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MBA503 Final Examination




Question;MBA 503 Final Examination-40 Questions;(1.) The inventory system that uses computer software to keep a running;record of inventory on hand is the;A-;Hybrid inventory system;B-;Periodic inventory system;C-;Costs of goods inventory system;D-;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 of goods sold;B-;And prices are rising, newer;higher, costs are shifted into cost of goods sold;C-;Net income decreases;D-;Income taxes decrease;(3.) Given the following data, calculate the dollar amount of ending;inventory using the average cost method. Round ending inventory to the nearest;dollar.;Date Item;Unit;1/1 Beginning;Inventory 40;units @ $12 per unit;3/5 Purchase of;Property 18;units @ $14 per unit;5/30 Purchase of Inventory 24 units @ $18 per;unit;12/31 Ending;Inventory;20 units;A-;$1,419;B-;$852;C-;$1,164;D-;$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. Company B 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 the asset or restore it to working order are recorded as;A-;Additions;B-;Improvements;C-;Expenses;D-;Capital Expenditures;(8.) The process of allocating the cost of a plant asset to expense over;the period in which the asset is used is called;A-;Allocation;B-;Disclosure;C-;Depreciation;D-;Amortization;(9.) At the end of an asset?s useful life, the balance in accumulated;depreciation will be the same as the;A-;Salvage value;B-;Cumulative depreciation expense;C-;Book value;D-;Tax liability;(10.);Thomas company trades in a;printing press for a newer model. The cost of the old printing press was;$61,500, and accumulated depreciation up to the date of the trade-in amounts 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-;$41,200;B-;$64,700;C-;$102,700;D-;$61,500;(11.);The future value of 1 will;always be;A-;Less than 1;B-;Equal to 1;C-;Equal to the interest rate;D-;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 assets;B-;Understate liabilities;C-;Understate income;D-;Understate owner?s equity;(14.);Sales taxes collected by a;retailer as reported are;A-;Current liabilities;B-;Current assets;C-;Revenues;D-;Contingent liabilities;(15.);The market interest rate is;also referred to as the;A-;Start rate;B-;Contractural rate;C-;Coupon rate;D-;Effective rate;(16.);On January 1, Multichip;Corporation issued $2,000,000, 10-year, 8% bonds at 102. 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, common stock 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 on the 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 stock along with a proportional;reduction in the stock in the par value is a;A-;Stock dividend;B-;Stock split;C-;Cash dividend;D-;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. Wildcat had 5,000 shares of $100;par value, 10% preferred stock outstanding and $40,000 shares of $1 par value;common stock outstanding for the entire year. Earnings per share was;A-;$16.25;B-;$17.50;C-;$18.75;D-;$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 of retained 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 flows under;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 flows under;A-;Inventory activities;B-;Financing Activities;C-;Operating Activities;D-;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 $275,000;Costs of goods sold $175,000;Gross profit $100,000;In 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 the beginning 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 days;B-;51 days;C-;41 days;D-;81 days;(34.);Thames, Inc?s inventory records;for a particular development program shows the following at July 31;Data Table;July 1 Beginning Inventory;??????.. 4 units @$150 = $600;15 Purchases?????????........ 5 units;150 = $750;26 Purchases???????????.. 9units @ 160;= $1,440;Requirements;(1.) Compute the costs of goods sold and ending inventory, using each of;the following methods;a.);Specific unit costs, with one;$150 units and seven $160 units still on hand at the end.;b.);Average cost;c.);Firs-in, First-out;d.);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 if the following for inventory methods;First, calculate the total units and the cash goods;available for sale;July 1 Beginning Inventory 4@ $150 = $ 600;15;Purchase 5@ $150 =;750;26;Purchase 9@ $160 =;1,440;Goods available for sale;(a.) Compute ending inventory and costs of goods sold using specific;costs method with 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;costs method. Begin by calculating the average costs per unit. (Round the;average costs per unit to the nearest cent).;The average cost per unit is $ _______-;Calculate the ending inventory and costs of goods sold.;(Use the average costs per unit to calculate ending inventory and costs of;goods sold. Round your final answer 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-out method.;Costs of goods available for sale;Less. Total ending inventory;Costs of goods sold;(d.)Compute ending inventory and costs of goods sold using the Last-in;First-out method.;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? Which method produces the lowest costs goods sold? Which causes;the difference in costs of goods sold?;Which method produces the highest costs of goods;sold? ?FIFO, LIFO, or Specific Unit Cost?;Please choose one.;Which method produces the lowest costs of goods sold?;?FIFO, LIFO, or specific Unit Cost? Please choose one.;The difference in costs of goods sold under the two;methods identified above was caused by;? the decrease in inventory costs, the increase in inventory costs, or;the 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 its useful 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, 6,000 miles 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 the three;depreciation methods. (For units-of ?production, and double-declining-balance;round to the nearest two decimals after each step of the calculation. For years;with $0 depreciation, make sure to enter ?0? in the appropriate columns).;Year Straight-Line Units-of-production Double-declining-balance;2012;2013;2014;2015;Total;Requirements;(1.) Prepare a schedule of depreciation expense per year for the van;under the three depreciation 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 in detail 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, method tracks 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 double-declining balance/;straight-line/ or units-of-production)-method because it produces the, please;choose one, (least or/most) depreciation, and thus, the, please choose one;largest, smallest) tax deductions 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 $1;Periods 6% 8%;10% 12% 14%;1;1.060 1.080 1.100;1.120 1.140;2;1.124 1.166 1.210;1.254 1.300;3;1.191 1.260 1.331;1.405 1.482;4;1.262 1.360 1.464;1.574 1.689;5;1.338 1.469 1.611;1.762 1.925;6;1.419 1.587 1.772;1.974 2.195;7;1.504 1.714 1.949;2.211 2.502;8;1.594 1.851 2.144;2.476 2.853;9;1.689 1.999 2.358;2.773 3.252;10;1.791 2.159 2.594;3.106 3.707;15;2.397 3.172 4.177;5.474 7.138;20;3.207 4.661 6.728;9.646 13.743;Present Value of $1;Periods 6% 8%;10% 12% 14%;1;0.943 0.926 0.909;0.893 0.877;2 0.890 0.857;0.826 0.797 0.769;3;0.840 0.794 0.751;0.712 0.675;4;0.792 0.735 0.683;0.636 0.592;5;0.747 0.681 0.621;0.567 0.519;6;0.705 0.630 0.564;0.507 0.456;7;0.665 0.583 0.513;0.452 0.400;8;0.627 0.540 0.467;0.404 0.351;9;0.592 0.500 0.424;0.361 0.308;10;0.558 0.463 0.386;0.322 0.270;15 0.417 0.315;0.239 0.183 0.140;20 0.312 0.215;0.149 0.104 0.073;Future Value of Annuity of $1;Periods 6%;8% 10% 12%;14%;1 1.000 1.000;1.000 1.000 1.000;2 2.060 2.080;2.100 2.120 2.140;3 3.184 3.246;3.310 3.374 3.440;4 4.375 4.506;4.641 4.779 4.921;5 5.637 5.867;6.105 6.353 6.610;6 6.975;7.336 7.716 8.115;8.536;7 8.394 8.923;9.487 10.089 10.730;8 9.897 10.637;11.436 12.300 13.233;9 11.491;12.488 13.57 14.776;16.085;10 13.181 14.487;15.937 17.549 19.337;15 23.276 27.152;31.772 37.280 43.842;20 36.786 45.762;52.275 72.052 91.025;Present Value of Annuity of $1;Periods 6% 8% 10% 12% 14%;1 0.943 0.926;0.909 0.893 0.877;2 1.833 1.783;1.736 1.690 1.647;3;2.673 2.577;2.487 2.402 2.322;4;3.465 3.312 3.170;3.037 2.914;5;4.212 3.993 3.791;3.605 3.433;6;4.917 4.623 4.355;4.111 3.889;7;5.582 5.206 4.868 4.564 4.288;8;6.210 5.747 5.335 4.968 4.639;9;6.802 6.247 5.759;5.328 4.946;10;7.360 6.710;6.145 5.650 5.216;15;9.712 8.559 7.606;6.811 6.142;20;11.470 9.818 8.514;7.469 6.623;(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.;2012;Jul1 Purchased delivery truck costing;$85,000 by issuing a one-year 8% note payable.;Dec 31 Accrued interests on the note payable;2013;Jul 11 Paid the note payable at maturity;Requirement 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 Table;July 23 Issued 2,500 shares of $4.00 per common;stock for cash of $14.50 per share.;July 12 Received inventory valued at $20,000;and equipment?s with market value of $46,000 for 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 the transactions given in this exercise. Retained earnings;had a balance of $45,000. Journal entries are not required.;Requirement 1. Prepare the;stockholder?s equity section of Colonel Sporting Good?s balance sheet for the;transactions given in this exercise. Retained earnings has a balance of;$45,000. Journal entries are not required. (Enter the accounts in the proper;order for the stockholders, equity section of the balance sheet.);Stockholder?s Equity;Stockholder?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.;Requirement;Identify 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 the statement of cash flows (N).;Indicate whether each;increases (+) or decreases (-) cash. The indirect method is used for operating;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, Inc;Balance Sheet, (Adapted);December 31, 2012 and 2011;(Dollars amounts in;millions) 2012 2011 Amount % (Inc/Dec);Assets;Current Assets;Cash and cash;equivalents $398 $310 $88 28.4%;Short-term;investments;16 42 (26) (61.9);Receivables, net 258 262 (4) (1.5);Inventories;108 82 26 31.7;Prepaid expenses and other;assets 262 394 (132) (33.5);Total Current assets 1,042 1,090 (48) (4.4);Property, plant, and;equipment, net 3,642 3,306 336 10.2;Intangible assets;1,100 828 272 32.9;Other assets;814 724 90 12.4;Total Assets;$6,598 $5,948 $650 10.9%;Liabilities;stockholder?s Equity;Current Liabilities 2012 2011 Amount %;Accounts Payable $1,326 $1,226 $100 8.2%;Income tax payable 30 78 (48) (61.5);Short-term debt 220 218 2 0.9;Other;70 72 (2) (2.8);Long-term debt 2,328 1,744 584 33.5;Other Liabilities 1,198 1,096 102 9.3;Total Liabilities 5,172 4,434 738 16.6;Stockholder?s Equity;Common Stock 2 2 --- -----;Retained Earnings 1,574 1,690 (116) (6.9);Accumulated other comp;loss (150) (178) 28 15.7;Total stockholder?s;equity 1,425 1,514 (88) (5.8);Total liabilities;Stockholder?s $6,598 $5,948 $650 10.9%;(Dollar Amounts In Millions);2012 2011;Revenues;$9,507 $9,309;Expenses;Food & paper (costs of;goods sold);2,200 2,236;Payroll & Employee;Benefits;2,119 2,181;Occupancy & other;operating expenses;2,453 2,375;General;Administrative Expenses;1,207 1,138;Interest Expense;194 133;Other Expense (Income);net;11 (36);Income before income;taxes;1,323 1,282;Income tax expense;273 269;Net income $1,050 $1,013;Compute 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 ratios;(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?s equity. 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. Enter amounts in millions. Round average calculations to the nearest;millions. Round your answer 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;decimal places;/ _________________-;= Leverage ratio;/;=;(e.)Compute the rate of return on common stockholder?s equity, for 2012;(____________________ ----- __________________) / _____________ = Rate of;return common SE


Paper#50164 | Written in 18-Jul-2015

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