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As a general rule, revenue is normally recognized when it is

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As a general rule, revenue is normally recognized when it is;A) measurable and earned.;B) measurable and received.;C) realizable and earned.;D) collected (the cash is received).;2. According to accounting standards, initial franchise fees should be recognized as income when;A) the franchiser has substantially performed or satisfied all material services and conditions.;B) the franchiser has collected the majority of fee in cash.;C) the franchisee shows the ability to pay the fee.;D) the franchiser bills the franchisee.;Use the following to answer questions 3-4;The following information was extracted from Slurm Corporation's 2009 annual report;Common stock;Shares outstanding 12/31/08 90 Million;New shares issued 4/1/09 10 Million;Shares outstanding 12/31/09 100 Million;Preferred stock;$10 par, 10%, convertible into 2 shares of common stock, shares;Outstanding 50 Million;Options;1 Million options, each to purchase one common share at $50 per;Share;Market price of stock;Average for year $ 75;Beginning of year $ 70;End of year $ 78;Preferred dividends paid;$ 50,000,000;Net Income for 2009 $350,000,000;3. Basic earnings per share for 2009 is;A) $3.50;B) $3.16;C) $3.08;D) $3.00;4. Using the treasury stock method, the options would result in how many extra shares being recognized in the diluted EPS calculation;A) 500,000;B) 358,975;C) 333,333;D) 285,714;5. Hulk Company reports the following;2008 2009;Sales $300,000 $360,000;Cost of goods sold $75,000 $90,000;Based upon this information which of the following is most correct;A) Cost of goods sold is a permanent cost;B) Cost of goods sold is a economic cost;C) Cost of goods sold is a totally variable cost;D) Cost of goods sold is a period expense;6. Which of the following combinations of accounting practices will lead to the highest reported earnings in an inflationary environment?;Depreciation Method Inventory Method;A) Straight-line LIFO;B) Double-declining balance LIFO;C) Straight-line FIFO;D) Double-declining balance FIFO;Use the following to answer questions 7 and 8;TMTOMH Company reported in its annual report software refinement expenses of $12M, $15M and $18M for fiscal years 2007, 2008 and 2009, respectively. At the end of fiscal 2009 it had total assets of $140M. Net income was $20M for fiscal 2009, and it had a marginal tax rate of 35%.;7. If software refinement had been capitalized each year and amortized over a three-year;period beginning in the year the cost was incurred, total assets at the end of fiscal 2009;would have been;A) $185M;B) $172M;C) $158M;D) $157M;8. If software refinement had been capitalized each year and amortized over a three year period beginning in the year the cost was incurred, net income for fiscal 2009 would have been;A) $31.7M;B) $29.75M;C) $21.95M;D) $14.95M;9. A firm has net sales of $6,000, cash expenses (including taxes) of $2,800, and depreciation of $1,000. If accounts receivable increased in the period by $800, cash flows from operations equal;A) $2,400;B) $3,200;C) $3,400;D) $4,200;10. Which of the following represents an investing activity in the statement of cash flows;A) depreciation of plant assets;B) sale of plant assets at a loss;C) stock dividend;D) purchase of inventory;11. Which of the following is not a financing activity in the statement of cash flows?;A) cash dividend;B) repurchase of common stock;C) payment of interest on debt;D) issuance of new debt;Use the following to answer questions 12-15;Below is an example of an incorrectly prepared statement of cash flows. The descriptions of the activities are correct.;Cash from operating activities;Net Income $ 60,000;Depreciation (4,000);Increase in accounts receivable (2,000);Increase in deferred tax liability (1,000);$ 53,000;Cash from investing activities;Purchase of marketable securities $(48,000);Dividends paid 1,500;$(46,500);Cash from financing activities;Increase in Short-term debt ? trade $ (500);Increase in Long-term debt ? bonds;Payable;(2,500);$ (3,000);Increase in cash $ 3,500;12. The correct cash flows from operating activities is;A) 65,500;B) 63,500;C) 53,500;D) none of the above;13. The correct cash flows from investing activities is;A) ($41,000);B) ($45,500);C) ($48,000);D) none of the above;14. The correct cash flows from financing activities is;A) ($4,500);B) $3,000;C) $1,000;D) none of the above;15. The correct change in cash for the year is;A) $4,000;B) $15,000;C) $16,500;D) none of the above;16. On a statement of cash flows that uses the indirect approach, calculation of cash flow from operations treats depreciation as an adjustment to reported net income because;A) depreciation is a direct source of cash;B) depreciation is an outflow of cash to a reserve account for the replacement of assets;C) depreciation reduces net income and involves an outflow of cash;D) depreciation reduces net income but does not involve an outflow of cash;17. Err Company has a major lawsuit against them for unsafe products. It recognizes a huge liability in 2008 of $300M. The effect of this liability is to decrease stockholders' equity by 50%. In 2009, the effect of recognizing this lawsuit in 2008, all else being equal in 2009, is;A) Return on net operating assets will increase dramatically;B) Return on net operating assets will decrease dramatically;C) Return on equity will increase dramatically;D) Return on equity will decrease dramatically;18. If Company A has a high profit margin and Company B has a low profit margin, then return on assets;A) should be higher for Company A than Company B.;B) should be lower for Company A than Company B.;C) should be the same for Company A and Company B.;D) cannot be determined based on the information given.;Use the following to answer questions 19-22;Below is selected information from Tripe Corp;Year 1 Year 2;Net operating assets /common equity 1.37 1.53;Net operating profit margin 19% 21%;Income tax rate 47% 28%;Revenues/net operating assets 0.81 0.61;EBIT/revenues 38% 32%;19. Return on Net Operating Assets for Year 1 is;A) 30.8%;B) 16.3%;C) 15.4%;D) 14.5%;20. Return on Common Equity for Year 1 is;A) 19.0%;B) 19.60%;C) 21.08%;D) 26.03%;21. Which of the following is correct concerning changes at Tripe Corp. from Year 1 to Year 2?;RNOA ROCE;A) Increased Increased;B) Increased Decreased;C) Decreased Decreased;D) Decreased Increased;22. Which of the following statements is correct concerning changes from year 1 to year 2 at Tripe Corp?;A) Despite favorable changes in the tax rate return on net operating assets has decreased;B) Despite favorable changes in net operating asset utilization return on net operating assets has decreased;C) Largely because of favorable changes in tax rates return on net operating assets has increased;D) Largely due to favorable changes in leverage return on net operating assets has increased;23. An increase in net operating income (NOPAT) will cause which of the following?;A) Increase in the return on net operating assets;B) Decrease in the return on net operating assets;C) No change in the return on net operating assets;D) The change in the return on net operating assets is unclear, there is not sufficient information;24. Which of the following ratios best measures the profitability of a company?;A) Return on equity;B) Gross margin;C) Current ratio;D) Net operating asset turnover;Use the following to answer questions 25-27;SQB Corporation reports sales of $10M for Year 2, with a gross profit margin of 40%. 20% of SQB's sales are on credit.;Year 1 Year 2;Accounts receivable $ 150,000 $ 170,000;Inventory 900,000 1,000,000;Accounts payable 1,100,000 1,200,000;25. Accounts receivable days outstanding at the end of Year 2 is (use year-end receivable balance);A) 30.6 days;B) 28.8 days;C) 27.0 days;D) 6.1 days;26. Accounts payable days outstanding at the end of Year 2 is (use average accounts payable for the year);A) 57.0 days;B) 69.0 days;C) 72.0 days;D) 43.2 days;27. Days in inventory at the end of Year 2 is (use year-end inventory amount);A) 60.0 days;B) 69.0 days;C) 66.0 days;D) 54.0 days;28. Which of the following industries would you expect to have the longest operating cycle?;A) Fast Food Industry;B) Aerospace Industry;C) Discount retail store industry;D) Utility industry;29. Which of the following industries would you expect to have the highest inventory turnover?;A) restaurant;B) car dealer;C) jewelry store;D) department store;30. If a company issues a 1% stock dividend what is the effect on the following ratios, all other things being equal?;Total Debt/Equity Times Interest Earned Financial Leverage Ratio;A) Increase Increase Increase;B) Increase No effect Increase;C) Increase No effect No effect;D) No effect No effect No effect;31. When calculating debt to equity ratio;A) Convertible bonds should be treated as debt;B) Convertible bonds should be excluded from debt but not included in equity;C) Convertible bonds should be treated as equity;D) Half the convertible bonds should be treated as debt, and the other half as equity;32. Venture Corporations total assets are 3 times greater than total equity, total equity is 50% of total liabilities. The total debt to total assets ratio is;A).67;B).75;C).87;D) undeterminable with the information given.;33. You are analyzing a stock. You expect that earnings will grow quickly relative to their current level, but the expected return on common stockholders' equity is low. What levels of the price earnings ratio (P/E) and price to book value ratio (P/BV) would you expect to see (relative to industry average)?;P/E Ratio P/BV Ratio;A) Low Low;B) Low High;C) High High;D) High Low;34. AQTHF Inc. is unsuccessfully trading on the equity. Which of the following statements best reflects this?;A) Their bonds payable after-tax interest rate is 7%, their ROI is 5%.;B) Their market capitalization decreased by 3%.;C) Stock dividends were issued this year.;D) Net income was down 18% compared to last year.;35. Which of the following statements is most correct?;A) If two companies have the same ROE and the same risk they must have the same residual income (abnormal earnings) for the year;B) If two companies have the same net book value and the same residual income this year, then their stock prices must be the same;C) If two companies have the same ROE and the same stock price their earnings must be the same for the year;D) If two companies have the same ROE, net book value, and cost of capital then their residual income must be the same for the year;36. When examining quarterly results of a company in a seasonal business it is useful;A) to compare to the preceding quarter;B) to match the company's results against economic statistics;C) to compare to the same period in the prior year;D) to analyze using a percentage income statement;37. Which of the following is not included the definition of earnings persistence?;A) Stability of the earnings;B) Magnitude of the earnings;C) Predictability of the earnings;D) The earnings? trend;38. Which of the following is not a factor in producing earnings forecasts?;A) Estimating the level of earnings;B) Separation of recurring and nonrecurring components;C) Recognizing potential earnings management;D) Recognizing potential income smoothing;Use the following to answer questions 39-40;Yi Corporation has no preferred stock and reports the following;2009;Earnings per share $1.80;Dividends per share $0.72;Book Value per share-end of year $8.62;39. If price-to-book value at the end of 2009 equals 1.00, and return on beginning of year equity is expected to remain constant, then cost of equity (to nearest percent) equals;A) 15%;B) 21%;C) 24%;D) Not determinable;40. If Yi Corporation had preferred stock outstanding then the earnings per share amount of $1.80 would be;A) unchanged.;B) cannot be determined.;C) greater than $1.80.;D) less than $1.80.;41. Interim financial reports are less _________ than annual financial reports.;A) relevant;B) consistent;C) timely;D) reliable;42. Which of the following statements concerning interim financial reports is incorrect?;A) Accrual accounting is used for revenue and expense recognition;B) Extraordinary items are reported in annual but not interim financial reports;C) LIFO liquidation is not reported for interim purposes, unless decline in inventory is expected to be permanent;D) Income taxes are accrued using effective tax rate expected for the annual period;Use the following to answer questions 43-45;Below is information for year ended 12/31/09 for Company A and Company B.;Company A Company B;Operating Inc. before $ 1000 $ 1000;Taxes and Interest;Interest Expense 400 0;Total assets ? 12/31/09 10,000 10,000;Total debt 5,000 0;Equity 5,000 10,000;Tax Rate 40% 40%;43. Return on total assets for Company A and B for 2009 are (use NOPAT);Company A Company B;A) 6% 6%;B) 8.4% 6%;C) 10% 10%;D) 14% 10%;44. ROE for Company A and B for 2009 are;Company A Company B;A) 2.0% 2.0%;B) 3.6% 4.0%;C) 7.2% 6.0%;D) 8.6% 10%;45. Times interest earned ratio for Company A is;A) 2.5;B) 2.6;C) 4.0;D) 4.2;**********5 Point Bonus Question**********;The effects of leveraging are magnified in;A) good years.;B) bad years.;C) both good and bad years.;D) years that the company is unsuccessfully trading on the equity

 

Paper#31987 | Written in 18-Jul-2015

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