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MBA503 FINAL EXAM-all correct a+




Question;MBA 503 Final Examination-40 Questions Contained(1.) The inventory system that uses computer software to keep a running record of inventoryon hand is the:A- Hybrid inventory systemB- Periodic inventory systemC- Costs of goods inventory systemD- Perpetual inventory system(2.) When a LIFO liquidation occurs:A- The company must dip into the older layers of inventory cost to compute the cost ofgoods soldB- And prices are rising, newer, higher, costs are shifted into cost of goods soldC- Net income decreasesD- Income taxes decrease(3.) Given the following data, calculate the dollar amount of ending inventory using theaverage cost method. Round ending inventory to the nearest dollar.Date1/13/55/3012/31ABCD-ItemBeginning InventoryPurchase of PropertyPurchase of InventoryEnding InventoryUnit40 units @ $12 per unit18 units @ $14 per unit24 units @ $18 per unit20 units$1,419$852$1,164$284(4.) The inventory turnover ratio:A- Will be lower for companies that have many low-priced items in the inventory.B- Shows how many times the company sold its average level of inventory.C- Should be high for a company that sells high-priced inventory items.D- Is determined by dividing costs of goods sold by net sales.(5.) Company B purchased some land and is preparing the land for a new building. CompanyB should include which of the following in the cost of the land?A- Cost of sprinkler system for the shrubbery.B- Grading and cleaning the land.C- Costs of driveways.D- Cost of fencing.(6.) Which of the following should be included in the costs of equipment?A- Freights costs to deliver the equipment.B- Installation costs for the equipment.C- Testing costs to get the equipment ready for use.D- All of the above.(7.) Costs that do not extend the assets capacity or it?s useful life, but merely maintain theasset or restore it to working order are recorded as:A- AdditionsB- ImprovementsC- ExpensesD- Capital Expenditures(8.) The process of allocating the cost of a plant asset to expense over the period in which theasset is used is called:A- AllocationB- DisclosureC- DepreciationD- Amortization(9.) At the end of an asset?s useful life, the balance in accumulated depreciation will be thesame as the:A- Salvage valueB- Cumulative depreciation expenseC- Book valueD- Tax liability(10.)Thomas company trades in a printing press for a newer model. The cost of the oldprinting press was $61,500, and accumulated depreciation up to the date of the trade-inamounts to $38,000. The company also pays $41,200 cash for the newer printing press.The journal entry to acquire the new printer, press will require a debit to Equipment for:A- $41,200B- $64,700C- $102,700D- $61,500(11.)The future value of 1 will always be:A- Less than 1B- Equal to 1C- Equal to the interest rateD- Greater than 1(12.)Which of the following discount rates will produce the smallest present value?A- 8%B- 10%C- 6%D- 4%(13.)Failure to record an accrued liability causes a company to:A- Overstate assetsB- Understate liabilitiesC- Understate incomeD- Understate owner?s equity(14.)Sales taxes collected by a retailer as reported are:A- Current liabilitiesB- Current assetsC- RevenuesD- Contingent liabilities(15.)The market interest rate is also referred to as the:A- Start rateB- Contractural rateC- Coupon rateD- Effective rate(16.)On January 1, Multichip Corporation issued $2,000,000, 10-year, 8% bonds at102. The journal entry to record this transaction would include a:A- Debit to cash $2,000,000.B- Credit to bond payable $2,040,000.C- Debt to discount on bonds payable $40,000.D- Credit to premium on bonds payable $40,000.(17.)A disadvantage of using bonds as a method of long-term financing is that:A- Issuing bonds results in higher earnings per share.B- Interest?s expense is tax deductible.C- Bond holders do not have voting rights.D- Interest must be paid regardless of earnings.(18.)If a corporation issues 5,000 shares of $5 par value common stock for $95,000,the entry would include a credit to:A- Common stock for $70,000.B- Paid-in capital in Excess of Par for $95,000.C- Paid-in Capital in Excess of Par for $70,000.D- Common stock for $95,000.(19.)ABC Corporation purchases 40,000 shares of its own $10 par value, commonstock for $25 per share. What will be the effect of stockholders equity?A- Decrease $1,000,000.B- Decrease $400,000.C- Increase $400,000.D- Increase $1,000,000.(20.)If a corporation declares a $1,000,000 cash dividend, the account to be debited onthe date of declaration is:A- Paid-in Capital in Excess of Par.B- Common stock.C- Dividends payable.D- Retained Earnings.(21.)An increase in the number of authorized, issues and outstanding shares of stockalong with a proportional reduction in the stock in the par value is a:A- Stock dividendB- Stock splitC- Cash dividendD- Deficit(22.)In general, the order of reporting stockholder?s equity on the balance sheet is:A- Preferred stock, Common stock, Paid-in Capital, Retained Earnings, Treasury Stock.B- Common Stock, Preferred Stock, Paid-in Capital, Retained Earnings, Treasury Stock.C- Preferred Stock, Common Stock, Treasury Stock, Paid-in Capital, Retained Earnings.D- Retained Earnings, Preferred Stock, Common Stock, Paid-in Capital, Treasury Stock.(23.)Income tax payable appears on the:A- Statement of stockholder?s equity.B- Tax returns.C- Balance Sheet.D- Income Statement.(24.)Changes in accounting estimates:A- Require prior financial statements to be restated.B- Are not allowed under GAAP.C- Are a prior period adjustment.D- Are reported for the current and future periods on the new basis.(25.)Wildcat corporation reported net income for the current year of $700,000. Wildcathad 5,000 shares of $100 par value, 10% preferred stock outstanding and $40,000 sharesof $1 par value common stock outstanding for the entire year. Earnings per share was:A- $16.25B- $17.50C- $18.75D- $16.67(26.)A statement of cash flows:A- May be combined with the balance sheet.B- May be combined with the income statement at the option of management.C- Is a basic financial statement recruited for publicly- held companies.D- Is typically prepared for request of major creditors.(27.)In addition to preparing the income statement, balance sheet, and statement ofretained earnings, which of the following is also a required financial statement?A- Statement of Cash flows.B- Cash Reconciliation Statement.C- Statement of cash inflows and outflows.D- Cash Reform Statements.(28.)Cash received from customers would be reported on the statement of cash flowsunder:A- Investing activities.B- Financing activities.C- Operating Activities.D- Non-cash activities.(29.)The receipt of interest on loans would be reported on a statement of cash flowsunder:A- Inventory activitiesB- Financing ActivitiesC- Operating ActivitiesD- Non-cash activities(30.)Horizontal analysis is performed on:A- Only the income statement.B- Only the balance sheet.C- Only the statements of retained earnings.D- The income statement, the balance sheet, and the statement of retained earnings.(31.)Tech support corporation reports the following data:Net Sales$275,000Costs of goods soldGross profit$175,000$100,000In a vertical analysis, the gross profit percentage is closest to:A- 36%B- 63%C- 57%D- 157%(32.)In performing a vertical analysis, the base for interest expense is:A- Net income.B- Net sales.C- Total operating expenses.D- Interest incomes.(33.)Depots Clothing Store had an accounts receivable balance of $420,000 at thebeginning of the year and a year ?end balance of $510,000. Net sales of the year totaled$2,100,000. The average collection period for the receivables was:A- 162 daysB- 51 daysC- 41 daysD- 81 days(34.)Thames, Inc?s inventory records for a particular development program shows thefollowing at July 31:Data TableJuly 1 Beginning Inventory ??????.. 4 units @$150 = $60015 Purchases?????????........ 5 units @ 150 = $75026 Purchases???????????.. 9units @ 160 = $1,440Requirements(1.) Compute the costs of goods sold and ending inventory, using each of the followingmethods:a.) Specific unit costs, with one $150 units and seven $160 units still on hand at theend.b.) Average costc.) Firs-in, First-outd.) Last-in, First-out(2.) Which method produces the highest cost of goods sold?What causes the difference in costs of goods sold?Requirement 1: Compute the costs of goods sold and ending inventory, using each ifthe following for inventory methods:First, calculate the total units and the cash goods available for sale:July 1 Beginning Inventory15 Purchase26 Purchase4@ $150 = $ 6005@ $150 = 7509@ $160 = 1,440Goods available for sale:(a.) Compute ending inventory and costs of goods sold using specific costs methodwith one $150 units and seven $160 units still on hand at the end.Costs available for sale___________________Less. Total ending inventory ______________Costs of goods sold _______________________(b.) Compute ending inventory and costs of goods sold using the average costsmethod. Begin by calculating the average costs per unit. (Round the averagecosts per unit to the nearest cent).The average cost per unit is $ _______Calculate the ending inventory and costs of goods sold. (Use the average costsper unit to calculate ending inventory and costs of goods sold. Round your finalanswer to the nearest whole dollar).Costs of goods available for sale ____________________________Less. Total ending inventory______________________________Costs of goods sold_______________________________(c.) Compute ending inventory and costs of goods sold, using the First-in, First-outmethod.Costs of goods available for saleLess. Total ending inventoryCosts of goods sold__________________________________________________________________________________(d.) Compute ending inventory and costs of goods sold using the Last-in, First-outmethod.Costs of goods available for sale ___________________________Less. Total ending inventory__________________________Costs of goods sold__________________________Requirement 2. Which method produces the highest costs of goods sold? Whichmethod produces the lowest costs goods sold? Which causes the difference incosts of goods sold?Which method produces the highest costs of goods sold? ?FIFO, LIFO, orSpecific Unit Cost? Please choose one.Which method produces the lowest costs of goods sold? ?FIFO, LIFO, or specificUnit Cost? Please choose one.The difference in costs of goods sold under the two methods identified above wascaused by: ? the decrease in inventory costs, the increase in inventory costs, orthe difference in the number of units sold?, Please choose one.(35.)Little Town?s Pizza- bought a used Toyota delivery van onJan2, 2012 for $18,000.The van was expected to remain in service for four years (39,250 miles). At the end of itsuseful life, Little Town?s officials estimated that the van?s residual value would be$2,300. The van traveled 13,000 miles the first year, 11,250 miles the second year, 6,000miles the third year, and 9,000 miles in the fourth year.Requirement 1: Prepare a schedule of depreciation expense per year for the van under thethree depreciation methods. (For units-of ?production, and double-declining-balance, roundto the nearest two decimals after each step of the calculation. For years with $0 depreciation,make sure to enter ?0? in the appropriate columns).YearStraight-LineUnits-of-productionDouble-declining-balance2012_____________________________________________2013____________________________________________2014____________________________________________2015______________________________________________Total__________________________________________________Requirements:(1.) Prepare a schedule of depreciation expense per year for the van under the threedepreciation methods.(2.) Which method best tracks the wear and tear on the van?(3.) Which methods would Little Town prefer to use for income tax purposes? Explain indetail why Little Town?s prefers this method?Requirement 2:Which method best tracks the wear and tear on the van?The (double-declining-balance/straight-line or/units of production) please choose one, methodtracks the wear and tear on the van most closely?Requirement 3:Which method would Little Town prefer to use for income tax purposes?Explain in detail why Little Town?s prefer this method.For income tax purposes, Little Town?s would prefer the please choose one, (the doubledeclining balance/ straight-line/ or units-of-production)-method because it produces the, pleasechoose one, (least or/most) depreciation, and thus, the, please choose one, (largest, smallest) taxdeductions in the early life of the asset.(36.)Calculate the present value of the following amounts:(1.) $5,000 at the end of ten years at 8%(2.) $5,000 a year at the end of the next ten years at 8%(Round your answers to the nearest whole dollar)Future Value of $1Periods1236%8%10% 12%1.060 1.080 1.100 1.1201.124 1.166 1.210 1.2541.191 1.260 1.331 1.40514%1.1401.3001.4824567891015201.2621.3381.4191.5041.5941.6891.7912.3973.2071.3601.4691.5871.7141.8511.9992.1593.1724.6611.4641.6111.7721.9492.1442.3582.5944.1776.7281.574 1.6891.762 1.9251.974 2.1952.211 2.5022.476 2.8532.773 3.2523.106 3.7075.474 7.1389.646 13.743Present Value of $1Periods 6%8% 10%12%14%10.943 0.926 0.909 0.893 0.87720.890 0.857 0.826 0.797 0.76930.840 0.794 0.751 0.712 0.67540.792 0.735 0.683 0.636 0.59250.747 0.681 0.621 0.567 0.51960.705 0.630 0.564 0.507 0.45670.665 0.583 0.513 0.452 0.40080.627 0.540 0.467 0.404 0.35190.592 0.500 0.424 0.361 0.308100.558 0.463 0.386 0.322 0.27015 0.417 0.315 0.239 0.183 0.14020 0.312 0.215 0.149 0.104 0.073Future Value of Annuity of $1123456789101520Periods 6% 8% 10%12%14%1.000 1.000 1.0001.000 1.0002.060 2.080 2.1002.120 2.1403.184 3.246 3.3103.374 3.4404.375 4.506 4.6414.779 4.9215.637 5.867 6.1056.353 6.6106.975 7.336 7.7168.115 8.5368.394 8.923 9.48710.089 10.7309.897 10.637 11.436 12.300 13.23311.491 12.488 13.57 14.776 16.08513.181 14.487 15.937 17.549 19.33723.276 27.152 31.772 37.280 43.84236.786 45.762 52.275 72.052 91.025Present Value of Annuity of $1Periods6%8% 10%10.9430.926 0.90912%0.89314%0.877234567891015201.8331.7831.7361.6902.6732.5772.4872.4023.4653.3123.1703.0374.2123.993 3.7913.6054.9174.623 4.3554.1115.5825.2064.8684.5646.2105.7475.3354.9686.802 6.247 5.7595.3287.360 6.710 6.1455.6509.712 8.559 7.6066.81111.470 9.818 8.5147.4691.6472.3222.9143.4333.8894.2884.6394.9465.2166.1426.623(1.) The present value of $5,000 at the end of ten years at 8% is ___________(2.) The present value of $5,000 a year at the end of the next ten years at 8% is ___________(37.)Assume that Cart Company completed the following note payable transactions.2012Jul1Purchased delivery truck costing $85,000 by issuing a one-year 8% notepayable.Dec 31 Accrued interests on the note payable2013Jul 11 Paid the note payable at maturityRequirement 1. How much interests expense must be accrued at December 31, 2012?(round your answer to the nearest whole dollar).The interests expense accrued at December 31, 2012 is $_____________Requirement 2. Determine the amount of Cart?s final payment on July 1, 2013.The amount of Cart?s final payment on July 1, 2013 is $_______________Requirement 3. How much interest expense will Cart report for 2012 and for 2013?(Round your answer to the nearest whole dollar)The company will report interests expense of $____________ in 2012 and$___________in 2013.(38.)Colonel Sporting Goods is authorized to issue 12,000 shares of common stock.During a two-month period, Colonel completed these stock issuance transactions:Data TableJuly 23Issued 2,500 shares of $4.00 per common stock for cash of $14.50 per share.July 12Received inventory valued at $20,000 and equipment?s with market value of $46,000for 3,500 shares of the $4.00 per common stock.Requirement(1.) Prepare the stockholder?s equity section of Colonel Sporting Good?s balance sheet for thetransactions given in this exercise. Retained earnings had a balance of $45,000. Journalentries are not required.Requirement 1. Prepare the stockholder?s equity section of Colonel Sporting Good?sbalance sheet for the transactions given in this exercise. Retained earnings has a balanceof $45,000. Journal entries are not required. (Enter the accounts in the proper order forthe stockholders, equity section of the balance sheet.)Stockholder?s EquityStockholder?s Equity__________________________________________________-______________________________________-Options To select and use on the balance sheet above:? 3,000 shares authorized, 500 shares issued? 12,000 shares authorized, 6000 shares issued? Additional paid-in capital? Common stock, $400 par.? Preferred stock, $7.00, no par.? Retained earnings? Total stockholder?s equity? Treasury stock(39.)Mc-Taggart-Hicks investments specializes in low-risk government bonds.RequirementIdentify each of Mc-Taggart-Hicks transactions as operating (O), investing (I), Financing(F), non-cash investing and financing (NIF), or a transaction that is not reported on thestatement of cash flows (N).Indicate whether each increases (+) or decreases (-) cash. The indirect method is used foroperating activities.(a.) Sale of long-term investments _________(b.) Issuance of long-term note payable to borrow cash __________(c.) Increase in prepaid expenses _____________(d.) Payment of cash dividends _____________(e.) Loss of sale of equipment ___________(f.) Decrease in merchandise inventory _____________(g.) Acquisition of equipment by issuance of note payable _____________(h.) Increase in accounts payable _____________-(i.) Amortization of intangible assets ___________(j.) Net income _____________(k.) Payment long-term debt ______________(l.) Accrual of salary expense ______________(m.) Cash sale of land ____________(n.) Purchase of long-term investment ___________(o.) Acquisition of building by cash payment_____________(p.) Purchase of treasury stock ____________(q.) Issuance of common stock for cash __________(r.) Decrease in accrued liabilities ___________(s.) Depreciation of equipment __________(40.)The financial statement of Homer, Inc. follow:Homer, IncBalance Sheet, (Adapted)December 31, 2012 and 2011(Dollars amounts in millions)(Inc/Dec)20122011$398162581082621,042$31042262823941,090Amount%AssetsCurrent AssetsCash and cash equivalentsShort-term investmentsReceivables, netInventoriesPrepaid expenses and other assetsTotal Current assets$88(26)(4)26(132)(48)28.4%(61.9)(1.5)31.7(33.5)(4.4)Property, plant, and equipment, net 3,6423,306336Intangible assets1,100828272Other assets81472490Total Assets$6,598$5,948$65010.232.912.410.9%Liabilities & stockholder?s EquityCurrent Liabilities20122011Accounts PayableIncome tax payable(61.5)Short-term debt$1,32630$1,22678220218Amount$100%8.2%(48)20.9Other(2.8)Long-term debtOther LiabilitiesTotal Liabilities16.6Stockholder?s EquityCommon Stock----Retained Earnings(6.9)Accumulated other comp lossTotal stockholder?s equity(5.8)Total liabilities & Stockholder?s10.9%70722,3281,1985,1721,7441,0964,43421,690(150)1,425(178)1,51458410273821,574(2)$6,598(Dollar Amounts In Millions)2011Revenues$9,309ExpensesFood & paper (costs of goods sold)2,236Payroll & Employee Benefits2,181Occupancy & other operating expensesGeneral & Administrative Expenses1,138Interest Expense133Other Expense (Income), netIncome before income taxes1,282Income tax expense269Net income$1,013$5,948--(116)28(88)15.7$6502012$9,5072,2002,1192,4531,2072,375194111,323273$1,050Compute these profitability measures, for 2012. Show each computation:(a.) Rate of return on sales(b.) Asset turnover(c.) Rate of return on total assets(d.) Leverage (equity multiplier0 ratios33.59.3(36)(e.) Rate of return of common stockholder r?s equity(f.) Is Homer, Inc?s profitability strong, medium or weak.(a.) Compute the rate of return on sales for 2012, (Abbreviation used, SE = stockholder?sequity. Enter amounts in millions. Round your answers to one decimal place.________________ /__________ = Rate of return on sales_________________/ ________ = %(b.) Compute asset turnover. (Abbreviation used, SE = stockholder?s equity. Enteramounts in millions. Round average calculations to the nearest millions. Round youranswer to the decimal places._________________ / ________________ = Asset Answer________________ / ______________________ = _____________(c.) Compute the ratio on total assets for 2012. (Enter percentages to one decimal place.Enter other components ratio in formula to three decimal places).________________ X _____________________ = Rate of return on total assets_________________ % X _______________- = _______________- %(d.) Compute the leverage (equity multiplier) ratio. (Abbreviation used, SE =stockholder?s equity. Enter amounts in millions. Round your answers three decimalplaces:______________________ / _________________- = Leverage ratio____________________ / ___________________ = ____________(e.) Compute the rate of return on common stockholder?s equity, for 2012:(____________________ ----- __________________) / _____________ = Rate of returncommon SE


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