Question 1
1. Indicate on which financial statement you would expect to find each of the following. If an item can be found on more than one statement, list each statement. 2. For each of the following items that appear on the balance sheet, identify each as an asset (A), liability (L), or element of stockholders' equity (SE). For any item that would not appear on the balance sheet, write the letter, N. 3. (4 points) Parker Pool Supply, Inc. reported the following items for the year ended December 31, 2008: Required: Prepare an income statement for the year. 4. (4 points) National Shops, Inc. reported the following amounts on its balance sheet on December 31, 2009: Required: 1. Prepare a balance sheet for National Shops as of December 31, 2009. 2. National Shops wishes to purchase merchandise from your company on account. The amount of the purchases would probably be about $10,000 per month, and the terms would require National to make payment in full within 30 days. Would you recommend that your company grant credit to National under these terms? Explain the reasoning for your response. 5. (2 points) For each financial statement element listed, indicate whether a debit or a credit is used to increase the account's balance. 1. Assets __________ 2. Liabilities _____________ 3. Contributed Capital ___________ 4. Retained Earnings ___________ 6. The Harris TV Store had the following transactions in August: a. Sold $60,000 of goods to customers, receiving $56,000 in cash with the rest on account. b. The cost of the inventory sold was $36,000. c. The store purchased $16,000 of inventory and paid for $12,000 in cash and the rest on account. d. They paid $16,000 in wages to employees who worked in August. e. Received a $2,000 bill for utilities for August that will not be paid until September. f. Received rent for the adjacent store front for the months of August and September in the amount of $4,000. Based on the information above, Complete the following statements with dollar amounts: 7. Explain why a $5,000 revenue collected in advance for service would be recorded as a debit to cash and a credit to a liability account. 8. Why might managers be tempted to violate the revenue principle and the matching principle in financial reporting? 9. (2 points) During 2010, Burlington Company incurred operating expenses amounting to $600,000, of which $550,000 was paid in cash; the balance will be paid in January 2011. On the 2010 income statement of the company, what amount should be reported for operating expenses? A. $550,000. B. $560,000. C. $600,000. D. $1,150,000. 10. (2 points) On December 31, 2009, Avery Corporation paid $10,000 for next year's insurance policy. This transaction should be recorded as follows by Avery: Select the correct answer-- A. B. C. D. 11. (2 points) On November 1, 2009, Bug Busters collected $6,000 in advance for three months of service to be provided beginning on that date. It was credited in full to unearned rent revenue. Assuming the accounting year ends December 31, give the adjusting entry required on December 31, 2009 (assuming that no adjusting entries have been made during the year). 12. (2 points) Below are two related transactions for Golden Corporation. The annual accounting period ends December 31. For each date listed, give the required entry in journal format. A. October 1, 2009?Golden Corporation borrowed $100,000 and signed a note providing for 8% interest. The principal and interest are due in one year (on September 30, 2010). What journal entry is needed? B. December 31, 2009?end of the annual accounting period. (Prepare the necessary entry, If no entry is required, explain why). 13. (2 points) Bridge Company keeps a small inventory of supplies used for cleaning and maintenance purposes. On January 1, 2009, the inventory of supplies on hand was $2,000. During the year, supplies purchased were debited to the supplies inventory account in the amount of $6,500. On December 31, 2009, the inventory count of supplies in the storeroom was $1,750. Give the adjusting entry required at December 31, 2009. 14. (2 points)On November 1, 2009, Bruce Company leased some of its office space to Fairlane Company and immediately collected twelve months rent in advance of $600,000. Bruce debited cash and credited unearned rent revenue for $600,000. At December 31, 2009 (the end of the accounting period), give the adjusting entry Bruce should make in respect to the rent. 15. (2 points) On December 1, 2009, Fleet Company paid $30,000 rent for some office space which was debited in full to the prepaid rent expense account. The rent was for three months. Assuming Fleet's accounting year ends December 31, give the adjusting entry required on December 31, 2009. 16. (4 points)Four transactions are given below that were completed during 2009 by Russell Company. The annual accounting period ends December 31. Each transaction requires an adjusting entry at December 31, 2009. You are to provide the adjusting entries required for Russell Company. No adjusting entries have been made during the year. A. On December 31, 2009, Russell Company owed employees $3,750 for wages that were earned by them during December and were not recorded. Prepare the necessary entry. B. During 2009, Russell Company purchased office supplies that cost $1,000 which were placed in the supplies room for use as needed. The purchase was recorded as follows: At January 1, 2009, the inventory of unused office supplies was $300. At December 31, 2009, a physical count showed unused office supplies in the supply room amounting to $100. What entry is needed? C. On December 1, 2009, Russell Company rented some office space to another party. Russell Company collected $900 rent for the period December 1, 2009, to March 1, 2010. The rent collected was recorded as follows: Prepare the necessary entry: D. On July 1, 2009, Russell Company borrowed $2,000 cash on a one-year, 8% interest-bearing, note payable. The interest is payable on the due date, May 31, 2010. The note was recorded as follows: Prepare the necessary entry: 17. (4 points) Below, to the left, are listed several different account titles that you have studied. Under each column for each cell you are to enter one capital letter which indicates for each account its normal characteristics. 18. On July 1, 2009, Bass Company paid a two-year insurance premium. On that date the following journal entry was made: The annual accounting period ends on December 31. A. How much of the premium should be reported as expense on the 2009 income statement? __________ B. What is the amount of prepaid insurance which should be reported on the balance sheet at December 31, 2009? __________ C. Give the adjusting entry that should be made on December 31, 2009. 19. The following income statement was reported for Bauer Inc. for the first year of operations ending December 31, 2009 reported (in thousands of dollars): A. Calculate net profit margin _____________ B. Calculate earnings per share if there are 200,000 shares of common stock outstanding _____________ 20. Explain how adjusting entries provide for potential manipulation by managers. In addition, discuss how compensation arrangements may result in incentives for such manipulation to occur. 21. PhotoFly has reported the following information on their income statements for the years 2008 through 2012: A. Compute the gross profit percentage for each year. 2012 2011 2010 2009 2008 _____ _____ _____ ______ _______ B. Has the gross profit ratio for PhotoFly improved over time or worsened? Explain your answer. 22. (4 points) On December 31, 2009, Colonial Corporation had the following account balances related to credit sales and receivables prior to recording adjusting entries: Required: Present the necessary year-end adjusting entry related to uncollectible accounts for each of the following independent assumptions: A. An aging of accounts receivable is completed. It is estimated that $2,150 of the receivables outstanding at year-end will be uncollectible. B. It is estimated that 1% of credit sales for the year will prove to be uncollectible. C. Assume the same information presented in (1. above except that prior to adjustment, the Allowance for Doubtful Accounts had a debit balance of $200 rather than a credit balance of $200. 23. (4 points) American Company uses the allowance method to account for uncollectible accounts. On January 1, The Allowance for Doubtful Accounts had a credit balance of $3,000. The balance in the Accounts Receivable account on that date was $75,000. On January 2, prior to any credit sales, a $500 account from National Company was deemed to be uncollectible and written off. Required: A. Compute the net realizable (A/R ? Allowance for Doubtful account) value of American's receivables on January 1. _________________ B. Present the journal entry American would record on January 2 related to the write-off of National's account. C. Compute the net realizable value of American's receivables on January 2, immediately following the write-off of National's account. _________ 24. Cyclone Inc. reported the following figures from their financial statements for the years 2009 through 2011: Calculate the accounts receivable turnover for 2011 and 2010: 2010 ______________ 2011 ____________ 25. Cyclone Inc. reported the following figures from their financial statements for the years 2009 through 2011: Calculate the days' sales in receivables for 2011 and 2010: 2010 ______________ 2011 ______________ 26. A recent annual report for Pap's Pop contained the following data: A. Calculate the accounts receivable turnover ratio and average days' sales in receivables for 2011. A/R turnover _______________ Avg Days sales _______________ B. Explain the meaning of each number. 27. Why is the reconciliation of a company's cash account to the bank statement so important for effective internal control for cash? 28. (4 points) A comparison of the balance in Cottonwood Company's cash account (per its books) as of April 30, 2009, and the bank statement dated April 30, 2009, revealed the following information: Required: Prepare a bank reconciliation using the format below. Complete the form below, then determine the correct cash balance. Note: If one or more of the items given above should not appear on the reconciliation statement, do not include the item(s). Item code = item description 29. (5 points) Burke Company has just received its June 30 bank statement from Urban Bank. The bank statement and the cash account, summarized below, are to be reconciled for the month of June. Required: A. Prepare a bank reconciliation. B. Give the journal entries that should be made in the accounts of Burke Company as a result of the above bank reconciliation. 30. What are "cash equivalents"? Specifically where would they appear on the financial statements? 31. You are the new manager of West Coast Company. The company distributes goods throughout the Rocky Mountain area. Customers are billed after the shipments are sent. Most customers pay within two weeks. You notice that one employee is responsible for opening all incoming payments, recording them in the accounting records, and depositing all receipts in the bank daily. When asked why this one person performed all of these duties, you were told that it was more efficient for one person to handle cash and to keep track of things. If any cash was missing, responsibility could be easily determined. Do you agree with this arrangement? If you were to make changes, what would you do, and why? 32. For each of the accounts listed below, indicate whether the typical or normal balance is a debit or credit. A. Inventory ____________ B. Notes payable ____________ C. Retained earnings ____________ D. Equipment ____________ E. Prepaid insurance ____________ F. Accounts receivable ____________ G. Land ____________ H. Contributed capital ____________ I. Accounts payable ____________ J. Unearned revenue ____________ 33. Give a brief summary of what SOX is why it is important (essay) Bonus 1 (+6 points max) Al, Bill and Chad organized the ABC Corporation on January 1, 2009. Each of these owners invested $100,000 cash and received shares of stock. Below are selected transactions that were completed during January. (A.) Give the entry on ABC's books for each transaction: 1. Sold stock to the owners. 2. Borrowed $80,000 on one-year note payable. 3. Purchased land by signing a $70,000 note payable. 4. Paid $10,000 of accounts payable. 5. Purchased two service vehicles, $24,000 each; paid cash. 6. Purchased $2,000 of supplies on credit.
Question 2
Assignment 2 (Individual) | MBA Focus Paper: Trend Micro Trend Micro is an Internet antivirus software company. The main virus response center is in the Philippines, where engineers work evening and midnight shifts as needed. Other labs are scattered from Munich to Tokyo. The financial headquarters is in Tokyo, where it went public; product development is in PhD-rich Taiwan; and most of its sales are in Silicon Valley inside the giant American market. Trend Micro is a global company that is growing, but lately the CEO has begun to think that maybe the company needs regional headquarter sites as well. In addition, critics of the company claim that the wrong kind of technology is being transferred to developing nations and that the company is not substantially increasing employment in these lesser developed countries. Furthermore, some critics claim that the company is taking more wealth from these lesser developed nations than it brings to them. The CEO thinks marketing should be able to handle and avert these criticisms. Marketing claims that there is nothing it can do. You have been designated by the CEO to head up this global team to address these concerns. Submit the following assignment checklist items as evidence of your ability to work effectively across functional and geographical boundaries of the organization on this corporate assignment. Assignment Checklist Include the following documentation in your final submission to the Dropbox. 1. Exhibit in an organizational chart which departments you will source your team from and why. 2. Categorize what information you will need from each team member to address the problems of: a) headquarters designation and organization of Trend Micro going forward b) increasing employment in lesser developed countries c) Increasing the positive press coverage on your initiatives d) addressing the concern about technology transfer to developing nations 3. Plan a process for meeting/communicating and working across functional and geographic boundaries. What communication channels does the team recommend to keep people talking across time and space? How will you deal with different cultural beliefs related to the concept of time, teamwork, authority, and the perception of deadlines? 4. Devise a list of deliverables and a timeline? take into account different time zones, formats, expectations, etc. How will you deal with different cultural beliefs related to the concept of time, teamwork, authority, and perception of deadlines? Submission Adhere to the current APA format and style as supported by Kaplan University. The paper should be double-spaced and at least five (5) written pages in length. Include a formal introduction and conclusion as well. Use at least three (3) outside peer review resources to validate your arguments.,Can you please, have it ready for monday by 2:00 pm? Please, ensure no plagiarism. The prof. will submit the paper to Turnitin. Can you please email me a response saying that you are working in my paper or something? Thanks, Patricia,Please, confirm you are working on my assignment.,I need to submit the paper by monday 9:00 pm and I would like to review it first. I would need to have the paper at least by 8:00 pm PST. Please let me know if it is ok for you.,Please, respond if the new deadline is ok for you. Thanks,Thank you for your prompt response. I'll be looking forward to hear from you. Please, send me an email if you need extra information (patriciaalzolam@yahoo.com). The class name is Leadership strategies for a changing world and our textbook is Leadership, Research findings, practice and skills by Andrew J. Dubrin 6th ed. However, I couldn't find anything related to this topic in the textbook. I already sent you all the information I have regarding the assignment but if you have questions I can email the professor. Thanks, Patricia,Thanks for your prompt response, and a well done papeer. Could you please provide me the references used for this paper. I'll appreciate your prompt response. Thanks, Patricia
Question 3
1) What is the project?s cost of equity? What is the appropriate discount factor to use for evaluating the refrigerator project? 2) Forecast the project?s cash flows for the next eight years. What assumptions did you use? Use straight line depreciation for this case. 3) Use the appropriate capital budgeting techniques to evaluate the project. 4) Use the average demand scenario to evaluate the sensitivity of the project?s NPV with respect to sale price of the refrigerator and the cost of the compressor. There is no word limit, as most of the question will be answered on Excel.,Thank you. This is my first time using this site, and I found you by doing a Google search on the problem I was needing assistance with. I thought since the problem was already on your site, there was possibly a solution bank where someone had already completed the problem? I initially offer a lower price because I thought you could just send me a solution rather then having to re-do the problem. Thank you again for you assistance.,I don't see a difference between question 3 and question 4, as the table is exactly the same. Can you please explain this to me? What does this table say about the sensitivity, and the overall riskiness of the project?
Question 4
On January 1, 2012, Doone Corporation acquired 70 percent of the outstanding voting stock of Rockne Company for $546,000 consideration. At the acquisition date, the fair value of the 30 percent noncontrolling interest was $234,000 and Rockne?s assets and liabilities had a collective net fair value of $780,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $280,000 in 2013. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $340,000 in 2012 and $440,000 in 2013. Approximately 40 percent of the inventory purchased during any one year is not used until the following year. a. What is the noncontrolling interest?s share of Rockne?s 2013 income? Noncontrolling interest's share $ b. Prepare Doone?s 2013 consolidation entries required by the intra-entity inventory transfers. Event General Journal Debit Credit Entry *G (Click to select)CashSales revenueRetained earnings, Jan. 1 (subsidiary)Cost of goods soldInterest expenseInventorySalesInvestment (Click to select)Cost of goods soldInventorySalesInvestmentCashSales revenueRetained earnings, Jan. 1 (subsidiary)Interest expense Entry Tl (Click to select)Dividends paidInventoryRetained earnings, Jan. 1 (subsidiary)InvestmentInterest expenseCashSalesCost of goods sold (Click to select)Sales revenueInterest expenseCost of goods soldRetained earnings, Jan. 1 (subsidiary)InventoryDividends paidInvestmentCash Entry G (Click to select)Sales revenueSalesCashInterest expenseInvestmentCost of goods soldRetained earnings, Jan. 1 (subsidiary)Inventory (Click to select)SalesRetained earnings, Jan. 1 (subsidiary)Cost of goods soldInventoryInterest expenseCashSales revenueInvestment
Question 5
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.
