to
take control of the business. This action is called a tender offer.
e. A large issue of new stock could cause the stock price to fall. This loss is called
“market pressure,” and it is treated as a flotation cost because it is a cost associated
with the new issue.

10. Which of the following factors will increase the likelihood that a company will choose to call its outstanding bonds?

a. An increase in the yield to maturity on the company’s outstanding bonds.
b. An increase in the call price of the outstanding bonds.
c. A reduction in the flotation costs associated with issuing new bonds.
d. Answers a and c are correct.
e. None of the answers above is correct.

11. Which of the following statements is most correct?

a. In a private placement, securities are sold to private (individual) investors rather than
to institutions.
b. Private placements occur most frequently in stock issues, but bonds can also be sold
by private placement.
c. Private placements are convenient for issuers, but the convenience is offset by higher
flotation costs.
d. The SEC requires that all private placements be handled by an investment banker.
e. The above statements are all false.

12. Which of the following advantages of going public simultaneously implies a potential disadvantage of going public?

a. Facilitates in stockholder diversification.
b. Changes liquidity of the firm’s stock.
c. Alters the difficulty associated with obtaining capital.
d. Establishes a market value for the firm.
e. Changes name recognition of the company.

13. Which of the following statements is most correct?

a. If a company which produces military equipment merges with a company which
manages a chain of motels, this is an example of a horizontal merger.
b. A defensive merger is where the firm’s managers merge with another firm to avoid or
lessen the possibility of being acquired through a hostile takeover.
c. Acquiring firms send a signal that their stock is undervalued if they choose to use
stock to pay for the acquisition.
d. None of the statements above is correct.
e. Answers a and c are correct.

14. Which of the following statements is most correct?

a. Tax considerations often play a part in mergers. If one firm has excess cash,
purchasing another firm exposes the purchasing firm to additional taxes. Thus, firms
with excess cash rarely undertake mergers.
b. The smaller the synergistic benefits of a particular merger, the greater the incentive to
bargain in negotiations, and the higher the probability that the merger will be
completed.
c. Since mergers are frequently financed by debt more than equity, financial economies
which imply a lower cost of debt or greater debt capacity are rarely a relevant
rationale for mergers.
d. Managers who purchase other firms often assert that the new combined firm will
enjoy benefits from diversification such as more stable earnings. However, since
shareholders are free to diversify their own holdings at lower cost, such a rationale is
generally not a valid motive for publicly held firms.
e. All of the answers above are correct.

15. Which of the following statements is most correct?

a. Leveraged buyouts (LBOs) are where a firm issues equity and uses the proceeds to
take a firm public.
b. In a typical LBO, bondholders do well but shareholders realize a decline in value.
c. Firms are unable to sell any assets in the first five years following a leverage buyout.
d. All of the answers above are correct.
e. None of the answers above is correct.

Multiple choice

1. A project has an up-front cost of $100,000. The project’s WACC is 12 percent and its net present value iss $10,000. Which of the following statements is most correct?

a. The project should be rejected since its return is less than the WACC.
b. The project’s internal rate of return is greater than 12 percent.
c. The project’s modified internal rate of return is less than 12 percent
d. All of the above answers are correct.
e. None of the above answers is correct.

2. Assume a project has normal cash flows. All else equal, which of the following statements is correct?

The project’s IRR increasess as the WACC declines.
The project’s NPV increases as the WACC declines.
The project’s MIRR is unaffected by changes in the WACC
The project’s regular payback increases as the WACC declines.
The project’s discounted payback increses as the WACC declines.

Multiple choice

Hello,
I just want to verify that the answers that I have come with are correct.

Thanks,

During year 4, Wall Co. purchased 2,000 shares of Hemp Corp. common stock for $31,500 as a short-term investment. The investment was appropriately classified as a trading security. The market value of this investment was $29,500 at December 31, year 4. Wall sold all of the Hemp common stock for $14 per share on January 15, year 5, incurring $1,400 in brokerage commissions and taxes. On the sale, Wall should report a Realized loss of:
Choose one answer.

a. $1,500

b. $2,900

c. $3,500

d. $4,900

The following information pertains to Lark Corp.’s long-term marketable equity securities portfolio:
Dec 31, 2009 Dec 31, 2008
Cost $200,000 $200,000
Fair value $240,000 $180,000
Differences between cost and market values are considered to be temporary. The decline in market value was properly accounted for at December 31, 2008. At December 31, 2009, what is the net unrealized holding gain or loss to be reported as: first column Other Comprehensive Income and the second column as Accumulated Other Comprehensive Income?
Choose one answer.

a. $60,000 gain (year) Accumulated $40,000 gain

b. $40,000 gain (year) Accumulated $40,000 gain

c. $20,000 loss (year) Accumulated $20,000 loss

d. $0 Year – Accumulated $0

When a product or service is delivered for which a customer advance has been previously received, the appropriate journal entry includes:
Choose one answer.

a. A debit to revenue and a credit to a liability account.

b. A debit to a revenue and a credit to an asset account.

c. A debit to an asset and a credit to a revenue account

d. A debit to a liability and a credit to a revenue account.

Which of the following is NOT a characteristic of a liability?
Choose one answer.

a. It represents a probable, future sacrifice of economic benefits.

b. It must be payable in cash.

c. It arises from present obligations to other entities.

d. It results from past transactions or events.

During 2009, Gum Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following the sale and 4% in the second 12 months following the sale. Sales and actual warranty expenditures for the years ended December 31, 2009 and 2010 are as follows:
Sales Actual Warranty Expenditures
2009 $150,000 $2,250
2010 $250,000 $7,500
Total $400,000 $9,750
What amount should Gum report as estimated warranty liability in its December 31, 2010, balance sheet?
Choose one answer.

a. $2,500

b. $4,250

c. $11,250

d. $14,250

A bond issue on June 1, 2009, has interest payment dates of April 1 and October 1. Bond interest expense for the year ended December 31, 2009 is for a period of:
Choose one answer.

a. Three months

b. Four months

c. Six months

d. Seven months

For a bond issue that sells for less than its par value, the market rate of interest is
Choose one answer.

a. Higher than the rate stated on bond.

b. Dependent on the rate stated on the bond.

c. Equal to the rate stated on the bond

d. Less than the rate stated on the bond

On January 31, 2009, Beau Corp. issued $300,000 maturity value, 12% bonds for $300,000 cash. The bonds are dated December 31, 2008, and mature on December 31, 2018. Interest will be paid semiannually on June 30 and December 31. What amount of accrued interest payable should Beau report in its September 30, 2009 balance sheet?
Choose one answer.

a. $9,000

b. $18,000

c. $27,000

d. $24,000

The company leases the following asset:
? Fair value of $200,000
? Useful life of 5 years with no salvage value
? Lease term is 4 years
? Annual lease payment is $30,000 and the lease rate is 11%
? The company’s overall borrowing rate is 9.5%
? The firm can purchase the equipment at the end of the lease period for $45,000
What type of lease is this?
Choose one answer.

a. Operating

b. Capital

c. Financing

d. Long Term

On January 1, 2009, Blaugh Co. signed a long-term lease for an office building. The terms of the lease required Blaugh to pay $10,000 annually beginning on December 30, 2009, and continuing each year for 30 years. The lease qualifies as a capital lease. On January 1, 2009, the present value of the lease payments is $112,500 at the 8% interest rate implicit in the lease. In Blaugh’s December 31, 2009, balance sheet, the capital lease liability should be
Choose one answer.

a. $102,500

b. $111,500

c. $112,500

d. $290,000

Neal Corp. entered into a nine-year capital lease on a warehouse on December 31, 2009. Lease payments of $52,000, which includes real estate taxes of $2,000, are due annually, Beginning on December 31, 2010, and every December 31 thereafter. Neal does not know the interest rate implicit in the lease; Neal’s incremental borrowing rate is 9%. The rounded present value of an ordinary annuity for nine years at 9% is 6.0. What amount should Neal report as capitalized lease liability at December 31, 2009?
Choose one answer.

a. $300,000

b. $312,000

c. $450,000

d. $468,000

In 2007, Fogg, Inc. issued $10 par value common stock for $25 per share. No other common stock transactions occurred until March 31, 2009, when Fogg acquired some of the issued shares for $20 per share and retired them. Which of the following statements correctly states the effect of this acquisition and retirement?
Choose one answer.

a. 2009 net income is decreased

b. Additional paid in capital is decreased

c. 2009 net income is increased

d. Retained earnings is increased

When a company issues a stock dividend which of the following would be affected?
Choose one answer.

a. Earnings per share

b. Total assets

c. Total liabilities

d. Total stockholders’ equity

Long Co. had 100,000 shares of common stock issued and outstanding at January 1, 2009. During 2009 Long took the following actions:
March 15 Declared a 2 for 1 stock split, when the fair value of the stock was $80 per share.
December 15 Declared a $0.50 per share cash dividend
In Long’s statement of stockholders’ equity for 2009, what amount should Long report as dividends?
Choose one answer.

a. $50,000

b. $100,000

c. $850,000

d. $950,000

At December 31, 2009 and 2008, Gow Corp. had 100,000 shares of common stock and 10,000 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2009 or 2008. Net income for 2009 was $1,000,000. For 2009, basic earnings per common share amounted to
Choose one answer.

a. $5.00

b. $9.50

c. $9.00

d. $10.00

Multiple Choice

Multiple choice

Multiple choice

Please see the attached Word 2007 document that includes screen-shots/pictures in the questions.

Thanks for your help!!
1. Which of the following statements is true?
A. When production exceeds sales, a manufacturing company’s variable costing net operating income will usually be greater than its absorption costing net operating income.
B. The variable costing method is usually not used for external reporting purposes.
C. The absorption costing method treats fixed production costs as period costs.
D. All of these.

2. Which of the following costs at a sofa manufacturing company would be treated as a period cost under the variable costing method?
A. the cost of glue used to assemble the wood frame of each sofa produced
B. depreciation on sales vehicles
C. the salary of a factory manager
D. both B and C above

3. A cost that would be included in product costs under both absorption costing and variable costing would be:
A. supervisory salaries.
B. equipment depreciation.
C. variable manufacturing costs.
D. variable selling expenses.

4. What is the cause of the difference between absorption costing net operating income and variable costing net operating income?
A. Absorption costing deducts all manufacturing costs from net operating income; variable costing deducts only prime costs.
B. Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories; variable costing considers all fixed manufacturing costs to be period costs.
C. Absorption costing includes variable manufacturing costs in product costs; variable costing considers variable manufacturing costs to be period costs.
D. Absorption costing includes fixed administrative costs in product costs; variable costing considers fixed administrative costs to be period costs.

5. The gross margin for a manufacturing company is the excess of sales over:
A. cost of goods sold, excluding fixed manufacturing overhead.
B. all variable costs, including variable selling and administrative expenses.
C. cost of goods sold, including fixed manufacturing overhead.
D. variable costs, excluding variable selling and administrative expenses.

6. Silver Company produces a single product. Last year, the company’s variable production costs totaled $7,500 and its fixed manufacturing overhead costs totaled $4,500. The company produced 3,000 units during the year and sold 2,400 units. There were no units in the beginning inventory. Which of the following statements is true?
A. Under variable costing, the units in the ending inventory will be costed at $4 each.
B. The net operating income under absorption costing for the year will be $900 lower than the net operating income under variable costing.
C. The ending inventory under variable costing will be $900 lower than the ending inventory under absorption costing.
D. Under absorption costing, the units in ending inventory will be costed at $2.50 each.

7. Charrd Corporation manufactures a gas operated barbecue grill. The following information relates to Charrd’s operations for last year:

What is Charrd’s variable costing unit product cost?
A. $29
B. $34
C. $58
D. $63

8. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the variable costing unit product cost for the month?
A. $97
B. $90
C. $68
D. $75

9. Overhead allocation based solely on a measure of volume such as direct labor-hours:
A. is a key aspect of the activity-based costing model.
B. will systematically overcost high-volume products and undercost low-volume products.
C. will systematically overcost low-volume products and undercost high-volume products.
D. must be used for external financial reporting.

10. Testing a prototype of a new product is an example of a:
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Organization-sustaining activity.

11. Daniele Corporation uses an activity-based costing system with the following three activity cost pools:

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:

The distribution of resource consumption across activity cost pools is given below:

The activity rate for the Fabrication activity cost pool is closest to:
A. $3.72 per machine-hour
B. $4.44 per machine-hour
C. $7.44 per machine-hour
D. $1.24 per machine-hour

12. Vodopich Corporation has provided the following data from its activity-based costing system:

According to the activity-based costing system, the average cost of product P58Z is closest to:
A. $113.33 per unit
B. $58.30 per unit
C. $123.40 per unit
D. $118.30 per unit

13. The materials purchase budget:
A. is the beginning point in the budget process.
B. must provide for desired ending inventory as well as for production.
C. is accompanied by a schedule of cash collections.
D. is completed after the cash budget.

14. The master budget process usually begins with the:
A. production budget.
B. operating budget.
C. sales budget.
D. cash budget.

15. The excess or deficiency of cash available over disbursements on the cash budget is calculated as follows:
A. The beginning balance less the expected cash receipts less the expected cash disbursements.
B. The cash available less the expected cash receipts plus the expected cash disbursements.
C. The beginning balance plus the expected cash receipts less the expected cash disbursements.
D. None of these.

16. The PDQ Company makes collections on credit sales according to the following schedule:

25% in month of sale
70% in month following sale
4% in second month following sale
1% uncollectible

The following sales have been budgeted:

Cash collections in June would be:
A. $113,400
B. $110,000
C. $111,000
D. $115,500

17. Modesto Company produces and sells Product AlphaB. To guard against stockouts, the company requires that 20% of the next month’s sales be on hand at the end of each month. Budgeted sales of Product AlphaB over the next four months are:

Budgeted production for August would be:
A. 62,000 units
B. 70,000 units
C. 58,000 units
D. 50,000 units

18. The Waverly Company has budgeted sales for next year as follows:

The ending inventory of finished goods for each quarter should equal 25% of the next quarter’s budgeted sales in units. The finished goods inventory at the start of the year is 3,000 units. Scheduled production for the third quarter should be:
A. 17,500
B. 18,500
C. 22,000
D. 13,500

19. The Tobler Company has budgeted production for next year as follows:

Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 pounds. The raw materials inventory at the end of each quarter should equal 10% of the next quarter’s production needs. Budgeted purchases of raw materials in the third quarter would be:
A. 63,200 pounds
B. 62,400 pounds
C. 56,800 pounds
D. 50,400 pounds

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store’s operations follow:

? Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
? Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
? The cost of goods sold is 80% of sales.
? The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
? Other monthly expenses to be paid in cash are $21,700.
? Monthly depreciation is $17,000.
? Ignore taxes.

20. Expected cash collections in December are:
A. $126,500
B. $230,500
C. $104,000
D. $230,000

21. The cost of December merchandise purchases would be:
A. $176,000
B. $208,000
C. $184,000
D. $84,000

Roberts Enterprises has budgeted sales in units for the next five months as follows:

Past experience has shown that the ending inventory for each month must be equal to 10% of the next month’s sales in units. The inventory on May 31 contained 410 units. The company needs to prepare a production budget for the second quarter of the year.

22. The beginning inventory in units for September is:
A. 370 units
B. 6,700 units
C. 530 units
D. 670 units

23. The total number of units to be produced in July is:
A. 7,630 units
B. 7,100 units
C. 6,920 units
D. 7,280 units

24. The desired ending inventory for August is:
A. 530 units
B. 670 units
C. 710 units
D. 370 units

Hardin, Inc, has budgeted sales in units for the next five months as follows:

Past experience has shown that the ending inventory for each month should be equal to 15% of the next month’s sales in units. The inventory on May 31 contained 1,020 units. The company needs to prepare a production budget for the next five months.

25. The beginning inventory for September should be:
A. 900 units
B. 1,035 units
C. 1,020 units
D. 1,050 units

26. The total number of units produced in July should be:
A. 6,500 units
B. 5,600 units
C. 5,660 units
D. 5,540 units

27. An unfavorable materials quantity variance indicates that:
A. actual usage of material exceeds the standard material allowed for output.
B. standard material allowed for output exceeds the actual usage of material.
C. actual material price exceeds standard price.
D. standard material price exceeds actual price.

28. A favorable materials price variance coupled with an unfavorable material usage variance would most likely result from:
A. labor efficiency problems.
B. machine efficiency problems.
C. the purchase and use of higher than standard quality material.
D. the purchase and use of lower than standard quality material.

29. Under a standard cost system, the materials price variances are usually the responsibility of the:
A. production manager.
B. sales manager.
C. purchasing manager.
D. engineering manager.

30. Higado Confectionery Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost?
A. store manager salaries
B. store building depreciation expense
C. the cost of corporate advertising aired during the Super Bowl
D. all of these

31. Return on investment (ROI) is equal to the margin multiplied by:
A. sales.
B. turnover.
C. average operating assets.
D. residual income.

32. Which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same?
A. A reduction in expenses.
B. An increase in net operating income.
C. An increase in operating assets.
D. An increase in sales.

33. Delmar Corporation is considering the use of residual income as a measure of the performance of its divisions. What major disadvantage of this method should the company consider before deciding to institute it?
A. this method does not take into account differences in the size of divisions.
B. investments may be adopted that will decrease the overall return on investment.
C. the minimum required rate of return may eliminate desirable investments.
D. residual income does not measure how effectively the division manager controls costs.

34. Bonniwell Corporation has two divisions: the Delta Division and the Alpha Division. The Delta Division has sales of $620,000, variable expenses of $359,600, and traceable fixed expenses of $229,200. The Alpha Division has sales of $820,000, variable expenses of $541,200, and traceable fixed expenses of $172,900. The total amount of common fixed expenses not traceable to the individual divisions is $122,000. What is the company’s net operating income?
A. $539,200
B. $15,100
C. $137,100
D. $417,200

35. Given the following data:

Return on investment (ROI) would be:
A. 10%
B. 20%
C. 16.7%
D. 80%

36. Largo Company recorded for the past year sales of $750,000 and average operating assets of $375,000. What is the margin that Largo Company needed to earn in order to achieve an ROI of 15%?
A. 2.00%
B. 15.00%
C. 9.99%
D. 7.50%

37. The Northern Division of the Smith Company had average operating assets totaling $150,000 last year. If the minimum required rate of return is 12%, and if last year’s net operating income at Northern was $20,000, then the residual income for Northern last year was:
A. $20,000
B. $l8,000
C. $5,000
D. $2,000

Niesen Corporation has two major business segments-Consumer and Commercial. Data for the segment and for the company for August appear below:

In addition, common fixed expenses totaled $282,000 and were allocated as follows: $127,000 to the Consumer business segment and $155,000 to the Commercial business segment.

38. The contribution margin of the Commercial business segment is:
A. $146,000
B. $169,000
C. $546,000
D. $296,000

The Consumer Products Division of Garafalo Corporation had average operating assets of $300,000 and net operating income of $46,900 in March. The minimum required rate of return for performance evaluation purposes is 16%.

39. What was the Consumer Products Division’s minimum required return in March?
A. $55,504
B. $48,000
C. $7,504
D. $46,900

40. What was the Consumer Products Division’s residual income in March?
A. $7,504
B. $1,100
C. -$7,504
D. -$1,100

Multiple Choice

1. In developing data for accounts receivable for the pro forma balance sheet, the analyst is most likely to turn to the ______.
a. pro forma income statement
b. cash budget
c. prior balance sheet
d. statement of retained earnings

2. A firm has forecasted sales of $3,000 in January, $6,000 in February, and $5,500 in March. All sales are on credit. 40% is collected the month of sale and the remainder the following month. How much is collected from accounts receivable in February?
a. $1,950
b. $6,500
c. $4,200
d. $5,100

3. In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced ______.
a. is higher
b. is lower
c. is the same
d. can be either higher or lower

4. Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?
a. decrease in inventory
b. increase in retained earnings
c. decrease in accounts payable
d. decrease in accounts receivable

Multiple Choice

I am looking for help on the following multiple choice questions.

1. At the equilibrium output for a monopolistic competitor:
Price equals marginal cost equals marginal revenue
Price equals average total cos equals marginal revenue
Marginal cost equals marginal revenue equals average total costs
Price equals average total cost and marginal cost equals marginal
revenue

2. For a cartel to be successful in increasing economic profits for its
members:
Entry of new firms must be blocked
Price must be set equal to marginal cost
Individual firms must be encouraged to adjust output so as to maximize
their own profits at the cartel price
Price must be set equal to average total cost

3. Once vaccinated a person cannot catch a cold nor give a cold to someone else. As a result the marginal social benefit resulting from consumption of the vaccine:
Exceeds the marginal benefit received by consumers of the vaccine
Equals the marginal social cost of producing the vaccine in a
competitive equilibrium.
is less than the marginal benefit received by consumers of the
vaccine.

4. A rightward shift of the marginal social benefit curve for pollution
control:
Has no effect on the efficient percentage reduction in polluting
abatement.
Makes it efficient to spend more on pollution abatement.
Makes it efficient to spend less on pollution abatement.
Makes pollution abatement cheaper.

5. A 2004 article written immediately after the re-election of George
W. Bush referred to his environmental policy system where power
plants buy and sell the right to pollute in the form of emission
credits. Do economists tend to favor this approach to pollution
control:
No; these programs are ineffective because they encourage major
polluters to free ride on the efforts of others.
No; it is possible for some firms to do nothing if they simply buy
enough credits.
Yes; they encourage all firms to cut pollution by the same
percentage.
Yes; they believe that such a proposal would achieve a level of
pollution reduction with the lowest cost to society.

6. If a positive externality is associated with the purchase of smoke
detectors:
The marginal social benefit of smoke detectors exceeds their price
The marginal social benefit of smoke detectors is zero
The marginal social benefit of smoke detectors equals their price
More than the efficient quantity of smoke detectors will be sold

7. What do economists mean when they say there is “market failure”?
Business has introduced a product that consumers did not want
Free markets have led to excessive profits
Markets have surpluses or shortages so that government rationing is
necessary.
Free markets yield results that economists do not consider socially
optimal.

8. A market for information is more likely to develop even in the
absence of government regulation of information as long as the
marginal:
Cost of information is zero
Benefit of information is zero
Cost of information exceeds the marginal benefit
Benefit of information exceeds the marginal cost

9. A widget has an opportunity cost of 4 wadgets in Saudi Arabia and 2
wadgets in the United States. Given these opportunity costs, you
would suggest that:
Saudi Arabia specialize in widgets and the US in wadgets
No trade should take place
Saudi Arabia specialize in wadgets and the US in widgets
Both countries produce an equal amount of each.

10. Some residents of Key West, an island located at the end of the
Florida Keys, fly the flag of the Conch Republic to empahasize that
they are different from the rest of the U.S. Suppose that Key West
separated from the U.S. and that all trade between it and the rest
of the U.S. ceased. What would happen?
The U.S. would be little affected while the effects on the Key West
would be large.
Key West would be little affected while the effects on the U.S.
would be large
Both the U.S. and Key West would be affected about equally
We cannot know without knowing about their bargaining abilities

11. Isolationism a policy of trying to minimize a nations political and
economic interactions with the rest of the world:
Has always been key part of American politics
Was important until the late 19th century and then declined
Rose in America in the late 19th century and was an important
political element until World War II
Rose to importance in the U.S. after World War II

12. All of the following are arguments in support of protectionist
legislation except
Supporting infant industries
Preserving domestic employment
Increasing global trade
Promoting National Security

13. In the early 2000s, China taxed its textile exports when the
international quota system for textiles expired. Many countries
were worried about rapid Chines expansion into textiles, and there
was discussion of new tariffs and quotas to slow an anticipated
increase in Chinese exports. Is there any advantage to China for
imposing export tariffs rather than having importers impose import
tariffs?
No; Both result in fewer jobs in China and higher prices in the U.S.
Yes; With a Chinese export tariff, China would get the revenue,
whereas with an American import tariff, the U.S. would get the
revenue.
Yes; With the Chinese export tariff, China will lose fewer jobs than
it would with an American import tariff
Yes; with the Chinese export tariff, prices will not rise in the U.S.
as they would with an American import tariff

14. If the primary purpose of a tariff is to completely eliminate foreign
competition, it will be expected to:
Raise either a large or a small amount of revenue depending on the
magnitude of the tariff imposed
Raise a relatively large amount of tax revenue
Raise an amount of revenue equal to the amount of the tariff
multiplied by the volume of exports
Raise a relatively small amount of tax revenue.

Multiple choice

1.Pete Moran bought a Dell Laptop Computer priced at $699. He put down 30 percent. The amount of down payment is:

a.$207.90
b.$209.07
c.$209.70
d.$489.30
e.None of these

2.Pumpkins at a local farm sell for $.49 each per pound. Jim Ring spent $73.50. How many pounds of pumpkins were purchased?

a.100
b.150
c.510
d.110
e.None of these

3.Norm’s electric bill for December 2008 was $149.32. In 2009 the electric bill was $194.31. Next year Norm expects the bill to be the 2008 amount plus $25.00 more than the difference between 2008 and 2009. What is the new bill expected to be?

a.$44.99
b.$194.31
c.$219.31
d.$69.99
e.None of these

4.Coffee costs $12 per case and tea costs $8 per case. If an order comes in for a total of 250 cases for $2,600, what was the specific number of cases of tea? (Hint, Let C = cases of coffee)

a.150
b.100
c.1,800
d.800
e.None of these

5.Ed Sloan bought 6,000 shares of stock in Ebay Co. After holding the stock for 6 months, he sold 500 shares on Monday, 220 shares on Tuesday and again on Thursday, and 900 shares on Friday. If the average share of stock he still has is worth $70 per share, what is the total value of the stock?

a.$306,600
b.$291,200
c.$219,200
d.$360,600
e.None of these

6.Lee, manager of Lexington soccer team, was trying to figure the percent of games they lost this season. Their record was 30 wins and 10 losses. What percent of the soccer games did they lose?

a.20%
b.75%
c.80%
d.25%
e.None of these

7.Janet Woo received the following grades in an accounting class at McClenan Community College: 65, 80, 70, 100, 75, and 90. The instructor said he would drop the lowest grade. What is Janet’s average?

a.81
b.83
c.84
d.82
e.None of these

8.Jim sells college textbooks. To date Jim sold $141,002 worth of texts. His sales quota is $194,159. Tomorrow he expects to sell $15,005 worth of text to B College. His last stop will be Munroe College. What must he sell to them to meet his quota?

a.$38,152
b.$38,251
c.$53,157
d.$53,175
e.None of these

9.If Jan sells 2,500 glow sticks at the fourth of July at $1.99 each, what will her total profit be if each stick cost her $.88?

a.$2,757
b.$3,000
c.$2,775
d.$20,757
e.None of these

10.9,432 written in verbal is:

a.nine thousand four hundred two
b.nine thousand and four hundred thirty-two
c.nine thousand four hundred twenty-three
d.nine thousand, four hundred thirty-two
e.none of these

Multiple choice

Multiple Choice–Choose the BEST answer – Macro Economics Questions

Multiple choice

4. Which of the following statements is correct?
“Characteristics line” is another name for the Security Market Line.
The characteristics line is the regression line that results from plotting the returns on a particular stock versus the returns on a stock from a different industry.
The slope of the characteristic line is the stock’s standard deviation.
The distance of the plot points from the characteristics line is a measure of the stock’s market risk.
The distance of the plot points from the characteristics line is a measure of the stock’s discounted diversifiable risk.

5. (TCO D) A share of common stock has just paid a dividend of $2. If the expected long-run growth rate for this stock is 5%, and if investors required rate of return is 10.5%, what is the stock price?

$35.39
$38.80
$37.23
$38.18
$39.14

6. If Do = $2.75, g (which is constant) = 3%, and Po – $36, what is the stock’s expeced total return for the coming year?

9.82%
10.07%
10.33%
10.60%
10.87%

7. You were hired as a consultant to Kroncke Company, whose target capital structure is 40% debt, 10% preferred, and 50% common equity. The after-tax cost of debt is 6%, the cost of preferred is 7.5%, and the cost of retained earnings is 13.25%. the firm will not be issuing any new stock. What is its WACC?
9.48%
9.78%
10.07%
10.37%
10.68%

Multiple choice

3. Which of the following does NOT always increase a company’s market value?
a. Increasing the expected growth rate of sales.

b. Increasing the expected operating profitability (NOPAT/Sales).

c. Decreasing the capital requirements (Capital/Sales).

d. Decreasing the weighted average cost of capital.

e. Increasing the expected rate of return on invested capital.

Discuss fully the reasons for your choice.

4. Your firm has debt worth $200,000, with a yield of 9%, and equity worth $300,000. It is growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth, what is the value of your firm’s tax shield, i.e., how much value does the use of debt add?
a. $92,571

b. $102,857

c. $113,143

d. $124,457

e. $136,903

Show all work

Multiple choice

9. A company’s account balances at December 31, 2007 for Accounts Receivable and the related Allowance for Doubtful Accounts are $460,000 debit and $700 credit, respectively. From an aging of accounts receivable, it is estimated that $12,500 of the December 31 receivables will be uncollectible. The necessary adjusting entry would include a credit to the allowance account for:

a. $12,500.
b. $13,200.
c. $11,800.
d. $700.
e. None of the above
f. Answer cannot be determined from the information provided

10. Gross billings for merchandise sold by a company to its customers last year amounted to $15,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for the company were:

a. $15,720,000.
b. $15,350,000.
c. $15,175,000.
d. $15,035,000.
e. None of the above
f. Answer cannot be determined from the information provided

11. A company has the following items: write-down of inventories, $120,000; loss on disposal of Sports Division, $185,000; and loss due to strike, $113,000. Ignoring income taxes, what total amount should the company report as extraordinary losses?

a. $ -0-.
b. $185,000.
c. $233,000.
d. $298,000.
e. None of the above
f. Answer cannot be determined from the information provided

12. A company has the following items: common stock, $720,000; treasury stock, $85,000; deferred taxes, $100,000 and retained earnings, $363,000. What total amount should the company report as stockholders’ equity?

a. $898,000.
b. $998,000.
c. $1,098,000.
d. $1,198,000.
e. None of the above
f. Answer cannot be determined from the information provided

13. A corporation reports:

Cash provided by operating activities $250,000
Cash used by investing activities 110,000
Cash provided by financing activities 140,000
Beginning cash balance 70,000

What is the corporation’s ending cash balance?

a. $280,000.
b. $350,000.
c. $500,000.
d. $570,000.
e. None of the above
f. Answer cannot be determined from the information provided

14. A company will invest $300,000 today. The investment will earn 6% for 5 years, with no funds withdrawn. In 5 years, the amount in the investment fund is:

a. $300,000.
b. $390,000.
c. $401,469.
d. $402,087.
e. None of the above
f. Answer cannot be determined from the information provided

15. A corporation will invest $25,000 every January 1st for the next six years (2006 – 2011). If it will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

a. $102,785.
b. $115,120.
c. $202,880.
d. $227,225.
e. None of the above
f. Answer cannot be determined from the information provided

16. What amount should be recorded as the cost of a machine purchased December 31, 2006, which is to be financed by making 8 annual payments of $6,000 each beginning December 31, 2007 if the applicable interest rate is 8%?

a. $42,000
b. $37,481
c. $63,820
d. $34,480
e. None of the above
f. Answer cannot be determined from the information provided

17. A company uses the percentage-of-completion method of accounting. In 2007, the company began work on a contract it had received which provided for a contract price of $15,000,000. Other details follow:

2007
Costs incurred during the year $7,200,000
Estimated costs to complete as of December 31 4,800,000
Billings during the year 6,600,000
Collections during the year 3,900,000
What should be the gross profit recognized in 2007?

a. $600,000
b. $7,800,000
c. $1,800,000
d. $3,000,000
e. None of the above
f. Answer cannot be determined from the information provided

18. A company began work in 2007 on contract #3814, which provided for a contract price of $7,200,000. Other details follow:

2007 2008
Costs incurred during the year $1,200,000 $3,675,000
Estimated costs to complete,
as of December 31 3,600,000 0
Billings during the year 1,350,000 5,400,000
Collections during the year 900,000 5,850,000

Assume that the company uses the completed-contract method of accounting. The portion of the total gross profit to be recognized as income in 2008 is:

a. $900,000.
b. $1,725,000.
c. $2,325,000.
d. $7,200,000.
e. None of the above
f. Answer cannot be determined from the information provided

20. A company sold some of its plant assets during 2008. The original cost of the plant assets was $750,000 and the accumulated depreciation at the date of sale was $700,000. The proceeds from the sale of the plant assets were $105,000. The information concerning the sale of the plant assets should be shown on the company’s statement of cash flows (indirect method) for the year ended December 31, 2008, as a(n):

a. subtraction from net income of $55,000 and a $55,000 increase in cash flows from financing activities.
b. addition to net income of $55,000 and a $105,000 decrease in cash flows from investing activities.
c. subtraction from net income of $55,000 and a $105,000 increase in cash flows from investing activities.
d. addition of $105,000 to net income.
e. none of the above
f. answer cannot be determined from the information provided

Multiple choice

I have 20 questions. Can someone please help with them?
12 are multiple choice and 8 are true/false.

Thank you.

David

1. Determining the maturity and type of funds raised in financial markets is part of the:
A. Investment decision
B. Capital budgeting decision
C. Financing decision
D. Both A & B

2. Which of the following does not cause accounting profits measured in a period to differ from cash flow in the same period:
A. Adjusting entries
B. Payable liabilities
C. Prepaid expenses
D. Depreciation

3. Bonds are quoted in:
A. Real interest rates
B. Nominal interest rates
C. Annual percent rates
D. Effective annual interest rates

4. Which of the following is not a function of an underwriter:
A. Providing pricing and timing advice
B. Securing venture capital
C. Selling the stock issues to the public
D. Buying the stock issues from the company

5. Which of the following is not a disadvantage of having too much invested in working capital:
A. Current assets may be insufficient to cover short-term obligations to suppliers
B. The profitability of assets is lowered if too much cash assets are idle
C. Too generous credit terms may bring losses
D. Inventory investments are unable to earn their opportunity rate of return

6. Pro forma financial statements result from which component of the financial planning model:
A. Inputs
B. The planning model
C. Outputs
D. None of the above

7. Total cash flow from a project includes cash flows from:
A. Cash flows associated with new investment in plant and equipment
B. Cash flows associated with preexisting overhead costs
C. Neither A nor B
D. Both A & B

8. Projects that have high fixed costs usually have:
A. High variable costs
B. High cash outflows
C. High project betas
D. None of the above

9. The theory that expected real interest rates in different countries are equal is known as:
A. Interest rate parity theory
B. International Fisher effect
C. Expectations theory of forward rates
D. Law of one price

10. In a tax-free acquisition:
A. The selling shareholders are viewed as selling their shares.
B. The firm is taxed as though it had always been together.
C. The assets of the selling firm are revalued.
D. A gain or loss may be produced which affects future depreciation.

11. Which of the following is not true about Chapter 11 bankruptcy:
A. Senior creditor tend to favor liquidation
B. Junior creditors tend to favor reorganization
C. Creditor receive interest payments while the company is in bankruptcy
D. This process allows the company to continue to function as an ongoing business

12. As it relates to corporate governance, agency problems can generally be controlled by:
A. Monitoring of management
B. Contracts that relate management compensation to firm performance
C. Competition in the market for managerial employees
D. All of the above

13. T/F____ According to GAAP, assets and liabilities are usually “booked” at their book value.

14. T/F____ Cash flows occurring at different time periods are not comparable for financial decision-making.

15. T/F____ The average tax rate is the relevant tax rate for financial decision-making analysis.

16. T/F____ The actual rate of return earned on the bond investment or the realized holding period return on the bond may be higher or lower than the yield to maturity.

17. T/F____ Lower after-tax costs of debt lowers the WACC and increases the present value of stream of asset cash flows.

18. T/F____ The net present value of a project is zero when the discount rate equals the internal rate of return.

19. T/F____ Sunk costs are relevant in the analysis of a project’s cash flow.

20. T/F____ Variability of returns is a measure of total risk.

Multiple choice

Subject:Business, Accounting/Business Analysis/Financial Reporting – Year 3 Description: CONSOLIDATED BALANCE SHEET

QUESTIONS

Problem:Deer Company acquired 70 percent of Elk Corporation’s outstanding stock. Deer’s separate balance sheet immediately after the acquisition and the consolidated balance sheet are as follows:
Deer C …there is more show problem
Deer Company acquired 70 percent of Elk Corporation’s outstanding stock. Deer’s separate balance sheet immediately after the acquisition and the consolidated balance sheet are as follows:

Deer Consolidated

Current Assets $106,000 $146,000
Investment in Elk (cost) 100,000
Goodwill 8,100
Fixed Assets (net) 270,000 370,000
$476,000 $524,100
Current Liabilities $ 15,000 $ 28,000
Capital Stock 350,000 350,000
Noncontrolling Interest 35,100
Retained Earnings 111,000 111,000
$476,000 $524,100

Ten thousand dollars of the excess payment for the investment in Elk was ascribed to undervaluation of its fixed assets; the balance of the excess payment was ascribed to goodwill. Elk’s current assets included a $2,000 receivable from Deer that arose before they became related on an ownership basis. The following two items relate to Elk’s separate balance sheet prepared at the time Deer acquired its 70 percent interest in Elk.

33. What was the total of the current assets on Elk’s separate balance sheet at the time Deer acquired its 70 percent interest?
a. $38,000.
b. $40,000.
c. $42,000.
d. $104,000.

What was the total stockholders’ equity on Elk’s separate balance sheet at the time Deer acquired its 70 percent interest?
a. $64,900.
b. $70,000.
c. $100,000.
d. $117,000..

A 70 percent owned subsidiary company declares and pays a cash dividend. What effect does the dividend have on the retained earnings and minority interest balances in the parent company’s consolidated balance sheet?
a. No effect on either retained earnings or minority interest.
b. No effect on retained earnings and a decrease in minority interest.
c. Decreases in both retained earnings and minority interest.
d. A decrease in retained earnings and no effect on minority interest.

Multiple choice

At the break-even point:
A)sales would be equal to contribution margin
B)contribution margin would be equal to fixed expenses
C)contribution margin would be equal to net operating income
D)sales would be equal to fixed expenses

Rovinsky Corporation, a company that produced and sells a single product, has provided its contribution format income statement for November:
Sales (5,700 units……………$319,200
Variable expenses……………. 188,100
Contribution margin………….. 131,100
Fixed expenses………………. 106,500
Net operating income…………. 24,600

If the company sells 5,300 units, its NET OPERATING INCOME should be closest to:
A)$24,600
B)$2,200
C)$22,874
D)$15,400

Multiple Choice

1. Which of the following items would not be classified as part of factory overhead?
Direct labor used
Amortization of manufacturing patents
Production supervisors’ salaries
Factory supplies used

2. For which of the following businesses would the process cost system be appropriate?
Book publisher
Dress designer
Lumber mill
Printing firm

3. The four steps necessary to determine the cost of goods completed and the ending inventory valuation in a process cost system are:
1. allocate cost to transferred and partially completed units
2. determine the units to be assigned costs
3. determine the cost per equivalent unit
4. calculate equivalent units of production
The correct ordering of the steps is:
2,4,3,1
4,2,3,1
2,3,4,1
2,3,1,4

4. Department R had 5,000 units in work in process that were 75% completed as to labor and overhead at the beginning of the period, 30,000 units of direct materials were added during the period, 32,000 units were completed during the period, and 3,000 units were 40% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. The first-in, first-out method is used to cost inventories. The number of equivalent units of production for conversion costs for the period was:
32,450
29,450
31,950
26,000

5. Which of the following is an example of a cost that varies in total as the number of units produced changes?
Salary of a production supervisor
Direct materials cost
Property taxes on factory buildings
Straight-line depreciation on factory equipment

6. Which of the following is not an example of a cost that varies in total as the number of units produced changes?
Electricity per KWH to operate factory equipment
Direct materials cost
Insurance premiums on factory building
Wages of assembly worker

7. Which of the following describes the behavior of the variable cost per unit?
Varies in increasing proportion with changes in the activity level
Varies in decreasing proportion with changes in the activity level
Remains constant with changes in the activity level
Varies in direct proportion with the activity level

8. For March, sales revenue is $800,000; sales commissions are 4% of sales; the sales manager’s salary is $80,000; advertising expenses are $75,000; shipping expenses total 1% of sales; and miscellaneous selling expenses are $2,100 plus 3/4 of 1% of sales. Total selling expenses for the month of March are:
$203,100
$187,550
$194,100
$192,100

9. If the expected sales volume for the current period is 7,000 units, the desired ending inventory is 200 units, and the beginning inventory is 300 units, the number of units set forth in the production budget, representing total production for the current period, is:
7,000
6,900
7,100
7,200

10. Wright Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $240,000, $300,000, and $420,000, respectively, for September, October, and November. The company expects to sell 20% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month of the sale, 25% in the month following the sale, and the remainder in the following month. The cash collections in September from accounts receivable are:
$240,000
$134,400
$192,000
$168,000

11. As of January 1, the Joyner Company had an account receivable of $50,000. The sales for January, February, and March were as follows: $120,000, $140,000 and $150,000. 20% of each months sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of January?
$74,000
$110,000
$71,600
$131,600

12. Standards that represent levels of operation that can be attained with reasonable effort are called:
theoretical standards
ideal standards
variable standards
normal standards

13. The following data relate to direct materials costs for November:
Actual costs 4,600 pounds at $5.50
Standard costs 4,500 pounds at $6.00

What is the direct materials quantity variance?

$550 unfavorable
$600 favorable
$550 favorable
$600 unfavorable

14. Favorable volume variances may be harmful when:
machine repairs cause work stoppages
supervisors fail to maintain an even flow of work
production in excess of normal capacity cannot be sold
there are insufficient sales orders to keep the factory operating at normal capacity

15. Businesses that are separated into two or more managable units in which managers have authority and responsibility for operations are said to be:
decentralized
consolidated
diversified
centralized

16. In a profit center, the department manager has responsibility for and the authority to make decisions that affect:
not only costs and revenues, but also assets invested in the center
the assets invested in the center, but not costs and revenues
both costs and revenues for the department or division
costs and assets invested in the center, but not revenues

17. Division T reported income from operations of $875,000 and total service department charges of $575,000. Therefore:
net income was $300,000
The gross profit margin was $300,000
income from operations before service department charges were $1,450,000
consolidated net income was $300,000

18. The amount of increase or decrease in cost that is expected from a particular couse of action as compared with an alternative is termed:
period cost
product cost
differential cost
discretionary cost

19. A cost that will not be affected by later decisions is termed a(n):
historical cost
differential cost
sunk cost
replacement cost

20.
Product
F G H Total
Sales $300,000 $220,000 $340,000 $860,000
Less Variable Costs $180,000 $190,000 $220,000 $590,000
Contribution Margin $120,000 $ 30,000 $120,000 $270,000
Less Fixed Costs $ 50,000 $ 50,000 $ 40,000 $140,000
Income (Loss) from operations $ 70,000 $(20,000) $ 80,000 $130,000
Management is considering the discontinuance of the manufacture and sale of Product G at the beginning of the current year. The discontinuance would have no effect on the total fixed csots and expenses or on the sales of Product F and H. What is the amount of change in net income for the current year that will result from the discontinuance of Product G?
$20,000 increase
$30,000 increase
$20,000 decrease
$30,000 decrease

21. The process by which management plans, evaluates, and controls long-term investment decision involving fixed assets is called:
absorption cost analysis
variable cost analysis
capital investment analysis
cost-volume-profit analysis

22. An anticipated purchase of equipment for $400,000, with a useful life of 8 years and no residual value, is expected to yield the following annual net incomes and net cash flows:
Year Net Income Net Cash Flow
1 $60,000 $110,000
2 $50,000 $100,000
3 $50,000 $100,000
4 $40,000 $90,000
5 $40,000 $90,000
6 $40,000 $90,000
7 $40,000 $90,000
8 $40,000 $90,000

What is the cash payback period?
5 years
4 years
6 years
3 years

23. Which method of evaluating capital investment proposals uses the concept of present value to compute a rate of return?
Average rate of return
Accounting rate of return
Cash payback period
Internal rate of return

24. Complete an income statement using the following data:
Sales 100,000
Gross Profit 93,000
Total Selling Expenses 50,000
Total Operating Expenses 65,000
Show all work

25. A company with a break-even point at $900,000 in sales revenue and had fixed costs of $225,000. When actual sales were $1,000,000 variable costs were $750,000. Determine (a) the margin of safety expressed in dollars, (b) the margin of safety expressed as a percentage of sales, (c) the contribution margin ratio, and (d) the operating income.
Label each part of your answer.

26. Delicious Cake Factory normally sells their specialty cake for $22. An offer to buy 100 cakes for $18 per cake was made by an organization hosting a national event in the city. The variable cost per cake is $12. A special decoration per cake will add another $1 to the cost. Determine the differential income or loss per cake from selling the cakes.

Multiple choice

A temporary difference arises when a revenue item is reported for tax purposes in a period

After it is reported Before it is reported
in financial income in financial income

a. Yes Yes
b. Yes No
c. No Yes
d. No No

3. A deferred tax liability is classified on the balance sheet as either a current or a noncurrent liability. The current amount of a deferred tax liability should generally be
a The net deferred tax consequences of temporary differences that will result in net taxable amounts during the next year
b Totally eliminated from the financial statements if the amount is related to a noncurrent asset.
c Based on the classification of the related asset or liability for financial reporting purposes.
d The total of all deferred tax consequences that are not expected to reverse in the operating period or one year, whichever is greater

Multiple Choice

6. A financially wise individual would prefer a loan based on __________ interest and an
investment earning __________ interest.
a. compound; compound
b. compound; simple
c. simple; compound
d. simple; simple
e. complex; compound

8. Over time, the future value of $1,000 invested today at 6 percent, compounded
annually, will increase by a(n):
a. constant annual amount given the interest on interest effect.
b. constant annual amount given that interest is compounded annually.
c. decreasing annual amount due to the compounding effect.
d. increasing annual amount given the compound interest effect.
e. increasing annual amount due to the effects of the simple interest rate.

9. Sancho deposits $500 in a bank account today which pays 4 percent interest,
compounded annually. The amount of interest Sancho earns in year 4 will be:
I. equal to the interest earned in year 3.
II. greater than the interest earned in year 3.
III. less than the interest earned in year 3.
IV. greater than the interest earned in year 5.
V. less than the interest earned in year 5.
a. I only
b. II and IV only
c. II and V only
d. III and IV only
e. III and V only

11. Tom, Dick, and Harry are triplets. They all decide to borrow $1,000 today to go on
vacation. They will repay their loans, plus all the accrued interest, in one lump sum
exactly 1 year from today. Tom borrows his money at 6 percent simple interest. Dick’s loan is based on 6 percent interest compounded monthly. Harry is charged 6 percent compounded annually. Given this information, which one of the following statements is correct?
a. Tom will pay the most interest.
b. Harry will pay the most interest.
c. Harry will pay more interest than Dick, but less interest than Tom.
d. Dick will pay more interest than either Harry or Tom.
e. Tom will pay more interest than Harry, but less than Dick.

13. The relationship between the present value and the interest rate is best described as:
a. direct.
b. inverse.
c. unrelated.
d. uncorrelated.
e. vertical.

14. The present value of $10,000 to be received in 10 years will __________ if the
discount rate is increased.
a. remain constant
b. decrease
c. increase
d. either remain constant or increase
e. either remain constant or decrease

15. Given a 6 percent rate of return and a time period of 5 years, the future value will
__________ if the present value is increased.
a. remain constant
b. decrease
c. increase
d. either remain constant or increase
e. either remain constant or decrease

18. You invest $10,000 today into a retirement account. You expect to earn 11 percent, compounded monthly, on your money for the next 25 years. After that, you want to be more conservative, so only expect to earn 7 percent, compounded semi-annually. How much money will you have in your account when you retire 40 years from now, assuming that this is the only deposit you make into the account?

19. Your grandfather spent $2,000 to buy 200 shares of stock in a new company 60 years ago. The stock has appreciated 9 percent per year on average. What is the current value of these 200 shares?

21. Today, you are investing $25,000 at 6 percent, compounded monthly, for 10 years. How much additional income could you earn if you could have invested this amount at 7 percent, compounded monthly?

22. Eight years from now, you will be inheriting $8,400. What is this inheritance worth to you today if you can earn 6 percent interest compounded annually?

23. You want to have $100,000 for your daughter’s education 18 years from now. If you can earn 8 percent, compounded quarterly, on your savings, how much do you need to deposit today to reach your goal?

24. How long will it take to quadruple your savings at 9 percent compounded quarterly?

25. Your firm has been told that it needs $74,300 today to fund a $120,000 expense 6 years from now. What rate of interest was used in the computation?

Multiple choice

1.On December 31, 2007, Shard Co. has $2,000,000 of short-term notes payable due on February 14, 2008. On January 10, 2008, Shard arranged a line of credit with County Bank which allows Shard to borrow up to $1,500,000 at one percent above the prime rate for three years. On February 2, 2008, Shard borrowed $1,200,000 from County Bank and used $500,000 additional cash to liquidate $1,700,000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as current liabilities on the December 31, 2007 balance sheet which is issued on March 5, 2008 is:
a. $0.
b. $300,000.
c. $500,000.
d. $800,000.

2. A company gives its 50 employees (assume they were all employed continuously through 2007 and 2008) 12 days of vacation a year if they are employed at the end of the year. The vacation accumulates and may be taken starting January 1 of the next year. The employees work 8 hours per day. In 2007, they made $14 per hour and in 2008 they made $16 per hour. During 2008, they took an average of 9 days of vacation each. The company’s policy is to record the liability existing at the end of each year at the wage rate for that year. What amount of vacation liability would be reflected on the 2007 and 2008 balance sheets, respectively?
a. $67,200; $96,000
b. $76,800; $96,000
c. $67,200; $93,600
d. $76,800; $93,600

3. On January 1, 2007, John Smith loaned $45,078 to Jan Fisher. A zero-interest-bearing note (face amount, $60,000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaid on December 31, 2009. The prevailing rate of interest for a loan of this type is 10%. The present value of $60,000 at 10% for three years is $45,078. What amount of interest income should Mr. Smith recognize in 2007?
a. $6,000
b. $4,508.
c. $18,000.
d. $13,524

Multiple choice

1. Harris Corporation purchased factory equipment that was installed and put into service January 2, 2006, at a total cost of $60,000. Salvage value was estimated at $4,000. The equipment is being depreciated over four years using the double-declining balance method. For the year 2007, Harris should record depreciation expense on this equipment of:
a. $30,000.
b. $28,000.
c. $15,000.
d. $14,000.

2. A plant asset has a salvage value of $6,000 and a cost of $24,000. The asset has a three-year life. If third year depreciation amounted to $3,000, which depreciation method was used?
a. Sum-of-the-years’-digits
b. Declining-balance
c. Straight-line
d. Cannot tell from information given

3. Spencer Co. purchased machinery on January 2, 2002, for $440,000. The straight-line method is used and useful life is estimated to be 10 years, with a $40,000 salvage value. At the beginning of 2008 Spencer spent $96,000 to overhaul the machinery. After the overhaul, Spencer estimated that the useful life would be extended 4 years (14 years total), and the salvage value would be $20,000. The depreciation expense for 2008 should be:
a. $28,250.
b. $34,500.
c. $40,000.
d. $37,000.

Multiple choice

Use the following information for questions 18 and 19.

Racker Co. purchased land as a factory site for $600,000. Racker paid $60,000 to tear down two buildings on the land. Salvage was sold for $5,400. Legal fees of $3,480 were paid for title investigation and making the purchase. Architect’s fees were $31,200. Title insurance cost $2,400, and liability insurance during construction cost $2,600. Excavation cost $10,440. The contractor was paid $2,200,000. An assessment made by the city for pavement was $6,400. Interest costs during construction were $170,000.
18.
The cost of the building that should be recorded by Racker Co. is
a. $2,403,800.
b. $2,404,840.
c. $2,413,200.
d. $2,414,240.

19.
The cost of the land that should be recorded by Racker Co. is
a. $660,480.
b. $666,880.
c. $669,880.
d. $676,280.

21.
In calculating the amount of interest cost to capitalize, “avoidable interest” refers to:

a. the total interest cost actually incurred.
b. a cost of capital charge for stockholders’ equity.
c. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made.
d. that portion of average accumulated expenditures on which no interest cost was incurred.

multiple choice

Question 11.2
Which one of the following does not occur as diatomic molecules in elemental form?

Bromine
Nitrogen
Hydrogen
Sulfur
Oxygen

Question 12.2
Sulfur forms an ion with a charge of _______.

+3
+2
-6
-2
+6

Question 13.2
Which species below is the nitrate ion?

NH4+
NO2-
N3-
NO3-
N3-

Question 14.2
The correct name for CCl4 is _______.

carbon chloride
carbon perchlorate
carbon tetrachloride
carbon tetrachlorate
carbon chlorate

Question 15.2
The correct name for Ni(CN)2 is ___________.

nickel cyanate
nickel(II) cyanide
nickel(I) cyanide
nickel carbonate
nickel(I) nitride

Question 16.2
What is the coefficient of O2 when the following equation is balanced?
C2H4O + O2 CO2 + H2O

3
4
5
2
1

Question 17.2
Which one of the following substances would be the product of this combination reaction?
Al(s) + I2(s) __________

AlI2
AlI
Al3I2
Al2I3
AlI3

Question 18.2
A certain element has three isotopes. The isotopic masses (amu) and abundances are: 159.37 (30.60%), 162.79 (15.79%), and 163.92 (53.61%). What is the average atomic weight (amu) of the element?

162.35
33.33
163.15
162.03
161.75

Question 19.2
Calculate the percentage by mass of hydrogen in PtCl2(NH3)2.

0.034
1.558
2.016
1.008
0.672

Question 20.2
How many grams of sodium carbonate contain 1.773 x 1017 carbon atoms?

6.066 x 10-5
1.517 x 10-5
1.011 x 10-5
3.121 x 10-5
9.100 x 10-5

Multiple choice

1. Debt securities that are accounted for at amortized cost, not fair value, are
held-to-maturity debt securities.
trading debt securities.
available-for-sale debt securities.
never-sell debt securities.

2. Bista Corporation declares and distributes a cash dividend that is a result of current earnings. How will the receipt of those dividends affect the investment account of the investor under each of the following accounting methods?

Fair Value Method Equity Method

No Effect Decrease
Increase Decrease
No Effect No Effect
Decrease No Effect

3. On its December 31, 2007 balance sheet, Klugman Company appropriately reported a $10,000 debit balance in its Securities Fair Value Adjustment (Available-for-Sale) account. There was no change during 2008 in the composition of Klugman’s portfolio of marketable equity securities held as available-for-sale securities. The following information pertains to that portfolio:

Security Cost Fair value at 12/31/08

X $125,000 $160,000

Y 100,000 95,000

Z 175,000 125,000

$400,000 $380,000

What amount of unrealized loss on these securities should be included in Klugman’s stockholders’ equity section of the balance sheet at December 31, 2008?

$30,000.
$20,000.
$10,000.
$0.

4. Barry Corporation earns $240,000 and pays cash dividends of $80,000 during 2007. Glenon Corporation owns 3,000 of the 10,000 outstanding shares of Barry.
What amount should Glenon show in the investment account at December 31, 2007 if the beginning of the year balance in the account was $320,000?

$392,000.
$320,000.
$368,000.
$480,000.

5. Stone Co. owns 4,000 of the 10,000 outstanding shares of Maye Corp. common stock. During 2007, Maye earns $120,000 and pays cash dividends of $40,000.
If the beginning balance in the investment account was $240,000, the balance at December 31, 2007 should be

$240,000.
$272,000.
$288,000.
$320,000.

Multiple choice

1. Which of the following statements about the cost-benefit approach is TRUE?

a. Resources should be spent if the costs of a decision outweigh the benefits of the decision.

b. A cost-benefit approach would not be appropriate for a decision to install a budget system or not.

c. Resources should be spent if they are expected to better attain company goals in relation to the expected costs of these resources.

d. In a cost-benefit analysis, both costs and benefits are easy to obtain.

2. Cost accounting:

a. provides information on the cost of servicing commercial customers

b. provides information on the performance of an operating division

c. provides information on the efficiency of factory labor

d. All of these answers are correct.

3. Which of the following is NOT one of the questions management accountants might attempt to help answer in the formulation of strategy?

a. Does the strategy comply with GAAP (Generally Accepted Accounting Principles)?

b. Who are our most important customers?

c. What substitute products exist in the marketplace?

d. Will adequate cash be available to implement the strategy?

4. The process of preparing a budget:

a. increases accounting efficiencies

b. reduces overcapacity

c. promotes production automation

d. forces coordination and communication across business functions

Multiple choice

1. Classifying a cost as either direct or indirect depends upon:

a. whether the cost can be easily identified with the cost object

b. whether an expenditure is avoidable or not in the future

c. the behavior of the cost in response to volume changes

d. whether the cost is expensed in the period in which it is incurred

2. Which one of the following items is a direct cost?

a. Utility costs of the administrative offices; the accounting department is the cost object.

b. Customer-service costs of a multiproduct firm; Product A is the cost object.

c. Printing costs incurred for payroll check processing; payroll check processing is the cost object.

d. The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object.

3.Variable costs:

a. can always be traced directly to the cost object

b. increase in total when the actual level of activity increases

c. include most personnel costs and depreciation on machinery

d. are always indirect costs

4. Indirect manufacturing costs:

a. may include both variable and fixed costs

b. can be easily identified with the cost object

c. generally include the cost of material and the cost of labor

d. can be traced to the product that created the costs

5. Fixed costs:

a. can be adjusted in the short run to meet actual demands

b. vary with production or sales volumes

c. include parts and materials used to manufacture a product

d. may include either direct or indirect costs

Multiple choice

Need some help with questions and the reason behind it each questions?

1. According to GAAP (the generally accepted accounting principles), some leases must be recorded as a purchase. What is the basis for this treatment?
a. A lease of this type effectively conveys the same benefits and risk to the lessee as it would an owner of the property.
b. The lease must be recorded in accordance with the concept of cause and effect.
c. The lease provides the use of the leased assets to the lessee for a limited period of time.
d. It is an example of form over substance.

2. Which of the following is one of the four general criteria for a capital lease?
a. The present value of the minimum lease payments equals or exceeds 50 percent of the property’s fair market value.
b. The present value of the minimum lease payments equals or exceeds 75 percent of the property’s fair market value.
c. The present value of the minimum lease payments equals or exceeds 90 percent of the property’s fair market value.
d. The present value of the minimum lease payments equals or exceeds the property’s fair market value.

3. In an operating lease, how should the monthly rental payments be records?
a. They should be split between interest expense and depreciation expense
b. They should be recorded as rental expense
c. They should be recorded as a reduction in liability for leased assets

4. Which of the following is one of the four for recording a lease as a capital lease?
a. The term of the lease must be equal to or greater than the estimated economic life of the property.
b. The term of the lease must be equal to or greater than 90 percent of the estimated economic life of the property.
c. The term of the lease must equal to or greater than 70 percent of the estimated economic life of the property
d. The term of the lease must be equal to or greater than 50 percent of the estimated economic life of the property

5. If a lease does not contain a bargain purchase option, but is equal to 90 percent of the estimated economic life of the leased property, how should this lease be classified?
a. It is a capital lease
b. It is an operating lease

6. At the inception of a capital lease, how is the leasee’s balance sheet affected?
a. The leased asset is decreased and the lease obligation is decreased
b. Cash is increased and the lease obligation is decreased
c. Cash is decreased and the lease obligation is decreased
d. The leased asset is increased and the lease obligation is increased

7. Using the direct method, how is the second lease payment through the final lease payment affected on the lessee’s statement of cash flows?
a. 1. In the operating section, the interest portion of a lease payment is recorded as a cash outflow. 2. In the financing section, the principle portion of the lease payments is recorded as cash outflow.
b. 1. In the operation section, the interest portion of a lease payments is recorded as a cash inflow. 2. In the financing section, the principle portion of the lease payments is recorded as a cash inflow.
c. 1. In the operating section, the inertest portion of a lease payment is record as a cash outflow. 2. In the investing section, the principle portion of the payment is recorded as a cash outflow.
d. 1. In the operating section, the interest portion of a lease payment is record as a cash inflow. 2. In the investing section, the principle portion of the payment is recorded as cash outflow.

8. In what instance would you report an obligation that is contingent on the occurrence of a future event as a liability on the balance sheet?
a. If the future event is likely to occur
b. If the occurrence of the future event is at least reasonably possible and the amount is know.
c. If the amount of the obligation can be reasonably estimated
d. If the occurrence of the future event is possible and the amount can be reasonable estimated.

9. When you disclose a contingent loss in a note to financial statement, but not record it as a liability?
a. When the outcome is uncertain
b. When the loss is reasonably possible
c. When the possibility of the loss is remove
d. When the contingency involves pending or threatened litigation

10. In December 2004, Company X was involved in several pending litigations issues.

In the first case, the legal department of the company X thinks it is possible that the company will be found liable and the best estimate of liability in the case is $900,000

In the second case, the legal department has determined that it is reasonably possible that the company will face a liability in the case. Company X is being sued for $1,000,000 in this case, but the amount of liability for the case is not reasonably estimable by Company X’s legal department

In the third case, a competitor is using the company for $2,000,000. The legal department thinks the chance of liability in this case is remote.

What amount, if any, should be accrued by a change to income by the Company X in 2005?

a. $3,900,000
b. $1,000,000
c. $900,000
d. $0

Multiple Choice

1. MC021
In determining the present value of the prospective benefits (often referred to as the projected benefit obligation), the following are considered by the actuary:

a. retirement and mortality rate.

b. interest rates.

c. benefit provisions of the plan.

d. all of these factors.

2. MC072
The following information is related to the pension plan of King, Inc. for 2008.
Actual return on plan assets $200,000 Amortization of unrecognized net gain 82,500 Amortization of unrecognized prior service cost 150,000 Expected return on plan assets 230,000 Interest on projected benefit obligation 362,500 Service Cost 800,000
Pension expense for 2008 is

a. $1,195,000.

b. $1,165,000.

c. $1,030,000.

d. $1,000,000.

3. MC077
The following data are for the pension plan for the employees of Nickels Company.
1/1/07 12/31/07 12/31/08
Accumulated benefit obligation $7,500,000 $7,800,000 $10,200,000 Projected benefit obligation 8,100,000 8,400,000 11,100,000 Market-related asset value 6,600,000 8,700,000 9,300,000 Plan assets (at fair value) 6,900,000 9,000,000 9,900,000 Unrecognized net loss -0- 1,440,000 1,500,000 Settlement rate (for year) 10% 9% Expected rate of return (for year) 8% 7%
Nickels’ contribution was $1,260,000 in 2008 and benefits paid were $1,125,000. Nickels esti-mates that the average remaining service life is 15 years.
The corridor for 2008 was $870,000. The amount of unrecognized net loss amortized in 2008 was

a. $100,000.

b. $96,000.

c. $42,000.

d. $38,000.

4. MC079
On January 1, 2008, Kinder Co. has the following balances:

Projected benefit obligation $2,100,000
Fair value of plan assets 1,800,000

The settlement rate is 10%. Other data related to the pension plan for 2008 are:

Service cost $180,000
Amortization of unrecognized prior service costs 60,000
Contributions 300,000
Benefits paid 105,000 Actual return on plan assets 237,000 Amortization of unrecognized net gain 18,000
The fair value of plan assets at December 31, 2008 is

a. $2,430,000.

b. $2,250,000.

c. $2,232,000.

d. $2,214,000.

5. MC050
When a company switches from a defined-benefit to a defined-contribution plan, any gain arising must generally be reported

a. in the current and prospective periods on a straight-line basis.

b. as a prior period adjustment.

c. currently as a gain.

d. in the current and prospective periods on a declining-balance method over the average remaining service life of existing employees.

6. MC036
The interest on the projected benefit obligation component of pension expense

a. reflects the incremental borrowing rate of the employer.

b. reflects the rates at which pension benefits could be effectively settled.

c. is the same as the expected return on plan assets.

d. may be stated implicitly or explicitly when reported.

7. MC068
Randel, Inc. received the following information from its pension plan trustee concerning the operation of the company’s defined-benefit pension plan for the year ended December 31, 2007.

January 1, 2008 December 31,2008
2007 2008
Market-related asset value $4,200,000 $4,500,000
Projected benefit obligation 4,800,000 5,160,000 Accumulated benefit obligation 840,000 1,020,000 Unrecognized net (gains) and losses -0- (90,000)
The service cost component of pension expense for 2008 is $360,000 and the amortization of unrecognized prior service cost is $60,000. The settlement rate is 10% and the expected rate of return is 9%. What is the amount of pension expense for 2008?

a. $360,000

b. $522,000

c. $531,000

d. $432,000

8. MC092
The following information relates to Haywood, Inc.:
For the Year Ended December 31
2007 2008
Plan assets (at fair value) $1,260,000 $1,824,000
Pension expense 570,000 450,000 Accumulated benefit obligation 1,620,000 1,884,000 Annual contribution to plan 600,000 450,000 Unrecognized prior service cost 480,000 420,000
Prior to 2007, cumulative pension expense recognized equaled cumulative contributions.
The amount reported as an intangible asset on the December 31, 2008 balance sheet is

a. $ -0-.

b. $60,000.

c. $90,000.

d. $30,000.

9. MC088
Barkley Corporation received the following report from its actuary at the end of the year:
The amount reported as the total pension liability at December 31, 2008 is
December 31,2007 December 31,2008

Projected benefit obligation $1,600,000 $1,800,000 Market related asset value 1,400,000 1,420,000 Accumulated benefit obligation 1,300,000 1,480,000 Fair value of pension plan assets 1,380,000 1,440,000 Prepaid pension cost 80,000 100,000
Assume that no prepaid or accrued pension cost exists on January 1, 2007

a. $ -0-.

b. $140,000.

c. $40,000.

d. $60,000.

10. MC085
The following information relates to the pension plan for the employees of Polzin Co.:
1/1/07 12/31/07 12/31/08
Accumulated benefit obligation $5,280,000 $5,520,000 $7,200,000 Projected benefit obligation 5,580,000 5,976,000 8,004,000 Fair Value of Plan assets 5,100,000 6,240,000 6,888,000 Market-related asset value 4,920,000 6,192,000 6,780,000 Unrecognized net (gain) or loss -0- (864,000) (960,000) Settlement rate (for year) 11% 11% Expected rate of return (for year) 8% 7%
Polzin estimates that the average remaining service life is 16 years. Polzin’s contribution was $378,000 in 2008 and benefits paid were $282,000.
The amount of unrecognized net gain amortized in 2008 is

a. $15,300.

b. $15,000.

c. $11,626.

d. $9,977.

11. MC065
Presented below is pension information related to Tyler, Inc. for the year 2008:
Service Cost $72,000
Interest on projected benefit obligation 54,000
Interest on vested benefits 24,000
Amortization of prior service cost due to increase benefit 12,000
Expected return on plan assets 18,000
The amount of pension expense to be reported for 2008 is

a. $108,000.

b. $144,000.

c. $162,000.

d. $120,000.

12. MC076
The following data are for the pension plan for the employees of Nickels Company.
1/1/07 12/31/07 12/31/08
Accumulated benefit obligation $7,500,000 $7,800,000 $10,200,000 Projected benefit obligation 8,100,000 8,400,000 11,100,000 Market-related asset value 6,600,000 8,700,000 9,300,000 Plan assets (at fair Value) 6,900,000 9,000,000 9,900,000 Unrecognized net loss -0- 1,440,000 1,500,000 Settlement rate (for year) 10% 9% Expected rate of return (for year) 8% 7%

Nickels’ contribution was $1,260,000 in 2008 and benefits paid were $1,125,000. Nickels esti-mates that the average remaining service life is 15 years.
The actual return on plan assets in 2008 was $765,000. The unexpected gain on plan assets in 2008 was

a. $156,000.

b. $135,000.

c. $114,000.

d. $72,000.

13. MC038
The actual return on plan assets

a. is equal to the change in the fair value of the plan assets during the year.

b. includes interest, dividends, and changes in the market value of the fund assets.

c. is equal to the actual rate of return times the fair value of the plan assets at the beginning of the period.

d. all of these.

14. MC051
A minimum liability for pension expense is reported when

a. the projected benefit obligation exceeds the fair value of pension plan assets.

b. the accumulated benefit obligation exceeds the fair value of pension plan assets.

c. the pension expense reported for the period is greater than the funding amount for the same period.

d. vested benefits exceed the fair value of pension plan assets.

15. MC053
Which of the following statements is correct?

a. There is an account titled Additional Pension Liability.

b. There is an account titled Minimum Pension Liability.

c. Accrued pension cost and additional pension liability should be reported separately on the balance sheet.

d. None of these.

16. TF018
Companies can combine the accrued pension cost balance and the additional liability balance for balance sheet purposes.

a. True

b. False

17. TF009
Companies recognize the projected benefit obligation in their accounts and in their financial statements.

a. True

b. False

18. TF003
An employer reports no liability on its balance sheet in a defined-contribution plan.
a. True

b. False

19. TF020
Companies must disclose a reconciliation of how the projected benefit obligation and the fair value of plan assets changed during the year either in their financial statements or in the notes.
a. True

b. False

20. TF013
The difference between the expected return and the actual return is referred to as the unexpected gain or loss.

a. True

b. False

Multiple choice

7. National Appliance Center sells washing machines that carry a three-year warranty against manufacturer’s defects. Based on company experience, warranty costs are estimated at $60 per machine. During the year, National sold 48,000 washing machines and paid warranty costs of $340,000. In its income statement for the year ended December 31, National should report warranty expense of
a. $680,000.
b. $960,000.
c. $2,200,000.
d. $2,880,000.

8. Millward Corporation’s books disclosed the following information for the year ended December 31, 2011:

Net credit sales ………………………………. $1,500,000
Net cash sales ………………………………… 240,000
Accounts Receivable at beginning of year …………. 200,000
Accounts Receivable at end of year ………………. 400,000

Millward’s accounts receivable turnover is
a. 3.75 times.
b. 4.35 times.
c. 5.00 times.
d. 5.80 times.

Multiple Choice

1.________ is an expense that is a legal obligation of the firm.

1. Labor expense
2. Interest expense
3. Salaries expense
4. Rent expense

2. Under MACRS, an asset which originally cost $10,000 is being depreciated using a 5-year normal recovery period. What is the depreciation expense in year 3?

1. $1,200
2. $1,900
3. $2,100
4. $1,500

3.Which of the following is a source of cash flows?

1. Depreciation.
2. Taxes.
3. Cost of goods sold.
4. Interest expense.

4.A firm’s operating cash flow is defined as

1. EBIT + depreciation.
2. gross profit minus operating expenses.
3. gross profit minus depreciation.
4. EBIT – taxes + depreciation.

5. $100 is received at the beginning of year 1, $200 is received at the beginning of year 2, and $300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, their combined future value at the end of year 3 is ________.

1. $1,245
2. $ 727
3. $1,536
4. $ 672

Multiple Choice

This is also attached as a document

The more frequent the compounding, the higher the future value, other things equal.

a. True
b. False

2. For a given amount,the lower the discount rate,the less the present value.

a. True
b. False

3. Systematic Risk can be totally eliminated in a portfolio through diversification.

a. True
b. False

4. Capital structure decisions refer to the

a. dividend yield of the firm’s stock
b. blend of equity and debt used by the firm.
c. capital gains available on the firms stock.
d. maturity date of the firms securities.
e. None of the above is a correct answer.

5. Which of the following is a key determinant of financial leverage?

a. Level of debt.
b. Technology.
c. Labor costs.
d. Amount of fixed assets used by the firm.
e. Variable cost of goods sold.

6. Given some amount to be received several years in the future, if the interest rate increases, the present value of the future amount will be

a. Higher.
b. Lower.
c. Stay the same.
d. Cannot tell.
e. Variable.

7. Which of the following statements is false?

a. If the discount (or interest) rate is positive, the future value of an expected series of payments will always exceed the present value of the same series.
b. To increase present consumption beyond present income normally requires either the payment of interest or else an opportunity cost of interest foregone.
c. Disregarding risk, if money has time value, it is impossible for the present value of a given sum to be greater than its future value.
d. Disregarding risk, if the present value of a sum is equal to its future value, either k = 0 or t = 0.
e. Each of the above statements is true.

8. The greater the number of compounding periods within a year, the greater the future value of a lump sum invested initially, and the greater the present value of a given lump sum to be received at maturity.

a. True
b. False

9. All other factors held constant, the present value of a given annual annuity decreases as the number of discounting periods per year increases.

a. True
b. False

10. The process of discounting or finding the present value of a cash flow to be received in the future is really the same as compounding.

a. True
b. False

11. A major disadvantage of the payback period method is that it

a. Is useless as a risk indicator.
b. Ignores cash flows beyond the payback period.
c. Does not directly account for the time value of money.
d. All of the above are correct.
e. Only answers b and c are correct.

12. The internal rate of return is that discount rate which equates the present value of the cash outflows (or costs) with the future value of the cash inflows.

a. True
b. False

13. One of the advantages of the payback period (either regular or discounted) is that it considers all cash flows throughout the entire life of a project.

a. True
b. False

14. The primary function of the capital budget is to forecast the funds required for future investments that must be raised through external funding, that is, by selling stock or bonds.

a. True
b. False

15. A firm should never undertake an investment if accepting the project would cause an increase in the firm’s required rate of return.

a. True
b. False

16. The mix of debt, preferred stock, and common equity with which the firm plans to support its asset structure is known as the target capital structure.

a. True
b. False

17. Financial risk refers to the extra risk stockholders bear as a result of the use of debt as compared with the risk they would bear if no debt were used.

a. True
b. False

18. If Miller and Modigliani had considered the cost of bankruptcy, it is unlikely that they would have concluded that 100 percent debt financing is optimal for the firm.

a. True
b. False

19. An investor’s ability and willingness to accept risk is termed:

a. Risk aversion.
b. Risk seeking.
c. Risk tolerance level.
d. Risk-free rate of return.
e. None of the above.

20. Fundamental analysts primarily base their investment decisions on analyses of supply and demand relationships that influence trends in price movements in stocks and general financial market conditions.

a. True
b. False
21. The dividend discount model (DDM) can only be used to value a company’s stock if it is expected that the company will pay a dividend that grows at a constant rate in the future.

a. True
b. False

22. The total return earned from the time an investment is purchased until it is liquidated is called a(n)______________.

a. Ask yield
b. Current yield
c. Holding period return
d. Coupon rate
e. Dividend yield rate

23. There is an inverse relationship between bond ratings and the required return on a bond. The required return is lowest for AAA rated bonds, and required returns increase as the ratings get lower (worse).

a. True
b. False

24. A junk bond is a high risk, high yield debt instrument typically used to finance a leveraged buyout or a merger, or to provide financing to a company of questionable financial strength.

a. True
b. False

25. The terms and conditions to which a bond is subject are set forth in its

a. Debenture.
b. Underwriting agreement.
c. Indenture.
d. Restrictive covenants.
e. Call provision.

26. A call provision gives bondholders the right to demand, or “call for,” repayment of a bond. Typically, calls are exercised if interest rates rise, because when rates rise the bondholder can get the principal amount back and reinvest it elsewhere at higher rates.

a. True
b. False

27. Suppose you put $100 into a savings account today, the account pays a simple annual interest rate of 6 percent, but compounded semiannually, and you withdraw $100 after 6 months. What would your ending balance be 20 years after the initial $100 deposit was made?

a. $226.20
b. $115.35
c. $ 62.91
d. $ 9.50
e. $ 3.00

28. Calculate the future value of $100,000 fifteen years from today based on the following interest rates:

a. 3 percent
b. 6 percent
c. 9 percent
d. 12 percent

29. Calculate the present of $25,000 20 years from today based on the following annual discount rates:

a. 3 percent
b. 6 percent
c. 9 percent
d. 12 percent
1. The more frequent the compounding, the higher the future value, other things equal.

a. True
b. False

2. For a given amount,the lower the discount rate,the less the present value.

a. True
b. False

3. Systematic Risk can be totally eliminated in a portfolio through diversification.

a. True
b. False

4. Capital structure decisions refer to the

a. dividend yield of the firm’s stock
b. blend of equity and debt used by the firm.
c. capital gains available on the firms stock.
d. maturity date of the firms securities.
e. None of the above is a correct answer.

5. Which of the following is a key determinant of financial leverage?

a. Level of debt.
b. Technology.
c. Labor costs.
d. Amount of fixed assets used by the firm.
e. Variable cost of goods sold.

6. Given some amount to be received several years in the future, if the interest rate increases, the present value of the future amount will be

a. Higher.
b. Lower.
c. Stay the same.
d. Cannot tell.
e. Variable.

7. Which of the following statements is false?

a. If the discount (or interest) rate is positive, the future value of an expected series of payments will always exceed the present value of the same series.
b. To increase present consumption beyond present income normally requires either the payment of interest or else an opportunity cost of interest foregone.
c. Disregarding risk, if money has time value, it is impossible for the present value of a given sum to be greater than its future value.
d. Disregarding risk, if the present value of a sum is equal to its future value, either k = 0 or t = 0.
e. Each of the above statements is true.

8. The greater the number of compounding periods within a year, the greater the future value of a lump sum invested initially, and the greater the present value of a given lump sum to be received at maturity.

a. True
b. False

9. All other factors held constant, the present value of a given annual annuity decreases as the number of discounting periods per year increases.

a. True
b. False

10. The process of discounting or finding the present value of a cash flow to be received in the future is really the same as compounding.

a. True
b. False

11. A major disadvantage of the payback period method is that it

a. Is useless as a risk indicator.
b. Ignores cash flows beyond the payback period.
c. Does not directly account for the time value of money.
d. All of the above are correct.
e. Only answers b and c are correct.

12. The internal rate of return is that discount rate which equates the present value of the cash outflows (or costs) with the future value of the cash inflows.

a. True
b. False

13. One of the advantages of the payback period (either regular or discounted) is that it considers all cash flows throughout the entire life of a project.

a. True
b. False

14. The primary function of the capital budget is to forecast the funds required for future investments that must be raised through external funding, that is, by selling stock or bonds.

a. True
b. False

15. A firm should never undertake an investment if accepting the project would cause an increase in the firm’s required rate of return.

a. True
b. False

16. The mix of debt, preferred stock, and common equity with which the firm plans to support its asset structure is known as the target capital structure.

a. True
b. False

17. Financial risk refers to the extra risk stockholders bear as a result of the use of debt as compared with the risk they would bear if no debt were used.

a. True
b. False

18. If Miller and Modigliani had considered the cost of bankruptcy, it is unlikely that they would have concluded that 100 percent debt financing is optimal for the firm.

a. True
b. False

19. An investor’s ability and willingness to accept risk is termed:

a. Risk aversion.
b. Risk seeking.
c. Risk tolerance level.
d. Risk-free rate of return.
e. None of the above.

20. Fundamental analysts primarily base their investment decisions on analyses of supply and demand relationships that influence trends in price movements in stocks and general financial market conditions.

a. True
b. False
21. The dividend discount model (DDM) can only be used to value a company’s stock if it is expected that the company will pay a dividend that grows at a constant rate in the future.

a. True
b. False

22. The total return earned from the time an investment is purchased until it is liquidated is called a(n)______________.

a. Ask yield
b. Current yield
c. Holding period return
d. Coupon rate
e. Dividend yield rate

23. There is an inverse relationship between bond ratings and the required return on a bond. The required return is lowest for AAA rated bonds, and required returns increase as the ratings get lower (worse).

a. True
b. False

24. A junk bond is a high risk, high yield debt instrument typically used to finance a leveraged buyout or a merger, or to provide financing to a company of questionable financial strength.

a. True
b. False

25. The terms and conditions to which a bond is subject are set forth in its

a. Debenture.
b. Underwriting agreement.
c. Indenture.
d. Restrictive covenants.
e. Call provision.

26. A call provision gives bondholders the right to demand, or “call for,” repayment of a bond. Typically, calls are exercised if interest rates rise, because when rates rise the bondholder can get the principal amount back and reinvest it elsewhere at higher rates.

a. True
b. False

27. Suppose you put $100 into a savings account today, the account pays a simple annual interest rate of 6 percent, but compounded semiannually, and you withdraw $100 after 6 months. What would your ending balance be 20 years after the initial $100 deposit was made?

a. $226.20
b. $115.35
c. $ 62.91
d. $ 9.50
e. $ 3.00

28. Calculate the future value of $100,000 fifteen years from today based on the following interest rates:

a. 3 percent
b. 6 percent
c. 9 percent
d. 12 percent

29. Calculate the present of $25,000 20 years from today based on the following annual discount rates:

a. 3 percent
b. 6 percent
c. 9 percent
d. 12 percent

Multiple choice

1. An accounting system that allocates costs only after production is completed is sometimes known as backflush costing.

a. True
b. False

2. During the month of May Antonio Company allocated overhead to Job 316 at a rate of $1.20 per direct labor hour with a total of 6500 direct labor hours used on Job 316.

At the end of the month the cost accountant reported actual overhead incurred for Job 316 was $5,000 made up of actual utility costs and indirect labor.

The result of the comparison between allocated overhead and actual would be.

a. Underapplied overhead of $5,000
b. Overapplied overhead of $7,800
c. Overapplied overhead of $2,800
d. Overapplied overhead of $12,800
e. None of the other answers

3. The cost of coods completed and ready for sale are normally transferred from work in process to _______________.

a. Cost of Goods Sold
b. Raw Materials Inventory
c. Finished Goods Inventory
d. None of the other answers

4. Which of the following indicates the typical flow of costs in either a job or process costing system?

a. Raw materials inventory;cost of goods sold; work in process inventory; finished goods inventory
b. Cost of goods sold; raw materials invnetory; work in process inventory; finished goods inventory
c. Raw materials inventory; work in process inventory; finished goods inventory; cost of goods sold
d. Raw materials inventory; work in process inventory; cost of goods sold; finished goods inventory
e. None of the other answers

5. Information from process cost summaries are hardly ever used in financial reporting.

a. True
b. False

Multiple choice

1. Which of the following items would be considered a fixed cost for the Honolulu Confectioners Company?

a. None of the other answers
b. the cost of sugar for making tasty treats!
c. costs of fuel for the company delivery truck that makes irregular rounds on Oahu dropping off marvelously sumptuous delicacies
d. the monthly lease payment on the factory location that smells so wonderful everyone is happy to work there!
e. labor costs for hourly employees who are carefully watched to ensure that they don’t dip their fingers into the vats of delicious candies

2. The newly formed Newton Cat Sitters travels around town with three employees sitting with finicky felines who cannot be without their owners for very long. Newton estimates that their fixed costs for operating the vehicles to travel to and from clients homes is $900 per month with the cost of employee labor and other expenses being roughly $65 per hour. Newton is considering charging $70 per hour for their cat sitting services. How many hours of cat sitting will be needed to begin earning a profit?

a. 13.85 hours
b. 181 hours
c. None of the other answers
d. 180 hours
e. 12.85 hours

3. Please refer back to the Newton Cat Sitters question.

If state law only allows Newton to work employees a maximum of 160 hours each will they be able to attain their necessary profit given the prices/costs listed?

a. Yes
b. No

4. Please refer back to the Newton Cat Sitters question.

If the owner of Newtons (F.G. Newton) wanted to have a net income of $200 next month from cat sitting services, how much in sales dollars need to be recorded to achieve that goal if we were to use the break even with target net income calculation?

a. roughly $15,714
b. about $32,857
c. close to $2,100
d. roughly $28,000
e. None of the other answers

5. Responsibility accounting systems use concepts of controllable costs to assign responsibility for costs and expenses to ________________.

a. rank and file employees.
b. the president and CEO’s only.
c. managers.
d. None of the other answers

6. Which costing method would work best for an automobile repair shop that specializes in repairing/restoring rare autos for exotic clients?

a. Process Costing
b. Job Costing

Multiple Choice

Please see the attached file.

20. Which of the following represents the largest number of common shares?
a. Treasury shares
b. Issued shares
c. Outstanding shares
d. Authorized shares

21. Treasury stock is
a. stock issued by the U.S. Treasury Department.
b. stock purchased by a corporation and held as an investment in its treasury.
c. corporate stock issued by the treasurer of a company.
d. a corporation’s own stock which has been reacquired but not canceled.

22. King Corporation makes a short-term investment in 300 shares of Renfro Company’s common stock. The stock is purchased for $30 a share plus brokerage fees of $400. The entry for the purchase is
a. Debt Investments 9,000
Cash 9,000
b. Stock Investments 9,400
Cash 9,400
c. Stock Investments 9,000
Brokerage Fee Expense . 400
Cash 9,400
d. Stock Investments 9,000
Cash 9,000

23. Baden Corporation sells 200 shares of common stock being held as a short-term investment. The shares were acquired six months ago at a cost of $50 a share. Baden sold the shares for $45 a share. The entry to record the sale is
a. Cash 9,000
Loss on Sale of Stock Investments 1,000
Stock Investments 10,000
b. Cash 10,000
Gain on Sale of Stock Investments 1,000
Stock Investments 9,000
c. Cash 9,000
Stock Investments 9,000
d. Stock Investments 9,000
Loss on Sale of Stock Investments 1,000
Cash 10,000

24. Short-term investments are listed on the balance sheet immediately below
a. cash.
b. inventory.
c. accounts receivable.
d. prepaid expenses.

25. The statement of cash flows
a. must be prepared on a daily basis.
b. summarizes the operating, financing, and investing activities of an entity.
c. is another name for the income statement.
d. is a special section of the income statement.

26. Which one of the following items is not generally used in preparing a statement of cash flows?
a. Adjusted trial balance
b. Comparative balance sheets
c. Current income statement
d. Additional information

27. The primary purpose of the statement of cash flows is to
a. provide information about the investing and financing activities during a period.
b. prove that revenues exceed expenses if there is a net income.
c. provide information about the cash receipts and cash payments during a period.
d. facilitate banking relationships.

28. Financing activities involve
a. lending money.
b. acquiring investments.
c. issuing debt.
d. acquiring long-lived assets.

29. The category that is generally considered to be the best measure of a company’s ability to continue as a going concern is
a. cash flows from operating activities.
b. cash flows from investing activities.
c. cash flows from financing activities.
d. usually different from year to year.

30. Meyer Company reported net income of $40,000 for the year. During the year, accounts receivable increased by $14,000, accounts payable decreased by $6,000 and depreciation expense of $10,000 was recorded. Net cash provided by operating activities for the year is
a. $30,000.
b. $70,000.
c. $38,000.
d. $40,000.

31. Which of the following would be subtracted from net income using the indirect method?
a. Depreciation expense
b. An increase in accounts receivable
c. An increase in accounts payable
d. A decrease in prepaid expenses

32. The current cash debt coverage ratio is used to evaluate
a. solvency.
b. profitability.
c. liquidity.
d. earning power.

33. Assume the following sales data for a company:
2004 $1,200,000
2003 1,020,000
2002 840,000
2001 600,000
If 2001 is the base year, what is the percentage increase in sales from 2001 to 2003?
a. 100%
b. 160%
c. 70%
d. 62.5%

34. Profit margin is calculated by dividing
a. sales by cost of goods sold.
b. gross profit by net sales.
c. net income by stockholders’ equity.
d. net income by net sales.

Multiple Choice

1. The government is hoping to reduce the amount of pollution in the Chesapeake Bay and determines that two firms are responsible for this pollution. For firm 1 the costs of pollution reduction are equal to 2X1 whereas for firm 2 they are constant and equal to 80.
a) Graph the industry-level marginal cost curve.
b) Which firm is reducing pollution in each range of pollution reduction x=x1+x2?
c) Suppose that the benefits of pollution reduction are equal to 180-x (with x=x1+x2). Solve for the socially efficient outcome.
d) Compare the total costs and benefits of achieving this outcome.

2. Assume that there are two firms in a local area that emit nitrous oxide into the atmosphere. Given their current level of activity, each firm could reduce its pollution though at some cost. The costs to firms A and B of reducing pollution are 40+4xA and 60+2xB, respectively, with the total amount of pollution reduction equal to xA+xB.
a) Graph the identity-level marginal cost curve assuming that each unit of pollution reduction is performed by the firm with the lowest cost.. Be sure to specify which firms are reducing pollution in each range of x.
b) Now suppose that the government releases a report showing that the marginal benefit of pollution reduction is equal to 100-x. Solve for the socially efficient value of x.
c) By how much does each firm reduce its level of pollution in this case?
d) How do the benefits of this pollution reduction compare with the costs?
e) Repeat parts b, c, and d assuming that the total amount of pollution reduction is the same. But in this case assume that each firm performs an equal amount of pollution reduction.

Multiple Choice

I need the correct answers for the practice exam to check my answers. This will help me study for the exam next week. See attachment for the practice exam.

MULTIPLE CHOICE

1. Equipment was purchased for $100,000 and has a book value of $44,000 and a depreciable cost of $76,000. The estimated salvage value is
a. $44,000.
b. $56,000.
c. $32,000.
d. $24,000.

2. The purchase of office equipment for $15,000 cash
a. is a cash outflow from financing activities.
b. is a cash outflow from operating activities.
c. is a cash outflow from investing activities.
d. does not affect cash flows.

3. Notes or accounts receivables that result from sales transactions are often called
a. sales receivables.
b. non-trade receivables.
c. trade receivables.
d. merchandise receivables.

4. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
a. a sale is made.
b. an account becomes bad and is written off.
c. management estimates the amount of uncollectibles.
d. a customer’s account becomes past-due.

5. When an account becomes uncollectible and must be written off,
a. Allowance for Doubtful Accounts should be credited.
b. Accounts Receivable should be credited.
c. Bad Debts Expense should be credited.
d. Sales should be debited.

6. Allowance for Doubtful Accounts on the balance sheet
a. is offset against total current assets.
b. increases the cash realizable value of accounts receivable.
c. appears under the heading “Other Assets.”
d. is offset against accounts receivable.

7. Two bases for estimating uncollectible accounts are:
a. percentage of assets and percentage of sales.
b. percentage of receivables and percentage of total revenue.
c. percentage of current assets and percentage of sales.
d. percentage of receivables and percentage of sales.

8. A company purchased land for $80,000 cash. Real estate brokers’ commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at
a. $87,000.
b. $80,000.
c. $85,000.
d. $92,000.

9. The balance in the Accumulated Depreciation account represents the
a. cash fund to be used to replace plant assets.
b. amount to be deducted from the cost of the plant asset to arrive at its fair market value.
c. amount charged to expense in the current period.
d. amount charged to expense since the acquisition of the plant asset.

10. The book value of an asset is equal to the
a. asset’s market value less its historical cost.
b. blue book value relied on by secondary markets.
c. replacement cost of the asset.
d. asset’s cost less accumulated depreciation.

11. On October 1, 2003, Nance Company places a new asset into service. The cost of the asset is $20,000 with an estimated 5-year life and $5,000 salvage value at the end of its useful life. What is the depreciation expense for 2003 if Nance Company uses the straight-line method of depreciation?
a. $750.
b. $4,000.
c. $1,000.
d. $2,000.

12. A company sells a plant asset that originally cost $180,000 for $60,000 on December 31, 2003. The accumulated depreciation account had a balance of $72,000 after the current year’s depreciation of $18,000 had been recorded. The company should recognize a
a. $120,000 loss on disposal.
b. $48,000 gain on disposal.
c. $48,000 loss on disposal.
d. $30,000 loss on disposal.

13. A current liability is a debt that can reasonably expected to be paid
a. within one year.
b. between 6 months and 18 months.
c. out of currently recognized revenues.
d. out of cash currently on hand.

14. From a liquidity standpoint, it is most desirable for a company to have current
a. assets equal current liabilities.
b. liabilities exceed current assets.
c. assets exceed current liabilities.
d. liabilities exceed long-term liabilities.

15. A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to $168,000, what is the amount of the sales taxes owed to the taxing agency?
a. $160,000.
b. $168,000.
c. $8,400.
d. $8,000.

16. Sales taxes collected by a retailer are reported as
a. contingent liabilities.
b. revenues.
c. expenses.
d. current liabilities.

17. Santo Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 30,000 subscriptions in January at $15 each. What entry is made in January to record the sale of the subscriptions?
a. Subscriptions Receivable 450,000
Subscription Revenue 450,000
b. Cash 450,000
Unearned Subscription Revenue 450,000
c. Subscriptions Receivable 75,000
Unearned Subscription Revenue 75,000
d. Prepaid Subscriptions 450,000
Cash 450,000

18. Stockholders of a corporation directly elect
a. the president of the corporation.
b. the board of directors.
c. the treasurer of the corporation.
d. all of the employees of the corporation.

19. Bob Rice has invested $400,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Rice stand to lose?
a. Up to his total investment of $400,000.
b. Zero.
c. The $400,000 plus any personal assets the creditors demand.
d. $200,000.

Multiple Choice

Can anyone assist with these review questions so that I can bounce them off your experience? Thanks!

1. Coca-Cola’s Latin American segment had revenues of $2,089 million, operating income of $1,033 million, and average assets of $1,443 millions. The Latin American segment return on assets is:

A. 49.4%
B. 69.0%
C. 71.6%
D. 139.7%
E. 144.8%

2. Assume that a company uses a sales journal, a purchases journal, a cash receipts journal, a cash disbursements journal, and a general journal. A sales return for credit on account would be recorded in the:

A. Sales journal.
B. General journal.
C. Cash receipts journal.
D. Accounts receivable ledger.
E. Cash disbursements journal.

3. The accounts receivable ledger:

A. Is for storing transaction data for customers.
B. Is for storing transaction data for individual customers.
C. Is for storing transaction data for individual creditors.
D. Is for storing transaction date for creditors.
E. Is also the controlling account

4. Cash equivalents:

A. Include savings accounts.
B. Include checking accounts.
C. Are short-term investments sufficiently close to their maturity date that their value is not sensitive to interest rate changes.
D. Include time deposits.
E. Have no immediate value.

5. The control principle for accounting information systems requires that the:

A. Benefits from an activity outweigh the costs of the activity.
B. System report useful, understandable, timely, and pertinent information for effective decision making.
C. System aid managers in controlling and monitoring business activities.
D. System adapt to changes in the company, business environment, and needs of decision makers.
E. System conform with a company’s activities, personnel, and structure.

6. A bank statement includes:

A. A list of outstanding checks.
B. A list of petty cash amounts.
C. The beginning and the ending balance of the depositor’s checking account.
D. A listing of deposits in transit.
E. All of the above.

7. The main difference in the sales journal under the perpetual and periodic inventory system is:

A. The column to record cost of goods sold and inventory amounts sold that is used under the perpetual system but not the periodic.
B. The sales tax receivable column that is used under the perpetual system but not the periodic.
C. The sales tax payable column that is used under the perpetual system but not the periodic.
D. The accounts receivable column that is used under the perpetual system but not the periodic.
E. The column for recording cash that is used under the perpetual system but not the periodic.

8. A company that uses the net method of recording invoices made a purchase of $400 with terms of 2/10, n/30. The entry to record the purchase would include:

A. A debit to Merchandise Inventory for $392.
B. A credit to Discounts Lost for $8.
C. A credit to Cash for $392.
D. A debit to Discounts Lost for $8.
E. A debit to Cash for $392.

9. The number of days’ sales uncollected is calculated by:

A. Dividing accounts receivable by net sales.
B. Dividing accounts receivable by net sales and multiplying this quotient by 365.
C. Dividing net sales by accounts receivable.
D. Dividing net sales by accounts receivable and multiplying this quotient by 365.
E. Multiplying net sales by accounts receivable and dividing the result by 365.

10. When originally purchased, a vehicle had an estimated useful life of 8 years. The vehicle cost $23,000 and its estimated salvage value is $1,500. After 4 years of straight-line depreciation, the asset’s total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals:

A. $ 5,375.00.
B. $ 2,687.50.
C. $ 5,543.75.
D. $10,750.00.
E. $ 2,856.25.

11. Thomas Enterprises purchased a depreciable asset on October 1, 2007 at a cost of $100,000. The asset is expected to have a salvage value of $15,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset’s book value on December 31, 2009 will be:

A. $27,540
B. $21,600
C. $32,400
D. $18,360
E. $90,000

12. A company has net sales of $900,000 and average accounts receivable of $300,000. What is its accounts receivable turnover for the period?

A. 0.20.
B. 5.00
C. 20.0
D. 73.0
E. 3.0

13. An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales, and (2) reports accounts receivable at the amount of cash to be collected is the:

A. Allowance method of accounting for bad debts.
B. Aging of notes receivable.
C. Adjustment method for uncollectible debts.
D. Direct write-off method of accounting for bad debts.
E. Cash basis method of accounting for bad debts

Multiple choice

____ 28. Here are the expected returns on two stocks:

Returns
Probability X Y
0.1 -20% 10%
0.8 20 15
0.1 40 20

If you form a 50-50 portfolio of the two stocks, what is the portfolio’s standard deviation?
a. 16.5%
b. 10.5%
c. 13.4%
d. 8.1%
e. 20.0%

____ 32. A share of preferred stock pays a quarterly dividend of $1.00. If the price of the stock is $50, what is the nominal (not effective) annual rate of return?
a. 8.0%
b. 8.5%
c. 10.0%
d. 9.0%
e. 9.5%

Multiple Choice

1.The amount of money that would have to be invested today at a given interest rate over a specified period in order to equal a future amount is called

1. 1. present value interest factor.
2. 2. future value.
3. 3. present value.
4. 4. future value interest factor.

2.As the interest rate increases for any given period, the future value interest factor will

1. 1. increase.
2. 2. move toward 1.
3. 3. remain unchanged.
4. 4. decrease.

3.If the present value of a perpetual income stream is increasing, the discount rate must be

1. 1. changing unpredictably.
2. 2. decreasing.
3. 3. increasing proportionally.
4. 4. increasing.

4.The annual rate of return is variously referred to as the

1. 1. all of these.
2. 2. cost of capital.
3. 3. opportunity cost.
4. 4. discount rate.

Multiple choice

1. In a troubled debt restructuring in which the debt is continued with modified terms and the carrying amount of the debt is less than the total future cash flows,

a) a loss should be recognized by the debtor.
b)a gain should be recognized by the debtor.
c)a new effective-interest rate must be computed.
d)no interest expense or revenue should be recognized in the future.

2.When a business enterprise enters into what is referred to as off-balance-sheet financing, the company
a) is attempting to conceal the debt from shareholders by having no information about the debt included in the balance sheet.
b) wishes to confine all information related to the debt to the income statement and the statement of cash flow.
c) can enhance the quality of its financial position and perhaps permit credit to be obtained more readily and at less cost.
d) is in violation of generally accepted accounting principles

3. When a note payable is issued for property, goods, or services, the present value of the note is measured by

a)the fair value of the property, goods, or services.
b) the market value of the note.
c) using an imputed interest rate to discount all future payments on the note.
d) any of these.

Multiple choice

A portfolio manager has a $10 million portfolio, which consists of $1 million invested in 10 separate stocks. The portfolio beta is 1.2. The risk-free rate is 5% and the market risk premium is 6%.

____ 6. What is the portfolio’s required return?
a. 9.85%
b. 12.00%
c. 12.20%
d. 12.35%
e. 6.20%

____ 7. The manager sells one of the stocks in her portfolio for $1 million. The stock she sold has a beta of 0.9. She takes the $1 million and uses the money to purchase a new stock that has a beta of 1.6. What is the required return of her portfolio after purchasing this new stock?
a. 14.60%
b. 10.75%
c. 12.62%
d. 12.35%
e. 13.35%

Multiple choice

33. In the rate process, the determination of the __________________ has historically been somewhat neglected in relation to the other steps in the process.

a. Rate structure.
b. Rate level.
c. Allowable operating costs.
d. Rate base.
e. Allowable rate of return.

43. An illustration of a non-credible commitment is the promise:

a. To not increase capacity in a declining industry.
b. To match a new entrant’s discount price.
c. To enter a profitable industry.
d. To restrain output to the quota assigned by a cartel.
e. To exit in the face of projected losses.

46. The problems of asymmetric information exchange arise ultimately because:

a. One party to the exchange possesses different information than another.
b. One party has more information than another.
c. One party knows nothing.
d. One party can not independently verify the information of another.
e. Information is scarce.

Multiple choice

Need assistance with the below questions.

6) What is the growth rate of multifactor productivity if b = 0.20, k = 3, n = 1, and
y = 4

a) 2.4
b) 0.4
c) 2.8
d) 1.0

16) Which of the following beliefs is not part of supply-side economics?

a) A sharp reduction in corporate income taxes would discourage U.S. corporations from shifting their production facilities to other countries, thus leading to a decrease in the unemployment rate
b) A sharp reduction in personal income taxes would bring forth a higher capital stock through greater savings and investment
c) A sharp reduction in personal income taxes would bring forth higher-labor-force participation.
d) A reduction in tax rates would lead to increased output and actually allow tax revenues to rise.

Multiple choice

Please see the attachment.
9. What is the balance in Gale’s investment in subsidiary account at the end of 2009?
A. $1,099,000
B, $1,020,000
(‘.$1,096,200
I). $1,098,000
1 . $1,144,400
10. At the end of 2009, the consolidation entry to eliminate Gale’s accrual of Kaltop’s earnings would include a credit to Investment in Kaltop Co. for
A. $124,400
B. $126,000
C. $127,000
I). $76,400
!?:. $0
11. Under the equity method of accounting for an investment,
A. The investment account remains at initial value
B. Dividends received are recorded as revenue
C. Goodwill is amortized over 20 years
I).Income reported by the subsidiary increases the investment account li. Dividends received increase the investment account
12. Under the initial value method, when accounting for an investment in a subsidiary,
A. Dividends received by the subsidiary decrease the investment account
B. The investment account is adjusted to fair value at year-end
( , Income reported by the subsidiary increases the investment account I). The investment account remains at initial value 1:, Dividends received are ignored
13. According to SFAS142, which of the following statements is true?
A. Goodwill recognized in consolidation must be amortized over 20 years
B. Goodwill recognized in consolidation must be expensed in the period of acquisition
(…’. Goodwill recognized in consolidation will not be amortized but subject to an annual test for
impairment
I). Goodwill recognized in consolidation can never be written off
1′. Goodwill recognized in consolidation must be amortized over 40 years /*”*
I
CHAPTER 3 QUESTIONS
1. Which one of the following accounts would not appear on the consolidated financial
statements at the end of the first fiscal period of the combination?
A. Goodwill
B. Equipment
C. Investment in Subsidiary
1). Common Stock
H. Additional Paid-in Capital
2. Which of the following internal record-keeping methods can a parent choose to account for a
subsidiary acquired in a business combination?
A. Initial value or book value
B. Initial value, lower-of-cost-or-market-value or equity
(“. Initial value, equity or partial equity
1). Initial value, equity or book value
I . Initial value, lower-of-cost-or-market-value or partial equity
3. Which one of the following varies between the equity, initial value and partial equity methods
of accounting for an investment?
A. The amount of consolidated net income
B. Total assets on the consolidated balance sheet
C. Total liabilities on the consolidated balance sheet
I). The balance in the investment account on the parent’s books 1:,. The amount of consolidated cost of goods sold
4. Racer Corp. purchased all of the common stock of Tangiers Co. several years ago. Tangiers
maintained its incorporation. Balances in which of Racer’s accounts would vary between the
equity method and the initial value method?
A. Goodwill, Investment in Tangiers Co. and Retained Earnings
B. Expenses, Investment in Tangiers Co. and Equity in Subsidiary Earnings
C. Investment in Tangiers Co., Equity in Subsidiary Earnings and Retained Earnings
!). Common Stock, Goodwill and Investment in Tangiers Co
I’.. Expenses, Goodwill and Investment in Tangiers Co
5. How does the partial equity method differ from the equity method?
A. In the total assets reported on the consolidated balance sheet
B, In the treatment of dividends
(‘. In the total liabilities reported on the consolidated balance sheet
I). Under the partial equity method, subsidiary income does not increase the balance in the
parent’s investment account
1 . Under the partial equity method, the balance in the investment account is not decreased by
amortization on allocations made in the acquisition of the subsidiary
6. Jansen Inc. acquired all of the outstanding common stock of Merriam Co. on January 1, 2009, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Jansen reported net income of $70,000 in 2009 and $50,000 in 2010 and paid $22,000 in dividends each year. Merriam reported net income of $40,000 in 2009 and $47,000 in 2010 and paid $10,000 in dividends each year. What is the Investment in Merriam Co. balance on Jansen’s books as of December 31, 2010, if the equity method has been applied? A. $286,000 II $296,000 ( . $276,000 I). $344,000 !?. $300,000
FOR QUESTIONS 7, 8, 9 & 10
On January 1, 2009, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained
separate incorporation. Cale used the equity method to account for the investment. The following
information is available for Kaltop’s assets, liabilities and stockholders’ equity accounts:
Book fair
Value Value
Current assets $120,000 $120,000
Land 72,000 192,000
Building (twenty year life) 240,000 268,000
Equipment (ten year life) 540,000 516,000
Current liabilities 24,000 24,000
Long-term liabilities 120,000 120,000
Common stock 228,000
Additional paid-in capital 384,000
Retained earnings 216,000
Kaltop earned net income for 2009 of $126,000 and paid dividends of $48,000 during the year.
7. The 2009 total amortization of allocations is calculated to be
A, $4,000
B. $6,400
( .$(2,400) 1). $(1,000) F. $3,800
8. In Gale’s accounting records, what amount would appear on December 31, 2009 for equity in
subsidiary earnings?
A. $79,000
B. $129,800
( . $126,000
D. $127,000 ,.-?–..
H, $81,800
14. Matthews Co. obtained all of the common stock of Jackson Co. on January 1, 2009. As of that date, Jackson had the following trial balance:
Debit Credit
Accounts payable $60,000
Accounts receivable $50,000
Additional paid-in capital 60,000
Buildings ? net (20-year life) 140,000
Cash and short-term investments 70,000
Common stock 300,000
Equipment ? net (8-year life) 240,000
Inventory 110,000
Land 90,000
Long-term liabilities (mature 12/31/11) 180,000
Retained earnings, 1/1/09 120,000
Supplies 20,000
Totals $720,000 $720,000
During 2009, Jackson reported net income of $96,000 while paying dividends of $12,000.
During 2010, Jackson reported net income of $132,000 while paying dividends of $36,000.
Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As
of January 1, 2009, Jackson’s land had a fair value of $102,000, its buildings were valued at
$188,000 and its equipment was appraised at $216,000. Any excess of consideration transferred
over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized
over 10 years.
Matthews decided to use the equity method for this investment.
Required:
(A.) Prepare consolidation worksheet entries for December 31, 2009.
CHAPTER 6 QUESTIONS
1. A special purpose entity can take all of the following forms except a
A. Trust
B. Partnership
C. Joint venture
I). Corporation
1 ??;. Estate
2. All of the following are potential losses or returns of a special purpose entity except
A. Entitles holder to residual profits
B. Entitles holder to benefit from increases in asset fair value
C. Entitles holder to receive shares of common stock
1). If the special purpose entity cannot repay liabilities, honoring a debt guarantee will produce a
loss
K, If leased asset declines below the residual value, honoring the guarantee will produce a loss
3. Which of the following characteristics is not indicative of an enterprise qualifying as a
primary beneficiary with a controlling financial interest in a variable interest entity?
A. The direct ability to make decisions about the entity’s activities
B. The indirect ability to make decisions about the entity’s activities
(.’. The obligation to absorb the expected losses of the entity if they occur
I). No ability to make decisions about the entity’s activities
1 . The right to receive the expected residual returns of the entity if they occur
4. Which of the following statements is false concerning variable interest entities (VIEs)?
A. Sometimes VIEs do not have independent management
B. Most VIEs are established for valid business purposes
(.’, VIEs may be formed as a source of low-cost financing
I). VIEs have little need for voting stock
1). A VIE cannot take the form of a trust, partnership, joint venture, corporation or estate
5. Which of the following statements is true concerning variable interest entities (VIEs)?
1) The role of the VIE equity investors can be fairly minor.
2) A VIE may be created specifically to benefit its sponsoring firm with low-cost financing.
3) VIE governing agreements often limit activities and decision making.
4) VIEs usually have a well-defined and limited business activity.
A. 2 and 4
B. 2, 3 and 4
(‘. 1,2 and 4
I). 1,2 and 3
I). 1,2, 3 and 4
CHAPTER 14 QUESTIONS
1. Cherryhill and Hace had been partners for several years and they decided to admit Quincy to
the partnership. The accountant for the partnership believed that the dissolved partnership and
the newly formed partnership were two separate entities. What method would the accountant
have used for recording the admission of Quincy to the partnership?
A. The bonus method
B. The equity method
( . The goodwill method I). The proportionate method 1 . The cost method
2. The disadvantages of the partnership form of business organization, compared to corporations,
include
A. The legal requirements for formation
B, Unlimited liability for the partners
( . The requirement for the partnership to pay income taxes i). The extent of governmental regulation H. The complexity of operations
3. The dissolution of a partnership occurs
A. Only when the partnership sells its assets and permanently closes its books
B. Only when a partner leaves the partnership
(‘.At the end of each year, when income is allocated to the partners
I). Only when a new partner is admitted to the partnership
I:, When there is any change in the individuals who make up the partnership
4. The partnership of Clapton, Seidel and Thomas was insolvent and will be unable to pay
$30,000 in liabilities currently due. What recourse was available to the partnership’s creditors?
A. They must present equal claims to the three partners as individuals
B. They must try obtain a payment from the partner with the largest capital account balance
C. They cannot seek remuneration from the partners as individuals
1) They may seek remuneration from any partner they choose
I ?.. They must present their claims to the three partners in the order of the partners’ capital account balances

FOR QUESTIONS 5,6,7,8,9 &10
Cleary, Wasser and Nolan formed a partnership on January 1, 2010, with investments of $100,000, $150,000 and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary and 40% each for Wasser and Nolan. Net income was $150,000 in 2010. Each partner withdrew $1,000 for personal use every month during 2010.
5. What was Wasser’s share of income for 2010?
A. $63,000
B. $53,000
C. $58,000
1), $29,000
I!. $51,000
6. What was Nolan’s share of income for 2010?
A. $63,000
B, $53,000
( . $58,000
I). $29,000
H. $51,000
7. What was deary’s share of income for 2010?
A, $63,000
B, $53,000
C, $58,000
I). $29,000
!. $51,000
8. What was Nolan’s capital balance at the end of 2010?
A. $200,000
B. $224,000
C. $238,000
1). $246,000
1 .$254,000
9. What was Wasser’s capital balance at the end of 2010?
A. $150,000
B. $160,000
C. $165,000
I). $213,000
I, $201,000 /^?> ‘
v ^;
10. What was Cleary’s capital balance at the end of 2010?
A. $100,000
B. $117,000
(‘.$119,000
I). $129,000
I-. $153,000

Multiple choice

1. The CEO of a highly profitable company, noticing that the excess cash not needed to fund business operations has accumulated in a company bank account that pays no interest, contemplates declaring and paying a cash dividend to common shareholders before year’s end. The likely effect of paying the dividend would be to
A. have no effect on ROI because dividends are paid out of retained earnings.
B. decrease ROI because the investment in the business would decrease while income would be unchanged.
C. increase ROI because all shareholders prefer dividends to capital gains.
D. increase ROI because the investment in the business would decrease while income would be unchanged.
E. cannot be determined from the information given because paying a dividend decreases profit and investment.

(For question #10 and #11)
Initial Investment —– $280,000
Annual cash recepits —– $196,000
Life of the project —– 6 years
Annual cash expenses —– $78,000
Salvage Value —– $28,000

10. Shufflebarger Inc. has provided the above data to be used in evaluating a proposed investment project.

The company’s tax rate is 30%. For tax purposes, the entire initial investment will be depreciated over 5 years without any reduction for salvage value. The company uses a discount rate of 16%.

When computing the net present value of the project, what is the annual amount of the depreciation tax shield? In other words, by how much does the depreciation deduction reduce taxes each year in which the depreciation deduction is taken?
A. $16,800
B. $39,200
C. $14,000
D. $32,667

11. Shufflebarger Inc. has provided the above data to be used in evaluating a proposed investment project.

The company’s tax rate is 30%. For tax purposes, the entire initial investment will be depreciated over 5 years without any reduction for salvage value. The company uses a discount rate of 16%.

When computing the net present value of the project, what is the after-tax cash flow from the salvage value in the final year?
A. $28,000
B. $8,400
C. $19,600
D. $0

12. You have just turned 60 and an endowment insurance policy has paid you a lump sum of $200,000. If you invest the sum at 5%, how much money can you withdraw from your account in equal amounts each year so that at the end of 15 years (age 75) there will be nothing left?
A. $17,342
B. $9,268
C. $19,268
D. $15,415
E. $2,075,932

Multiple choice

1. The income statement measures the increase in the assets of a firm over a period of time.
True False

2. Retained earnings represent the firm’s cumulative earnings since inception, minus dividends and other adjustments.
True False

3. Free cash flow is equal to cash flow from operating activities plus depreciation.
True False

4. For corporations with low taxable income (less than $100,000), the effective tax rate can be as much as 40%.
True False

5. Interest expense is deductible before taxes and therefore has an after-tax cost equal to the interest paid times (1 tax rate).
True False

6. Allen Lumber Company had earnings after taxes of $580,000 in the year 2006 with 400,000 shares outstanding on December 31, 2006. On January 1, 2007, the firm issued 35,000 new shares. Because of the proceeds from these new shares and other operating improvements, 2007 earnings after taxes were 25 percent higher than in 2006. Earnings per share for the year-end 2007 was
A. $1.67
B. $1.45
C. $1.81
D. None of these

7. Earnings per share is
A. operating profit divided by number of shares outstanding.
B. net income divided by number of shares outstanding.
C. net income divided by stockholders’ equity.
D. net income minus preferred dividends divided by number of shares outstanding.

8. Net worth is equal to stockholders’ equity
A. plus dividends.
B. minus preferred stock.
C. plus preferred stock.
D. minus liabilities.

9. Which of the following would represent a use of funds and, indirectly, a reduction in cash balances?
A. an increase in inventories
B. a decrease in marketable securities
C. an increase in accounts payable
D. the sale of new bonds by the firm

10. Assuming a tax rate of 30%, the after-tax cost of interest expense of $200,000 is
A. $60,000
B. $140,000
C. $200,000
D. $120,000

11. In examining the liquidity ratios, the primary emphasis is the firm’s
A. ability to effectively employ its resources.
B. overall debt position.
C. ability to pay short-term obligations on time.
D. ability to earn an adequate return.

12. Refer to the figure above. Times interest earned for Megaframe Computer is
A. 4.5x
B. 9x
C. 11x
D. 10x

13. Refer to the figure above. The firm’s debt to asset ratio is
A. 58%.
B. 33%.
C. 25%.
D. 48%.

14. Refer to the figure above. Using the DuPont method, return on assets (investment) for Marni is approximately
A. 200%
B. 7.5%
C. 3.75%
D. None of these.

15. Trend and industry analysis provide all of the following information except
A. benchmarking
B. the progress of the company
C. basis for decision-making about capital structure
D. future information about the company

16. If accounts receivable stays the same, and credit sales go up
A. the average collection period will go up.
B. the average collection period will go down.
C. accounts receivable turnover will decrease.
D. B and C.

17. In addition to comparison with industry ratios, it is also helpful to analyze ratios using
A. trend analysis.
B. historical comparisons.
C. neither; only industry ratios provide valid comparisons.
D. both a and b.

18. Disinflation may cause
A. an increase in the value of gold, silver, and gems.
B. a reduced required return demanded by investors on financial assets.
C. additional profits through falling inventory costs.
D. None of these.

19. If the company’s accounts receivable turnover is increasing, the average collection period:
A. is going up slightly
B. is going down
C. could be moving in either direction
D. is going up by a significant amount

20. Refer to the figure above. What is Megaframe Computer’s total asset turnover?
A. 4.50x
B. 3.6x
C. 2x
D. 1.76x

21. The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.
True False

22. Compared to a firm operating at 100% of capacity, firms that are operating at less than full capacity will require greater new external funds when sales increase.
True False

23. The cash budget approach to financial forecasting assumes that balance sheet accounts maintain a constant relationship to cash.
True False

24. A firm’s cash borrowing needs can be reduced if its inventory turnover rate can be increased.
True False

25. The calculation of cash receipts requires a breakout of cash and credit sales and collections history.
True False

26. MG Lighting had sales of 1,000 units at $100 per unit last year. The marketing manager projects a 10 percent decrease in unit volume this year because a 20 percent price increase is needed to pass rising costs through to customers. Returned merchandise will represent 2 percent of total sales. What is your net dollar sales projection for this year?
A. $206,976
B. $169,344
C. $172,800
D. None of these

27. A firm has beginning inventory of 300 units at a cost of $11 each. Production during the period was 650 units at $12 each. If sales were 700 units, what is the value of the ending inventory using LIFO?
A. $2,750
B. $3,250
C. $3,300
D. $2,550

28. In forecasting a firm’s cash needs for some future period
A. the percent-of-sales method is a “broad-brush” approach.
B. cash budgets are more exact than the percent-of-sales method.
C. a cash budget approach can deal effectively with both level and seasonal production schedules.
D. all of these.

29. Firms that successfully increase their rates of inventory turnover will, among other things,
A. be able to reduce their borrowing needs.
B. be able to reduce their dividend payments to stockholders.
C. find it more difficult to be given credit by their resource suppliers.
D. have a greater need for high balances in their cash accounts.

30. If the actual December 31st A/R balance was $12,000; projected sales in March are $50,000; 70% of sales are on credit; 60% of credit sales are collected in the month of sale and 40% are collected in the month after the sale, what is the projected A/R balance on the proforma balance sheet for the end of March?
A. $26,000
B. $14,000
C. $20,000
D. $35,000

31. A highly automated plant would generally have
A. more variable than fixed costs.
B. more fixed than variable costs.
C. all fixed costs.
D. all variable costs.

32. If the price per unit decreases because of competition but the cost structure remains the same
A. the breakeven point rises.
B. the degree of combined leverage declines.
C. the degree of financial leverage declines.
D. All of these

33. A high DOL means:
A. there are high labor costs.
B. there is high debt.
C. there is a large amount of equity.
D. there are high fixed costs.

34. A firm’s earnings per share is not impacted by its financing plan at the point when
A. debt is equal to equity.
B. return on assets equals return on equity.
C. the cost of borrowed funds equals the return on equity.
D. the cost of borrowed funds equals the return on assets.

35. Refer to the figure above. The Degree of Operating Leverage is
A. 1.43x
B. 1.56x
C. 3.33x
D. 2.22x

36. The contribution margin is equal to price per unit minus total costs per unit.
True False

37. Degree of operating leverage should be computed only over a profitable range of operations.
True False

38. Operating leverage primarily affects the left hand side of the balance sheet while financial leverage affects the right hand side of the balance sheet.
True False

39. The degree of financial leverage measures the percentage change in EPS for every 1 percent move in EBIT.
True False

40. The interwoven boundaries of banks and different trading companies in Japan make it easier to acquire credit in Japan than in the U.S.
True False

41. Many companies such as McDonalds have embraced supply chain management using web-based procedures.
True False

42. Firms with highly volatile and perishable inventory should assume relatively low levels of risk.
True False

43. Generally a downward sloping yield curve indicates an eminent economic boom.
True False

44. Tinbergen Cans expects sales next year to be $30,000,000. Inventory and accounts receivable (combined) will increase $4,000,000 to accommodate this sales level. The company has a profit margin of 10 percent and a 30 percent dividend payout. How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing
A. No external financing will be needed.
B. Less than $1,000,000 of external financing is needed.
C. Between $1,000,000 and $2,000,000 of external financing is needed.
D. More than $2,000,000 of external financing is needed.

45. Publishing companies are characterized by
A. fluctuating production to match sales.
B. seasonal sales.
C. low inventories due to computer inventory management.
D. a and b.

46. The use of cash budgeting procedures
A. helps the firm plan its current asset levels for a given production plan.
B. makes managing inventory easier under seasonal production.
C. illustrates fluctuating levels of current assets for a given production plan.
D. all of these are correct.

47. Financial managers can accurately predict future interest rates by
A. calculating the anticipated inflation rate
B. the Fed’s decision regarding the target federal funds rate
C. measuring investor sentiment and consumer confidence indices
D. none of these

48. Yield curves change daily to reflect
A. changing conditions in the money and capital markets.
B. new inflation expectations.
C. changing conditions in the overall economy.
D. all of these.

49. The theory of the term structure of interest rates which suggests that long-term rates are determined by the average of short-term rates expected over the time that a long-term bond is outstanding is the
A. expectations hypothesis.
B. segmentation theory.
C. liquidity premium theory.
D. market average rate theory.

50. An aggressive, risk-oriented firm will likely
A. borrow long-term and carry low levels of liquidity.
B. borrow short-term and carry low levels of liquidity.
C. borrow long-term and carry high levels of liquidity.
D. borrow short-term and carry high levels of liquidity.

51. “Float” is the name given for a short-term loan between suppliers and buyers.
True False

52. A lock-box is used by the selling corporation to speed up the check collection and check-clearing process.
True False

53. Small-denomination certificates of deposit are usually more liquid than large-denomination CDs.
True False

54. Inventories are usually the most liquid, but lowest-yielding, current asset of a firm.
True False

55. Seasonal production allows for maximum efficiency in machinery and manpower use.
True False

56. When a potential customer has a mediocre credit history, a firm should not consider allowing them to become a customer.
True False

57. International cash management is more complex than domestic based cash management because of
A. difficult liquidity management.
B. different banking systems.
C. currency risk fluctuations.
D. all of these.

58. A banker’s acceptance
A. is a draft drawn on a bank and paid by that bank when presented to it.
B. may be accepted by the bank for future payment.
C. is traded in a relatively liquid market until maturity.
D. all of these.

59. The three primary policy variables to consider when extending credit include all of the following except
A. credit standards.
B. the level of inflation.
C. the terms of trade.
D. collection policy.

60. When developing a credit scoring report, many variables would be considered. Which of the following best represent the major factors Dun & Bradstreet would examine?
A. The age of the management team, the dollar amount of sales, net profits, and long-term debt.
B. The age of the company, the number of employees, the level of current assets.
C. The financial statements, satisfactory or slow payment experiences, negative public records (suits, liens, judgments, bankruptcies).
D. The company’s cash balances, return on equity, and its average tax rates.

Multiple choice

Can you help me with this assignment? Thanks!

4. At the beginning of 2006, Findlay Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Findlay reported this note as a $1,000 trade note receivable on its 2006 year-end statement of financial position and $1,000 as sales revenue for 2006. What effect did this accounting for the note have on Finney’s net earnings for 2006, 2007, 2008, and its retained earnings at the end of 2008, respectively?
a. Overstate, overstate, understate, zero
b. Overstate, understate, understate, understate
c. Overstate, overstate, overstate, overstate
d. None of these

Titan, Inc.’s checkbook balance on December 31, 2007 was $21,200. In addition, Titan held the following items in its safe on December 31.
(1) A check for $450 from Peters, Inc. received December 30, 2007, which was not included in the checkbook balance.
(2) An NSF check from Garner Company in the amount of $900 that had been deposited at the bank, but was returned for lack of sufficient funds on December 29. The check was to be redeposited on January 3, 2008. The original deposit has been included in the December 31 checkbook balance.
(3) Coin and currency on hand amounted to $1,450.
The proper amount to be reported on Titan’s balance sheet for cash at December 31, 2007 is
a. $21,300.
b. $22,200
c. $20,400.
d. $21,750.

32. On January 2, 2007, Spencer Co. bought a trademark from Stype, Inc. for $500,000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Stype’s books was $400,000. In Spencer’s 2007 income statement, what amount should be reported as amortization expense?
a. $20,000.
b. $25,000.
c. $40,000.
d. $50,000

17. In no case can “market” in the lower-of-cost-or-market rule be more than
a. estimated selling price in the ordinary course of business.
b. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for an approximately normal profit margin, and an adequate reserve for possible future losses.
c. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and an allowance for an approximately normal profit margin.
d. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal

35. Select the correct statement from the following?
a. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis.
b. A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an ability to consummate a refinancing.
c. A company may exclude a short-term obligation from current liabilities if it is paid off after the balance sheet date and subsequently replaced by long-term debt before the balance sheet is issued.
d. None of these

Multiple choice

Please I need details on numbers 45- 50 but not so much on 27 -44.

27.
The U.S. Treasury offers to sell you a bond for $613.81. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?

5.91%
6.71%
7.10%
5.59%
5.00%

28.
Temple Square Inc. reported that its retained earnings for 2005 were $490,000. In its 2006 financial statements, it reported $60,000 of net income, and it ended 2006 with $510,000 of retained earnings. How much were paid as dividends to shareholders during 2006?

$20,000
$25,000
$30,000
$35,000
$40,000

29.
Collins Inc’s latest net income was $1 million, and it had 200,000 shares outstanding. The company wants to pay out 40% of its income. What dividend per share should the company declare?

$1.60
$1.70
$1.80
$1.90
$2.00

30. The Federal Reserve sells $50 billion of short-term U.S. Treasury securities to the public, other things held constant, what would be the most likely effect on short-term securities prices and interest rates?

Prices and interest rates will both rise.
Prices will rise and interest rates will decline.
Prices and interest rates will both decline.
Prices will decline and interest rates will rise.
There is no reason to expect a change in either prices or interest rates.

31.
Your uncle would like to limit both his interest rate price risk (the risk that rising rates will cause the value of his bonds to decline) and his default risk, but he would still like to invest in corporate bonds. He is considering the following bonds. Which of these bonds would best meet his criteria?

AAA bonds with 10 years to maturity.
BBB perpetual bonds.
BBB bonds with 10 years to maturity.
AAA bonds with 5 years to maturity.
BBB bonds with 5 years to maturity.

32.
Tom Skinner has $45,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 1.4. These are the only two investments in his portfolio. What is his portfolio’s beta?

0.93
0.98
1.03
1.08
1.13

33.
A share of common stock has just paid a dividend of $2.00. If the expected long-run growth rate for this stock is 7%, and if investors require a(n) 11% rate of return, what is the price of the stock?

$47.50
$49.00
$50.50
$52.00
$53.50

34.
Wagner Inc estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept?

Project A is of average risk and has a return of 9%.
Project B is of below-average risk and has a return of 8.5%.
Project C is of above-average risk and has a return of 11%.
None of the projects should be accepted.
All of the projects should be accepted.

35.
The regular payback method has a number of disadvantages. Which of the following items is NOT a disadvantage of this method?

Lack of an objective, market-determined benchmark for making decisions.
Ignores cash flows beyond the payback period.
Does not directly account for the time value of money.
Does not provide any indication regarding a project’s liquidity.
Does not directly account for differences in risk among projects.

36.
The relative risk of a proposed project is best accounted for by

Adjusting the discount rate upward if the project is judged to have above average risk.
Adjusting the discount rate downward if the project is judged to have above average risk.
Reducing the NPV by 10% for risky projects.
Picking a risk factor equal to the average discount rate.
Ignoring it because project risk cannot be measured accurately.

37.
A firm is considering the purchase of an asset whose risk is greater than the firm’s current risk, based on all methods for assessing risk. In evaluating this asset, it would be reasonable for the decision maker to

Increase the IRR of the asset to reflect its greater risk.
Increase the NPV of the asset to reflect the greater risk.
Reject the asset, since its acceptance would increase the firm’s risk.
Ignore the risk differential if the project would amount to only a small fraction of the firm’s total assets.
Increase the cost of capital used to evaluate the project to reflect the project’s higher risk.

38.
Brandi Co. has an unlevered beta of 1.10. The firm currently has no debt, but is considering changing its capital structure to be 30% debt and 70% equity. If its corporate tax rate is 40%, what is Brandi’s levered beta?

1.2549
1.3829
1.5764
1.6235
1.7458

39.
Ridgefield Enterprises has total assets of $300 million. The company currently has no debt in its capital structure. The company’s basic earning power is 15%. The company is contemplating a recapitalization where it will issue debt at 10% and use the proceeds to buy back shares of the company’s common stock. If the company proceeds with the recapitalization, its operating income, total assets, and tax rate will remain the same. Which of the following will occur as a result of the recapitalization?

The company’s ROA will increase.
The company’s ROA will remain unchanged.
The company’s basic earning power will decline.
The company’s basic earning power will increase.
The company’s ROE will increase.

40.
You are analyzing the value of an investment by calculating the present value of its expected cash flows. Which of the following would cause the investment to look better?

The discount rate decreases.
The cash flows are extended over a longer period of time, but the total amount of the cash flows remains the same.
The discount rate increases.
The riskiness of the project’s cash flows increases.
The total amount of cash flows remains the same, but more of the cash flows are received in the later years and less are received in the earlier years.

41.
You are considering buying a new, $15,000 car, and you have $2,000 to put toward a down payment. If you can negotiate a nominal annual interest rate of 10% and finance the car over 60 months, what are your monthly car payments?

$216.67
$252.34
$276.21
$285.78
$318.71

42.
Elizabeth has $35,000 in an investment account, but she wants the account to grow to $100,000 in 10 years without making any additional contributions to the account. What effective annual rate of interest does she need to earn on the account to meet her goal?

9.03%
11.07%
10.23%
8.65%
12.32%

43.
If the CEO of a firm were filling out a fitness report on a division manager (i.e., “grading” the manager), which of the following situations would be likely to cause the manager to get a BETTER GRADE? In all cases, assume that other things are held constant.

The division’s total assets turnover ratio is below the average for other firms in the industry.
The division’s DSO (days’ sales outstanding) is 40, whereas the average for competitors is 30.
The division’s inventory turnover is 6, whereas the average for competitors is 8.
The division’s debt ratio is above the average for other firms in the industry.
The division’s basic earning power ratio is above the average of other firms in the industry.

44.
McGwire Company’s pension fund projects that most of its employees will take advantage of an early retirement program the company plans to offer in five years. Anticipating the need to fund these pensions, the firm bought zero coupon U.S. Treasury Trust Certificates maturing in five years. When these instruments were originally issued, they were 12% coupon, 30-year U.S. Treasury bonds. The stripped Treasuries are currently priced to yield 10%. Their total maturity value is $6,000,000. What is their total cost (price) to McGwire today?

553,776
$5,142,600
$3,404,561
$4,042,040
$3,725,528

45.
A stock that currently trades for $40 per share is expected to pay a year-end dividend of $2 per share. The dividend is expected to grow at a constant rate over time. The stock has a beta of 1.2, the risk-free rate is 5%, and the market risk premium is 5%. What is the stock’s expected price seven years from today?

46.
The capital budgeting director of Sparrow Corporation is evaluating a project that costs $200,000, is expected to last for 10 years and produces after-tax cash flows, including depreciation, of $44,503 per year. If the firm’s WACC is 14% and its tax rate is 40%, what is the project’s IRR?

47.
Maxvill Motors has annual sales of $15,000. Its variable costs equal 60% of its sales, and its fixed costs equal $1,000. If the company’s sales increase 10%, what will be the percentage increase in the company’s earnings before interest and taxes (EBIT)?

48.
In 1958 the average tuition for one year at an Ivy League school was $1,800. Thirty years later, in 1988, the average cost was $13,700. What was the growth rate in tuition over the 30-year period?

49.
Cleveland Corporation has 100,000 shares of common stock outstanding, its net income is $750,000, and its P/E is 8. What is the company’s stock price?

50.
S. Claus & Co. is planning a zero coupon bond issue that has a par value of $1,000 and matures in 2 years. The bonds will be sold today at a price of $826.45. If the firm’s marginal tax rate is 40%, what is the annual after-tax cost of debt to the company on this issue?

Multiple choice

1. Which of the following best describes a possible result of treasury stock transactions by a corporation?
a. May increase but not decrease retained earnings.
b. May increase net income if the cost method is used.
c. May decrease but not increase retained earnings.
d. May decrease but not increase net income.

2. Which of the following are temporary differences that are normally classified as expenses or losses that are deductible after they are recognized in financial income?
a. Advance rental receipts.
b. Product warranty liabilities.
c. Depreciable property.
d. Fines and expenses resulting from a violation of law.

3. Which of the following disclosures is required for a change from LIFO to FIFO?
a. The cumulative effect on prior years, net of tax, in the current retained earnings statement
b. The justification for the change
c. Restated prior year income statements
d. All of these are required.

37. In a defined-benefit plan, a formula is used that
a. requires that the benefit of gain or the risk of loss from the assets contributed to the pension plan be borne by the employee.
b. defines the benefits that the employee will receive at the time of retirement.
c. requires that pension expense and the cash funding amount be the same.
d. defines the contribution the employer is to make; no promise is made concerning the ultimate benefits to be paid out to the employees.

38. In January 2007, Castro Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2007, Castro Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of these treasury shares
a. decreased total stockholders’ equity.
b. increased total stockholders’ equity.
c. did not change total stockholders’ equity.
d. decreased the number of issued shares.

41. An unrealized holding loss on a company’s available-for-sale securities should be reflected in the current financial statements as
a. an extraordinary item shown as a direct reduction from retained earnings.
b. a current loss resulting from holding securities.
c. a note or parenthetical disclosure only.
d. other comprehensive income and deducted in the equity section of the balance sheet.

42. Which of the following best describes a possible result of treasury stock transactions by a corporation?
a. May increase but not decrease retained earnings.
b. May increase net income if the cost method is used.
c. May decrease but not increase retained earnings.
d. May decrease but not increase net income.

43. In a defined-contribution plan, a formula is used that
a. defines the benefits that the employee will receive at the time of retirement.
b. ensures that pension expense and the cash funding amount will be different.
c. requires an employer to contribute a certain sum each period based on the formula.
d. ensures that employers are at risk to make sure funds are available at retirement.

44. Tanner, Inc. incurred a financial and taxable loss for 2007. Tanner therefore decided to use the carryback provisions as it had been profitable up to this year. How should the amounts related to the carryback be reported in the 2007 financial statements?
a. The reduction of the loss should be reported as a prior period adjustment.
b. The refund claimed should be reported as a deferred charge and amortized over five years.
c. The refund claimed should be reported as revenue in the current year.
d. The refund claimed should be shown as a reduction of the loss in 2007.

48. Which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income?
a. Subscriptions received in advance.
b. Prepaid royalty received in advance.
c. An installment sale accounted for on the accrual basis for financial reporting purposes and on the installment (cash) basis for tax purposes.
d. Interest received on a municipal obligation.

50. An unrealized holding gain on a company’s available-for-sale securities should be reflected in the current financial statements as
a. an extraordinary item shown as a direct increase to retained earnings.
b. a current gain resulting from holding securities.
c. a note or parenthetical disclosure only.
d. other comprehensive income and included in the equity section of the balance sheet.

Multiple choice

1.The two methods of preparing the statement of cash flows differ in the preparation of which section?

a. Operating
b. Investing
c. Financing
d. Notes to the financial statement
e. None of the other answers

2.Laghenfeld Miller bought $30,000 worth of 8% semiannual bonds at 98 in the City of San Diego. How much did Laghenfeld pay for the bonds?

a. $30,000
b. $29,400
c. $1,200
d. None of the other answers

3.Please refer back to question 2.
How much bond interest will Mr. Miller receive every six months?

a. $1,200
b. $2,400
c. $1,176
d. $30,000
e. None of the other answers

4.Please refer back to question 2.
At maturity, how much will the bonds pay to Mr. Miller (excluding interest)?

a. $29,400
b. $30,000
c. $1,200
d. None of the other answers

Multiple Choice

____ 1. Period costs would include
a. direct labor.
b. direct materials.
c. indirect manufacturing costs.
d. selling and administrative costs.

____ 2. Manufacturing costs are typically classified as
a. product costs or period costs.
b. direct materials or direct labor.
c. direct materials, direct labor, or manufacturing overhead.
d. direct materials, direct labor, or selling and administrative.

____ 3. A debit balance in the Manufacturing Overhead account at the end of an interim month means that
a. the balance should be reported as a current liability in the monthly balance sheet.
b. corrective action by management is necessary.
c. overhead has been underapplied.
d. cost of goods sold should be credited on the monthly income statement.

____ 4. In a job order cost system, which of the following accounts is not a control account?
a. Raw Materials Inventory
b. Factory Labor
c. Finished Goods Inventory
d. Manufacturing Overhead

____ 5. In the current assets section of the balance sheet, manufacturing inventories are listed in the following order:
a. raw materials, work in process, finished goods.
b. finished goods, work in process, raw materials.
c. work in process, finished goods, raw materials.
d. finished goods, raw materials, work in process.

The following data should be used for questions 6-9:
Raw materials inventory, January 1 $ 10,000
Raw materials inventory, December 31 15,000
Work in process, January 1 9,000
Work in process, December 31 5,000
Finished goods, January 1 16,000
Finished goods, December 31 20,000
Raw materials purchases 600,000
Direct labor 230,000
Factory utilities 75,000
Indirect labor 25,000
Factory depreciation 200,000
Selling and administrative expenses 210,000

____ 6. Direct materials used is
a. $630,000.
b. $610,000.
c. $600,000.
d. $595,000.

____ 7. Assume your answer to question 6 above is $600,000. Total manufacturing costs equal
a. $1,130,000.
b. $1,127,000.
c. $1,030,000.
d. $1,340,000.

____ 8. Assume your answer to question 7 above is $1,100,000. Cost of goods manufactured equals
a. $1,096,000.
b. $1,097,000.
c. $1,104,000.
d. $1,109,000.

____ 9. Assume your answer to question 8 is $1,120,000. The cost of goods sold is
a. $1,123,000.
b. $1,104,000.
c. $1,116,000.
d. $1,124,000.

____ 10. A company’s break-even point can be decreased by decreasing
a. the contribution margin ratio.
b. the contribution margin.
c. the selling price.
d. variable costs per unit.

____ 11. Brooke Company desires net income of $720,000 when it has $2,000,000 of fixed costs and variable costs of 60% of sales. Contribution margin equals
a. $6,800,000.
b. $2,720,000.
c. $1,280,000.
d. $1,200,000.

____ 12. Fixed costs
a. increase in total as total production increases.
b. decrease in total as production decreases.
c. decrease per unit as total production decreases.
d. increase per unit as total production decreases.

____ 13. Assume October is the high volume month for a toy manufacturer and July is the low volume month. The following total production costs and volume levels have been recorded:

Total Costs Volume
October $30,000 6,000
July $12,000 2,000

Compute the total fixed costs.
a. $18,000.
b. $3,000.
c. $9,000.
d. $6,000.

____ 14. A relevant cost
a. is a sunk cost.
b. is a past cost.
c. must be a future cost.
d. is an opportunity cost.

____ 15. What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and fixed and variable factory overhead cost?
a. standard costing.
b. variable costing.
c. absorption costing.
d. direct costing.

____ 16. Which of the following is included in the cost of goods manufactured under absorption costing but not under variable costing?
a. direct materials.
b. variable factory overhead.
c. fixed factory overhead.
d. direct labor.

____ 17. Which of the following would not be deducted in determining the contribution margin under variable costing?
a. direct labor.
b. sales commissions.
c. sales office depreciation based using the straight-line method.
d. variable factory overhead.

____ 18. Under absorption costing, which of the following costs would not be included in finished goods inventory?
a. hourly wages of assembly workers.
b. overtime wages paid factory workers.
c. advertising costs for a clothing manufacturer.
d. depreciation on factory equipment.

____ 19. Under variable costing, which of the following costs would not be included in finished goods inventory?
a. hourly wages of assembly workers.
b. direct material costs.
c. fixed factory overhead cost.
d. variable factory overhead cost.

____ 20. Under variable costing, which of the following costs would be included in finished goods inventory?
a. hourly wages of assembly workers.
b. utilities expense for corporate headquarters.
c. sales commissions.
d. fixed factory overhead cost.

____ 21. Under variable costing, which of the following costs would be included in finished goods inventory?
a. advertising costs.
b. salary of CEO.
c. wages of carpenters in furniture factory.
d. rent on corporate headquarters.

____ 22. The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured
a. exceed units sold.
b. equal units sold.
c. are less than units sold.
d. are equal to or greater than units sold.

____ 23. The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured
a. exceed units sold.
b. equal units sold.
c. are less than units sold.
d. are equal to or greater than units sold.

____ 24. Cost-plus pricing means that:
a. selling price = fixed costs + (markup percentage X variable costs)
b. selling price = cost + (markup percentage X cost).
c. selling price = variable costs + (markup percentage X fixed costs).
d. selling price = cost + (markup percentage X variable costs).

____ 25. Rusty Company is considering developing a new product. The company has gathered the following information on this product:

Expected total unit cost $20
Estimated investment for new product $700,000
Desired ROI 5%
Expected number of units to be produced and sold 1,000

The desired selling price given this information is:
a. $35.
b. $50.
c. $15.
d. $55.

____ 26. Rusty Company is considering developing a new product. The company has gathered the following information on this product:

Expected total unit cost $20
Estimated investment for new product $700,000
Desired ROI 5%
Expected number of units to be produced and sold 1,000

The desired markup percentage is:
a. 275%.
b. 75%.
c. 175%.
d. 100%.

____ 27. The following information is provided by Bullet Corporation for a new product it recently introduced:

Total unit cost $50
Desired ROI per unit $20
Target selling price $70

What would be Bullet Corporation’s percentage markup on cost?
a. 40%.
b. 71%.
c. 29%.
d. 60%.

____ 28. Target costing assumes
a. the market price is known and works to achieve an acceptable cost.
b. the cost is known and works to achieve an acceptable market price.
c. the desired profit is known and works to achieve an acceptable market price.
d. the desired profit is known and works to achieve an acceptable cost.

____ 29. The Molding Division of White Corporation manufactures plastic molds and then sells them to customers for $80 per unit. Its variable cost is $30 per unit, and its fixed cost per unit is $10. Management would like the Molding Division to transfer 15,000 of these molds to another division within the company at a price of $45. The Molding Division is operating at full capacity. What is the minimum transfer price the Molding Division should accept?
a. $45.
b. $40.
c. $80.
d. $50.

____ 30. The Molding Division of White Corporation manufactures plastic molds and then sells them to customers for $80 per unit. Its variable cost is $30 per unit, and its fixed cost per unit is $10. Management would like the Molding Division to transfer 15,000 of these molds to another division within the company at a price of $45. The Molding Division has available capacity to produce the 15,000 units for the other division. What is the minimum transfer price the Molding Division should accept?
a. $40.
b. $30.
c. $45.
d. $80.

____ 31. HIT Company provides the following cost information related to its production of its primary product:

Per unit
Variable manufacturing cost $40
Fixed manufacturing cost $40
Variable selling and administrative expenses $10
Fixed selling and administrative expenses $12
Desired ROI per unit $14

What is its markup percentage assuming that HIT Company uses absorption costing?
a. 27.5%.
b. 17.5%.
c. 45%.
d. 260%.

___ 32. Looker Hats is planning to sell 600 felt hats, and 700 will be produced during
June. Each hat requires ½ yard of felt and ¼ hour of direct labor. Felt costs
$3.00 per yard and employees of the company are paid $20 per hour. How
much is the total amount of budgeted direct labor for June?
a. $3,000
b. $48,000
c. $3,500
d. $2,400

____ 33. Orr Corporation’s manufacturing costs for August when production was 800
units appears below:

Direct material $10 per unit
Direct labor $4,800
Variable overhead 4,000
Factory depreciation 3,000
Factory supervisory salaries 2,000
Other fixed factory costs 1,000

How much is the budgeted manufacturing cost for a month when 900 units
are produced?
a. $23,800
b. $18,900
c. $24,900
d. $25,650

____ 34. Lewis Production is planning to sell 220 boxes of bricks and produce 200
boxes of bricks during May. Each box of bricks requires 20 pounds of brick
mix and a half hour of direct labor. Brick mix costs $5 per 100 pounds and
employees of the company are paid $12.00 per hour. Manufacturing overhead
is applied at a rate of 120% of direct labor costs. Lewis Production has 600
pounds of brick mix in beginning inventory and wants to have 800 pounds of brick mix in ending inventory. What is the total amount to be budgeted for manufacturing overhead for the month?
a. $1,440
b. $2,880
c. $2,400
d. $1,200

____ 35. Hargrow, Inc. makes and sells a single product, buckets. It takes 30 ounces of
plastic to make one bucket. Budgeted production of buckets for the next three
months is as follows: August 90,000 units, September 75,000 units, October
65,000 buckets. The company wants to maintain monthly ending inventories of
plastic equal to 10% of the following month’s production needs. On August
31st, 195,000 ounces of plastic were on hand. The cost of plastic is $0.03 per
ounce. How much is the ending inventory of plastic to be reported on
the company’s balance sheet at September 30?
a. $195,000
b. $5,850
c. $6,750
d. $7,500

____ 36. Razmataz Company makes and sells umbrellas. The company is in the process
of preparing its Selling and Administrative Expense Budget for the last half of
the year. The following budget data are available:

Item Variable Cost Per Unit Sold Monthly Fixed Cost
Sales commissions $0.60 $3,000
Shipping $1.20
Advertising $0.30
Depreciation on office equipment $4,000
Other operating expenses $0.35 $34,000

Expenses are paid in the month incurred. If the company has budgeted to sell 2,000 umbrellas in October, how much is the total budgeted variable selling and administrative expenses for October?
a. $41,000
b. $4,600
c. $45,900
d. $4,900

____ 37. Which one of the following is a similarity of both a job order and a process
cost system?
a. They both track direct materials and direct labor, but not manufacturing overhead.
b. They both track conversion costs, but not materials.
c. They both track the same three manufacturing cost elements – direct materials, direct labor, and manufacturing overhead.
d. They both are used for the same type of inventory production items.

____ 38. How are costs assigned in a process cost system?
a. To only one work in process account
b. To work in process and finished goods inventory
c. To work in process, finished goods, and cost of goods sold
d. To multiple work in process accounts

____39. Schiller Company has unit costs of $5 for materials and $15 for conversion costs. There are 4,200 units in ending work in process which are 25% complete as to conversion costs, and fully complete as to materials cost. How much is the total cost assignable to the ending work in process inventory if the weighted average method is used?
a. $36,750
b. $84,000
c. $21,000
d. $15,750

____40. Which of the following is a characteristic of products that are mass-produced in
continuous fashion?

a. They are grouped in batches.
b. They are produced all in one process.
c. Each batch of costs is accumulated in a separate cost of goods sold account.
d. The products are identical or very similar in nature.

____41. For which one of the following would a process cost system most likely be
used?

a. Custom furniture
b. Potato chips
c. Motion pictures
d. Cruise ships

____42. The functions of management in an organization are

a. planning, controlling, and decision making.
b. planning, directing and motivating, and controlling.
c. directing and motivating, controlling, and decision making.
d. directing and motivating, planning, and decision making.

____43. The major activities of managerial accounting include all of the following except
a. providing a basis for controlling costs by comparing actual results with planned objectives.
b. preparing financial statements designed primarily for stockholders and creditors.
c. preparing internal reports for management.
d. determining the behavior of costs as activity levels change.

____44. A job order cost system would most likely be used by a(n)
a. cement manufacturer.
b. paint manufacturer.
c. specialty printing company.
d. automobile manufacturer.

____45. The formula for computing a predetermined overhead rate is
a. estimated annual overhead costs ÷ estimated annual operating activity.
b. estimated annual overhead costs ÷ actual annual operating activity.
c. actual annual overhead costs ÷ actual annual operating activity.
d. actual annual overhead costs ÷ estimated annual operating activity.

____46. An example of a period cost, as opposed to a product cost, is
a. factory utilities.
b. wages of factory workers.
c. salesmen’s commissions.
d. depreciation on the factory building.

____47. When production costs are debited to Work in Process Inventory, accounts that may be credited are
a. Raw Materials Inventory, Factory Labor, and Manufacturing Overhead.
b. Accounts Payable, Factory Wages Payable, and Accumulated Depreciation.
c. Raw Materials Inventory, Factory Labor, and Finished Goods Inventory.
d. Manufacturing Overhead, Factory Labor, and Cost of Goods Sold.

____48. Variable costs, as activity increases, will
a. decrease per unit.
b. increase per unit.
c. remain constant per unit.
d. decrease in total.

____49. A cost that increases in total, but not proportionately with increases in the activity level, is a(n)
a. mixed cost.
b. variable cost.
c. fixed cost.
d. unusual fixed cost.

____50. Given the following costs for Bently Company, classify each cost as either variable, fixed, or mixed.
Total Cost at
2,000 Units 3,000 Units
Cost A $12,900 $19,350
Cost B 12,300 16,650
Cost C 13,000 13,000
a. Cost A and Cost B are variable; Cost C is fixed.
b. Cost A is variable; Cost B is mixed; Cost C is fixed.
c. Cost A and Cost B are mixed; Cost C is fixed.
d. Cost A is mixed; Cost B is variable; Cost C is fixed.

____ 51. The assumptions that underlie basic CVP analysis include all of the following except
a. when more than one product is sold, total sales will be in a constant sales mix.
b. all costs can be classified as variable or fixed with reasonable accuracy.
c. the behavior of both costs and revenues is linear throughout the relevant
range.
d. all of the above are assumptions.

____ 52. Brooke Company desires net income of $720,000 when it has $2,000,000 of fixed costs and variable costs of 60% of sales. Required sales equals
a. $3,200,000.
b. $6,800,000.
c. $5,000,000.
d. $4,533,333.

____ 53. Grant Company estimates its sales at 80,000 units in the first quarter and that
sales will increase by 8,000 units each quarter over the year. They have, and
desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40%
of the sales are for cash. 70% of the credit customers pay within the quarter.
The remainder is received in the quarter following sale. Cash collections for
the third quarter are budgeted at
a. $1,356,000.
b. $1,968,000.
c. $2,364,000.
d. $2,736,000.

____ 54. At January 1, 2006, Jake, Inc. has beginning inventory of 3,000 surfboards.
Jake estimates it will sell 14,000 units during the first quarter of 2006 with a
10% increase in sales each quarter. Jake’s policy is to maintain an ending
inventory equal to 20% of the next quarter’s sales. Each surfboard costs $140
and is sold for $200. How many units should Jake produce during the first
quarter of 2006?
a. 14,080
b. 14,000
c. 16,800
d. 14,200

____ 55. Nunnally Manufacturing Company has furnished the following information
which occurred during May:

Accounts Payable balance at April 30 $ 29,000
Purchases on account during May 150,000
Cash payments for materials purchased in April 29,000
Cash payments for materials purchased in May 135,000

The accounts payable account is used only for direct materials. How much will
Nunnally report as accounts payable on the balance sheet at the end of May?
a. $21,000
b. $103,000
c. $8,000
d. $15,000

____ 56. Harrah Company provided the following information for the month of
October:

Beginning cash balance $ 35,000
Cash receipts 460,000
Cash disbursements 485,000

Harrah’s policy is to keep a minimum end of the month cash balance of $30,000. How much will Harrah’s need to borrow during October?
a. $20,000
b. $25,000
c. $10,000
d. $0

____ 57. Each production worker can produce 4 wooden chairs per hour. During the
month of June, Chairs, Inc. has forecasted sales of 100,000 chairs. The beginning inventory was 10,000 chairs, and desired ending inventory is 2,500 chairs. How many hours of direct labor must be budgeted to meet production needs?
a. 25,375
b. 25,000
c. 23,125
d. 24,625

____ 58. Zargus Company began the month of June with 650 units in beginning work in
process, 11,400 units started into production, and 500 units in ending work in
process that are 30% completed. How many units were transferred out during
June?
a. 11,550
b. 12,050
c. 11,900
d. 11,250

____ 59. The Cutting Department’s output during the period consists of 12,000 units
completed and transferred out, and 3,000 units in ending work in process that
were 45% complete as to materials and conversion costs. Beginning inventory
was 1,500 units that were 25% complete as to materials and conversion costs.
How many units were started during the period?
a. 15,000
b. 16,500
c. 13,500
d. 12,000

____60. The Cutting Department’s output during the period consists of 12,000 units
completed and transferred out, and 3,000 units in ending work in process that were 45% complete as to materials and conversion costs. Beginning inventory was 1,500 units that were 25% complete as to materials and conversion costs. Under the weighted average method, what are the equivalent units of production for materials?
a. 15,000
b. 13,350
c. 13,500
d. 14,475

Multiple Choice

1. The cost of capital should reflect the average cost of the various sources of long-term funds a firm uses to acquire assets.

a. True
b. False

Answer: ___________ _________________

2. The cost of common stock is the rate of return the marginal stockholder requires on the firm’s common stock.

a. True
b. False

Answer: ______________ ______________

3. For capital budgeting and cost of capital purposes, the firm should always consider retained earnings as the first source of capital, i.e., use these funds first, because retained earnings have no cost to the firm.

a. True
b. False

Answer: ____________________________

4. If a firm’s marginal tax rate is increased, this would, other things held constant, increase the cost of debt used to calculate its WACC.

a. True
b. False

Answer: ____________________________

5. In general, firms should use their weighted average cost of capital (WACC) to evaluate capital budgeting projects because most projects are funded with general corporate funds, which come from a variety of sources. However, if the firm plans to use only debt or only equity to fund a particular project, it should use the after-tax cost of that specific type of capital to evaluate that project.

a. True
b. False

Answer: ____________________________

6. You have funds that you want to invest in bonds, and you just noticed in the financial pages of the local newspaper that you can buy a $1,000 par value bond for $800. The coupon rate is 10% (with annual payments), and there are 10 years before the bond will mature and pay off its $1,000 par value. You should buy the bond if your required return on bonds with this risk is 12%.

a. True
b. False

Answer: ____________________________

7. The payment made each period on an amortized loan is constant, and it consists of some interest and some principal. The closer we are to the end of the loan’s life, the greater the percentage of the payment that will be a repayment of principal.

a. True
b. False

Answer: ____________________________

8. If a bank compounds savings accounts quarterly, the nominal rate will exceed the effective annual rate.

a. True
b. False

Answer: ____________________________

9. The present value of a future sum decreases as either the discount rate or the number of periods per year increases.

a. True
b. False

Answer: ____________________________

10. A call provision gives bondholders the right to demand, or “call for,” repayment of a bond. Typically, calls are exercised if interest rates rise, because when rates rise the bondholder can get the principal amount back and reinvest it elsewhere at higher rates.

a. True
b. False

Answer: ____________________________

11. The market value of any real or financial asset, including stocks, bonds, or art work purchased in hope of selling it at a profit, may be estimated by determining future cash flows and then discounting them back to the present.

a. True
b. False

Answer: ____________________________

12. Because short-term interest rates are much more volatile than long-term rates, you would, in the real world, generally be subject to much more interest rate price risk if you purchased a 90-day Tbill than if you bought a 30-year Treasury bond.

a. True
b. False

Answer: ____________________________

13. According to the nonconstant growth model discussed in the Financial Management course, the discount rate used to find the present value of the expected cash flows during the initial growth period is the same as the discount rate used to find the Present Values of cash flows during the subsequent constant growth period.

a. True
b. False

Answer: ____________________________

14. If an investor buys enough stocks, he or she can, through diversification, eliminate all of the market risk inherent in owning stocks, but as a general rule it will not be possible to eliminate all company-specific risk.

a. True
b. False

Answer: ____________________________

15. If the returns of two firms are negatively correlated, then one of them must have a negative beta.

a. True
b. False

Answer: ____________________________

Multiple choice

1.Which of the following is not an advantage of bonds.

a. Bonds do not affect owner control
b. None of the other answers
c. Bonds can increase return on equity
d. Bonds require payment of both periodic interest and the par value at maturity

2.Hildebrand Morgan makes trendy clothing and accessories for sophisticated women’s boutiques on the upper east side of Manhattan. They are leasing their current location as well as their delivery vehicle and would like to sell bonds. Without the necessary collateral to back the issuance Hildebrand must issue the debt based on their overall credit worthiness. The types of bonds Hildebrand will issue will be

a. Secured bonds
b. Debentures
c. Junk Bonds
d. Sinking Fund Bonds
e. None of the other answers

3.Securities not classified as trading or held-to-maturity securities but purchased with the intent to sell them in the future are known as…

a. None of the other answers
b. Equity securities with significant influence
c. Available for sale securities
d. Equity securities with controlling influence

4.Martigan Smith Pet Supplies in Liverpool, England orders vanity collars for attractive pooches around town. They ordered zippy-dippy collars from LeBluff Canine Clothiers located in Baltimore, Maryland. LeBluff’s catalog is printed in British pounds for their English clientel.

LeBluff sold the four hundred collars at one pound (British Pound) per collar while the exchange rate was $1.75 per pound

Two weeks later during preparation of the quarterly financial statements their accounting clerk noted that the exchange rate increased to $1.90. What would be the result of these activities on the financial statements?

a. No affect on the financial statements…
b. The Balance Sheet would show an increase to Foreign Exchange Liability
c. The Income Statement would show an increase arising from a Foreign Exchange Gain
d. None of the other answers

5.True or False? Corporations with international subsidiaries must report their subsidiary financial data in the currency in which the subsidiary is physically located.

a. True
b. False

6.Held to maturity debt securities are typically…

a. Long term stock purchases in high profile corporations
b. Long term stock purchases in smaller companies
c. Bonds
d. None of the other answers

Multiple Choice

Same information applies to question 1 & 2

Imperial Products has a budget of $600,000 in 20×1 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $40,000 in variable costs. The new method will require $12,000 in training costs and $80,000 in annual equipment costs. Management is willing to adjust the budget for an amount equal to the cost of the new equipment. The budget includes a production level of 100,000 units.

Appraisal costs for the year are budgeted at $400,000. The new prevention procedures will save appraisal costs of $20,000. Internal failure costs average $10 per failed unit of finished goods. The internal failure rate is expected to be 2% of all completed items, but the proposed changes will cut the internal failure rate in half. Internal failure units are destroyed. External failure costs average $36 per failed unit, and external failures average 2% per units sold. The new procedures will reduce this rate by 80%.

1. How much do external failure costs change if the new prevention procedures fulfil expectations?

a. $57,024 decrease
b. $57,600 increase
c. $57,600 decrease
d. $72,000 decrease
e. None of the above

2. Assume management offers to implement the new procedures if they take place as anticipated and the amounts netted are less than the cost of equipment. What is the net impact of all the changes caused by the new prevention procedures?

a. $52,000
b. $(5,024)
c. $(57,024)
d. $(35,024)
e. None of the above

3. Pershing Company budgeted the following costs for the production of its one and only product, razor blades, for the next fiscal year:

Direct material 187,500
Direct labour 130,000
Factory Overhead:
Variable 140,000
Fixed 107,500
Selling and Admin
Variable 60,000
Fixed 80,000

Total costs 705,000

Pershing has a target profit of $150,000

The target rate of return for setting prices as a percentage of prime costs would be

a. 54%
b. 87%
c. 96%
d. 122%
e. 169%

Same information applies to question 4 & 5

Audio Labs collected the following information on the costs of producing 20,000 speaker units.

Direct material $32 per unit
Direct labour $4 per unit
Variable OH $16 per unit
Fixed OH – (purchasing, receiving, and setups) $8 per unit
Fixed OH- Amortization $12 per unit

Cartunes has offered to sell Audio the speakers for $64 each.

Audio labs has an option to make 10,000 CD units to sell to Stereo Sound Studios at $64 each. Costs incurred in production include:

Direct material $24 per unit
Direct labour $4 per unit
Variable OH (power, utilities) $16 per unit

4. Which of the two products should audio labs use its facilities to produce?

a. produce speakers
b. buy speakers and do not produce CD players
c. buy speakers and produce CD players for Stereo Sound Studios
d. buy speakers and indifferent to CD players
e. none of the above

5. What is the opportunity cost of making speakers if audio labs has the capacity to produce both items?

a. $160,000 lost profit
b. $80,000 profit increase
c. $40,000 profit increase
d. Zero
e. None of the above

6. First Image has a plant capacity of 80,000 units per month. Unit costs at the capacity are:

Direct material $2
Direct labour $3
Variable OH $1.50
Fixed OH $1.50
Marketing – Fixed $3.50
Marketing/distribution – Variable $1.80

Current monthly sales are 78,000 units at $12.60 each. Computer output management has contacted First Image about purchasing 2,000 units at $12.00 each. Current sales would not be affected by the special order. What will First Images change in profit be if the order is accepted?

a. 7,400 increase
b. $8,600 increase
c. $11,000 increase
d. 16,600 increase
e. None of the above

Multiple Choice

* Whenever an unallocated credit differential exists as the result of a bargain purchase, the FASB requires that the resulting negative goodwill be treated as follows:
a. Recorded as an extraordinary gain in the period of combination
b. Allocated proportionately against the amounts that otherwise would be assigned to all of the acquired assets other than current assets, assets to be disposed of by sale, and deferred tax assets
c. Recorded as revenue in the period of combination
d. Recorded as a liability and amortized over future periods
e. None of the above

* Which of the following is a reason that the retained earnings of each subsidiary is completely eliminated when the subsidiary is consolidated, assuming the parent uses the equity method on its books?

a. The parent’s share of the subsidiary’s income since acquisition is already included in the parent’s equity-method retained earnings

b. The noncontrolling interest’s share of the subsidiary’s retained earnings is not included in consolidated retained earnings

c. Retained earnings cannot be purchased, so subsidiary retained earnings at the date of a business combination cannot be included in the retained earnings of the combined company

d. All of the above

e. None of the above

Multiple choice

Need to understand the reason behind each questions. Please explain.

1. Which types of strategies are used to implement the growth and competitive strategies of the firm?
a. Focus strategies
b. Generic strategies
c. Functional strategies
d. Corporate Strategies

2. A specialty store that caters to the needs of teenagers by offering designer clothing in a trendy atmosphere is most likely pursuing which types of strategy?
a. Differentiation advantage
b. Learning curve advantage
c. Cost advantage
d. Differentiation combined with cost leadership

3. Direction setting is a major corporate-level strategic management responsibility.
a. True
b. False

4. When are economies of scales most important?
a. When there are more than 100 employees in a firm
b. When the minimum efficient scale to produce the product is large compared to the size of the market
c. When combing dissimilar businesses under common ownership
d. When there is proprietary technology

5. When is variety-based positioning most effective?
a. When a company has distinct capabilities that allow it to perform a subset of activities better than it competitors
b. When different groups or segments of consumers have different needs
c. When a company distributes their produce in only select locations
d. When the company offers multiple services

6. What types of positioning does Travel and Leisure magazine use?
a. Access positioning
b. Market positing
c. Variety-based positioning
d. Straddle positioning

7. What must be true for a competitive advantage to survive over time?
a. It must be scarce
b. It must be imperfectly mobile
c. It most persist despite efforts by competitors to duplicate it
d. All of the above

8. Which of the following is not a barrier to limitation?
a. Patents
b. Economics of scales
c. Long-term purchase agreements
d. Superior design

9. How would you describe Dell computer’s competitive strategy?
a. Differentiations of the basis of service to customers
b. Differentiations of the basis of its computer offerings
c. Cost advantage on the basis of the volume of computers it manufactures
d. Cost advantage on the basis of its logistic systems

10. In the courses scenario, which of the following is not a competitive advantage for Hercules Cards?
a. Brand recognition
b. Economies of scales
c. Strong distribution channel
d. High-quality product

Multiple choice

Darlene wishes to accumulate $50,000 by the end of 10 years by making
Equal annual end-of-the year deposits over the next 10 years. If Darlene
Can earn 5 percent on her investments, how much must she deposit at the
end of each year?
a. $3,975
b. $6,475
c. $5,000
d. $4,513

A corporation is considering expanding operations to meet growing
demand. With the capital expansion, the current accounts are expected to
change. Management expects cash to increase by $20,000, accounts
receivable by $40,000, and inventories by $60,000. At the same time
accounts payable will increase by $50,000, accruals by $10,000, and
long-term debt by $100.000. The change in networking capital is
a. an increase of $120,000
b. a decrease of $ 40,000
c. a decrease of $120,000
d. an increase of $ 60,000

Multiple choice

Which of the following statements is most correct?

a. The rate of depreciation will often affect operating cash flows, even though depreciation is not a cash expense.
b. Corporations should fully account for sunk costs when making investment decisions.
c. Corporations should fully account for opportunity costs when making investment decisions.
d. All of the answers above are correct.
e. Answers a and c are correct.

Suppose the firm’s WACC is stated in nominal terms, but the project’s expected cash flows are expressed in real dollars. In this situation, other things held constant, the calculated NPV would

a. Be correct.
b. Be biased downward.
c. Be biased upward.
d. Possibly have a bias, but it could be upward or downward.
e. More information is needed; otherwise, we can make no reasonable statement.

Using the corporate valuation model, the value of a company’s operations is $400 million. The company’s balance sheet shows $20 million in short-term investments that are unrelated to operations. The balance sheet also shows $50 million in accounts payable, $90 million in notes payable, $30 million in long-term debt, $40 million in preferred stock, and $100 million in total common equity. If the company has 10 million shares of stock, what is your best estimate for the stock price per share?

a. $10
b. $21
c. $24
d. $26
e. $42

Multiple choice

Hi–Could you please help me with these questions? Thanks.

Please see attached file for full problem description.

1. Using the information below?taken from the accounting books of Madison, for the year end Dec 31, 20×6 -Calculate on Dec 31, 20×6

01/ 01/x6 12/ 31/x6
Assets $ 3750 Assets??
Liabilities $2860.00 Liabilities $3455.00
Owner’s Equity$? Owner’s Equity$ 2565.00
Dividends paid $1230.00

A. $6020 b. $4790.00 c. $890 d. $295

2. The inventory account is increased by

a. Credits
B.debits
C. either a or b
D.neither a or b

3. At the beginning of the fiscal year the balance sheet showed assets of $682 and owner’s equity of $418. During the year, the assets increased $37 and liabilities decreased $19 Owner’s equity at the end of the year would total:

A. $418
b.436
C. $474
D. $719

4. EXPENSE AND REVENUE ACCOUNTS APPEAR on the:

a. Balance sheet
B.income statement
C.statement of owner’s equity
D.cash flow statement

5. Which of the the following is NOT normally considered to be an asset?

A. cash
B. accounts receivable
c.land
D. accounts payable

6. The ethical concept of integrity means that an individual must:

a. Sign a pledge to abide by all laws and regulations
B.Report to a supervisor, any violation of the code of conduct of her company that is observed.
c.Read, understand and agree to follow all provisions of her employer’s code of conduct
d. Attempt to be honest and forthright in dealings and communication with others

7. If the auditor is unable to achieve reasonable assurance because the company has not provided enough evidence?the auditor will issue a (n):

a. Unqualified
b.Disclaimer
c. Adverse opinion
D.Qualified opinion

8. In completing an audit of a company’s financial statements, auditors:

a. Provide some assurance that the financial statements are not misleading
b. Guarantee that there are no errors or fraud
c. Examine every transaction that relates to the financial statements
d. Prepare the financial statements

9. The sale of merchandise on account would, in the seller’s records:

a. Increase assets and increase expenses
b. Increase assets and decrease expenses
C.Increase assets and increase revenues
D.Increase assets and decrease revenues

10. At the beginning of the fiscal year, the balance sheet showed assets $682 and owner’s equity of $418. During the year, assets increased $37 and liabilities $19. Liabilities at the end of the totaled:

A. $245
B. $264
c.418
D. $455

11. Owner’s equity refers to which to the following?

a. A listing of the organization’s assets and liabilities
b. Is the ownership right of the owner(s) of the entity
c. Probable future sacrifices of economics
d. All of the above