Question 1
Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Manilow's Accounts Receivable account was $611,500 and the Allowance for Doubtful Accounts had a credit balance of $40,000. The year-end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below. Days Account Outstanding Amount Probability of Collection Less than 16 days $318,600 0.96 Between 16 and 30 days 119,200 0.92 Between 31 and 45 days 86,000 0.86 Between 46 and 60 days 42,600 0.82 Between 61 and 75 days 28,000 0.56 Over 75 days 17,100 00 *(a) What is the appropriate balance for Allowance for Doubtful Accounts at year-end? Balance for Allowance for Doubtful Accounts $ The Allowance for Doubtful Accounts should have a balance of $54,308 at year-end. The supporting calculations are shown below: Days Account Outstanding Amount Expected Percentage Uncollectible Estimated Uncollectible 0?15 days $318,600 0.04 $ 12,744 16?30 days 119,200 0.08 9,536 31?45 days 86,000 0.14 12,040 46?60 days 42,600 0.18 7,668 61?75 days 28,000 0.44 12,320 Balance for Allowance for Doubtful Accounts $54,308 The accounts which have been outstanding over 75 days ($17,100) and have zero probability of collection would be written off immediately by a debit to Allowance for Doubtful Accounts for $17,100 and a credit to Accounts Receivable for $17,100. It is not considered when determining the proper amount for the Allowance for Doubtful Accounts. *Exercise 7-4 Your accounts receivable clerk, Mary Herman, to whom you pay a salary of $2,055 per month, has just purchased a new Audi. You decided to test the accuracy of the accounts receivable balance of $160,290 as shown in the ledger. The following information is available for your first year in business. (1) Collections from customers $271,260 (2) Merchandise purchased 438,400 (3) Ending merchandise inventory 95,900 (4) Goods are marked to sell at 40% above cost Compute an estimate of the ending balance of accounts receivable from customers that should appear in the ledger and any apparent shortages. Assume that all sales are made on account. The ending balance of accounts receivable from customers $ Apparent shortage $ Computation of cost of goods sold: Merchandise purchased $438,400 Less: Ending inventory 95,900 Cost of goods sold $342,500 Selling price = 1.4(Cost of good sold) = 1.4($342,500) = $479,500 Sales on account $479,500 Less: Collections 271,260 Uncollected balance 208,240 Balance per ledger 160,290 Apparent shortage $47,950 1. Checking account balance $933,350; certificate of deposit $1,425,100; cash advance to subsidiary of $980,310; utility deposit paid to gas company $188. Cash balance $ 2. Checking account balance $504,120; an overdraft in special checking account at same bank as normal checking account of $21,100; cash held in a bond sinking fund $239,090; petty cash fund $399; coins and currency on hand $1,490. Cash balance $ 3. Checking account balance $597,260; postdated check from a customer $11,100; cash restricted due to maintaining compensating balance requirement of $112,840; certified check from customer $9,580; postage stamps on hand $696. Cash balance $ 4. Checking account balance at bank $45,850; money market balance at mutual fund (has checking privileges) $52,400; NSF check received from customer $824. Cash balance $ 5. Checking account balance $700,910; cash restricted for future plant expansion $500,900; short-term Treasury bills $187,200; cash advance received from customer $910 (not included in checking account balance); cash advance of $7,470 to company executive, payable on demand; refundable deposit of $30,900 paid to federal government to guarantee performance on construction contract. Cash balance $ 1. Cash balance of $933,350. Only the checking account balance should be reported as cash. The certificates of deposit of $1,425,100 should be reported as a temporary investment, the cash advance to subsidiary of $980,310 should be reported as a receivable, and the utility deposit of $188 should be identified as a receivable from the gas company. 2. Cash balance is $484,909 computed as follows: Checking account balance $504,120 Overdraft (21,100 ) Petty cash 399 Coin and currency 1,490 $484,909 Cash held in a bond sinking fund is restricted. Assuming that the bonds are noncurrent, the restricted cash is also reported as noncurrent. 3. Cash balance is $606,840 computed as follows: Checking account balance $597,260 Certified check from customer 9,580 $606,840 The postdated check of $11,100 should be reported as a receivable. Cash restricted due to compensating balance should be described in a note indicating the type of arrangement and amount. Postage stamps on hand are reported as part of office supplies inventory or prepaid expenses. 4. Cash balance is $98,250 computed as follows: Checking account balance $45,850 Money market mutual fund 52,400 $98,250 The NSF check received from customer should be reported as a receivable. 5. Cash balance is $701,820 computed as follows: Checking account balance $700,910 Cash advance received from customer 910 $701,820 Cash restricted for future plant expansion of $504,120 should be reported as a noncurrent asset. Short-term Treasury bills of $187,200 should be reported as a temporary investment. Cash advance received from customer of $910 should also be reported as a liability; cash advance of $7,470 to company executive should be reported as a receivable; refundable deposit of $30,900 paid to federal government should be reported as a receivable.
Question 2
? Exercise 88 (Ch. 3) 88. Refer to the Baseball 2005 data, which reports information on the 30 major league teams for the 2005 baseball season. a. Select the variable team salary and find the mean, median, and the standard deviation. b. Select the variable that refers to the age the stadium was built. (Hint: Subtract the year in which the stadium was built from the current year to find the stadium age and work with that variable.) Find the mean, median, and the standard deviation. c. Select the variable that refers to the seating capacity of the stadium. Find the mean, median, and the standard deviation ? Exercise 56 (Ch. 5) 56. Assume the likelihood that any flight on Northwest Airlines arrives within 15 minutes of the scheduled time is .90. We select four flights from yesterday for study. a. What is the likelihood all four of the selected flights arrived within 15 minutes of the scheduled time? b. What is the likelihood that none of the selected flights arrived within 15 minutes of the scheduled time? c. What is the likelihood at least one of the selected flights did not arrive within 15 minutes of the scheduled time? Exercise 64 (Ch. 6) 64. An internal study by the Technology Services department at Lahey Electronics revealed company employees receive an average of two emails per hour. Assume the arrival of these emails is approximated by the Poisson distribution. a. What is the probability Linda Lahey, company president, received exactly 1 email between 4 P.M. and 5 P.M. yesterday? b. What is the probability she received 5 or more email during the same period? c. What is the probability she did not receive any email during the period? ? Exercise 50 (Ch. 7) 50. Fast Service Truck Lines uses the Ford Super Duty F-750 exclusively. Management made a study of the maintenance costs and determined the number of miles traveled during the year followed the normal distribution. The mean of the distribution was 60,000 miles and the standard deviation 2,000 miles. a. What percent of the Ford Super Duty F-750s logged 65,200 miles or more? b. What percent of the trucks logged more than 57,060 but less than 58,280 miles? c. What percent of the Fords traveled 62,000 miles or less during the year? d. Is it reasonable to conclude that any of the trucks were driven more than 70,000 miles? Explain. ? Exercise 38 (Ch. 8) 38. The mean amount purchased by a typical customer at Churchill?s Grocery Store is $23.50 with a standard deviation of $5.00. Assume the distribution of amounts purchased follows the normal distribution. For a sample of 50 customers, answer the following questions. a. What is the likelihood the sample mean is at least $25.00? b. What is the likelihood the sample mean is greater than $22.50 but less than $25.00? c. Within what limits will 90 percent of the sample means occur? Exercise 54 (Ch. 9) 54. Families USA, a monthly magazine that discusses issues related to health and health costs, surveyed 20 of its subscribers. It found that the annual health insurance premiums for a family with coverage through an employer averaged $10,979. The standard deviation of the sample was $1,000. a. Based on this sample information, develop a 90 percent confidence interval for the population mean yearly premium. b. How large a sample is needed to find the population mean within $250 at 99 percent confidence?,? Exercise 88 (Ch. 3) 88. Refer to the Baseball 2005 data, which reports information on the 30 major league teams for the 2005 baseball season. a. Select the variable team salary and find the mean, median, and the standard deviation. b. Select the variable that refers to the age the stadium was built. (Hint: Subtract the year in which the stadium was built from the current year to find the stadium age and work with that variable.) Find the mean, median, and the standard deviation. c. Select the variable that refers to the seating capacity of the stadium. Find the mean, median, and the standard deviation ? Exercise 56 (Ch. 5) 56. Assume the likelihood that any flight on Northwest Airlines arrives within 15 minutes of the scheduled time is .90. We select four flights from yesterday for study. a. What is the likelihood all four of the selected flights arrived within 15 minutes of the scheduled time? b. What is the likelihood that none of the selected flights arrived within 15 minutes of the scheduled time? c. What is the likelihood at least one of the selected flights did not arrive within 15 minutes of the scheduled time? Exercise 64 (Ch. 6) 64. An internal study by the Technology Services department at Lahey Electronics revealed company employees receive an average of two emails per hour. Assume the arrival of these emails is approximated by the Poisson distribution. a. What is the probability Linda Lahey, company president, received exactly 1 email between 4 P.M. and 5 P.M. yesterday? b. What is the probability she received 5 or more email during the same period? c. What is the probability she did not receive any email during the period? ? Exercise 50 (Ch. 7) 50. Fast Service Truck Lines uses the Ford Super Duty F-750 exclusively. Management made a study of the maintenance costs and determined the number of miles traveled during the year followed the normal distribution. The mean of the distribution was 60,000 miles and the standard deviation 2,000 miles. a. What percent of the Ford Super Duty F-750s logged 65,200 miles or more? b. What percent of the trucks logged more than 57,060 but less than 58,280 miles? c. What percent of the Fords traveled 62,000 miles or less during the year? d. Is it reasonable to conclude that any of the trucks were driven more than 70,000 miles? Explain. ? Exercise 38 (Ch. 8) 38. The mean amount purchased by a typical customer at Churchill?s Grocery Store is $23.50 with a standard deviation of $5.00. Assume the distribution of amounts purchased follows the normal distribution. For a sample of 50 customers, answer the following questions. a. What is the likelihood the sample mean is at least $25.00? b. What is the likelihood the sample mean is greater than $22.50 but less than $25.00? c. Within what limits will 90 percent of the sample means occur? ? ? ? ? ? ? ? Exercise 54 (Ch. 9) 54. Families USA, a monthly magazine that discusses issues related to health and health costs, surveyed 20 of its subscribers. It found that the annual health insurance premiums for a family with coverage through an employer averaged $10,979. The standard deviation of the sample was $1,000. a. Based on this sample information, develop a 90 percent confidence interval for the population mean yearly premium. b. How large a sample is needed to find the population mean within $250 at 99 percent confidence?
Question 3
1. What is the purpose of the reconciliation of taxable income with book income? 2. Mountain Corporation forms Hill Corporation, and acquires Mound Corporation by merging Mound into Hill Corporation, with the former Mound Corporation shareholders receiving solely voting stock of Mountain Corporation. a. What type of reorganization has taken place? Describe the tax consequences to Mound Corporation, its former shareholders, and Mountain Corporation. b. How would you answers change if the former Mound shareholders instead received only nonvoting stock of Mountain Corporation? 3. What is the purpose off the dividends received deduction? What corporations are entitled to claim this deduction? What dividends qualify for this deduction? 4. Sam Rogers forms a corporation. Sam transfers to the corporation property having a basis to him of $15,000 and a fair market value of $27,000 for 900 shares of the $10 par stock of the corporation. A year later, bill Morrison, who is not related to Sam, transfers property having a basis to him of $1,000 and a fair market value of $3,000 for 100 shares of the corporate stock. The corporation issued no other stock. a. How much gain does bill recognize on his exchange? What is the basis to Sam of his 900 shares? b. how much gain does Bill recognize on his exchange? What is the basis to Bill of his 100 shares? c. What gain or loss in recognized by the corporation when it issues its shares to Sam? What is the basis to the corporation of the property it received from Sam? d. What is the gain or loss recognized by the corporation when it issues its shares to Bill? What is the basis to the corporation of the property it received from Bill? 5. What is the purpose of the reconciliation of taxable income with book income?
Question 4
The Bank of Canada announced the auction of $10 billion of 3-month T-bills on October 28, 2009. The auction results were released after the auction. The lowest yield was 5.25% and the highest yield was 5.3%. The non-competitive tenders amounted to $66,594,000 with all of these accepted. The total amount of competitive bids tendered was $16,215,097,000, with $9,934,570,000 accepted. 36. What was the stop (cut-off) yield? ____ A) 5.300% B) 5.275% C) 5.250% D) Undetermined 10 37. What was the bid-to-cover ratio? ___ A) 1.639 B) 2.045 C) 1.993 D) 1.628 38. Which of the following is true regarding Treasury bills? ____ A) The market for Treasury bills is extremely thin and illiquid B) Occasionally, investors find that earnings on T-bills do not compensate them for changes in purchasing power due to inflation C) By volume, most Treasury bills are sold to individuals who submit non-competitive bids D) All of the above 39. The most influential participant(s) in the Canadian money markets is (are) ____ A) Investment banks that underwrite securities B) Banks and deposit-taking institutions C) Corporations D) Bank of Canada 40. Which of the following is false regarding banker?s acceptance (BA)? ____ A) They can be bought and sold until they mature B) They are relatively new money market securities that arose in the 1960s as international trade expanded C) They are orders to pay a specified amount of money to the bearer on a given date D) They carry low interest rates because of the very low default risk E) None of the above 41. Governments never issue stock because ____ A) They cannot sell ownership claims B) The constitution expressly forbids such an issuance C) Both (A) and (B) D) Neither (A) nor (B) 42. Which of the following is true? ____ A) The best known capital market securities are stocks and bonds B) Securities having an original maturity that is greater than one year are traded in capital markets C) Firms and individuals use the capital markets for long-term investments D) All of the above 11 43. The over-the-counter (OTC) market in corporate shares ____ A) Is the dominant market for these securities B) Is restricted to the shares of only a few firms C) Is the third market in corporate shares D) Is based in Toronto and Montreal only E) Includes national trading in some shares and trading among local investors in others 44. Which of the following is true regarding Canada real return bonds? ____ A) The principal amount used to compute the interest payment varies with the consumer price index (CPI) B) The interest payment rises when inflation occurs C) At maturity the securities pay the greater of face-value or inflation-adjusted principal D) All of the above E) None of the above 45. Most of the time, the interest rate on Canada bonds is ____ that on money market securities because of ____ risk. ____ A) Above; interest rate B) Above; default C) Below; interest rate D) Below; default 46. Bonds with a 10% coupon rate will trade at the following price when the appropriate market interest rates are 10%. ____ A) 105 B) 100 C) 95 D) Insufficient information 47. The market price is $1,130 for a 10% non-callable corporate bond with a par value of $1,000 and 14 years to maturity. It pays interest semi-annually. The required rate of return on similar bonds is presently 8.4%. How much accrued interest would have to be paid if you purchased the bond on February 8, 2010, if the bond matures on June 30, 2024? ____ A) $5.34 B) $10.41 C) $10.68 D) Insufficient information Hint: Accrued interest = Par amount ? Coupon rate ? (Timer period/365) 12 48. A bond that is issued by a Japanese company in Canada that is denominated in U.S. dollars is an example of a ____ A) Domestic bond B) Foreign bond C) Eurobond D) Maple bond 49. To sell an old bond when interest rates have ____, the holder will have to ____ the bond until the yield to the buyer is the same as the market rate. ____ A) Fallen; discount B) Fallen; inflate C) Risen; discount D) Risen; inflate 50. Blue-chip bonds ____ A) Are considered highly risky by rating agencies such as Standard and Poor B) Pay higher rates of interest than those bonds that are considered less than blue-chips C) Are government bonds D) Go in and out of vogue with surges in corporate takeovers E) None of the above (The following information relates to Questions 51 and 52) Assume that a $500 million pool of mortgages backs a new MBS issue. The projected prepayment speed is 140% PSA. 51. What is the single monthly mortality (SMM) rate for the first month? ____ A) 0.01668% B) 0.02243% C) 0.02336% D) 0.02535% Hint: For months 1 ? t ? 30 based on 100% PSA, SMM = 1 ? (1 - 0.2% ? t)(1/12) 52. If the estimated prepayment for the first month will be $116,776.64, what is the scheduled principal repayment for this period? _____ A) $100,000 B) $150,000 C) $200,000 D) Undetermined 13 53. An individual needs a mortgage loan of $190,000 while he has put up a 25% down payment. How much is the purchase price of the property? ____ A) $275,000 B) $142,500 C) $253,300 D) $237,500 54. Canadian law requires interest on fixed-rate mortgages to be compounded semi-annually. With an effective annual rate of 11.30%, what is the posted rate? ____ A) 10.54% B) 11.00% C) 11.62% D) Undetermined
Question 5
You asked: "Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining to that inventory is as follows: What should be the carrying value of Montana's inventory? a. $600,000. b. $520,000. c. $590,000. d. $510,000. Save Answer 2. (Points: 2) Under the conventional retail method, which of the following are not included in the denominator of the current period cost-to-retail conversion percentage? a. Purchase returns b. Net markups c. Purchases d. Net markdowns Save Answer 3. (Points: 2) Fad City sells novel clothes which are subject to a great deal of price volatility. A recent item which cost $20 was marked up $12, marked down for a sale by $6 and then had a markdown cancellation of $3. The latest selling price is: a. $14. b. $26. c. $29. d. $35. Save Answer 4. (Points: 2) Lacy's Linen Mart uses the retail method to estimate inventories. Data for the first six months of 2011 include: beginning inventory at cost and retail were $60,000 and $120,000, net purchases at cost and retail were $312,000 and $480,000, and sales during the first six months totaled $490,000. The estimated inventory at June 30, 2011, would be: a. $68,200. b. $55,000. c. $71,500. d. $63,250. Save Answer 5. (Points: 2) Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $30,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $20,000 was incorrectly recorded as a $2,000 purchase. None of these errors were discovered until the next year. As a result, Prunedale's cost of goods sold for this year was: a. Overstated by $31,000. b. Overstated by $5,000. c. Understated by $31,000. d. Understated by $48,000. Save Answer 6. (Points: 2) Retrospective treatment of prior years' financial statements is required when there is a change from: a. Average cost to FIFO. b. FIFO to average cost. c. LIFO to average cost. d. All of the above. Save Answer 7. (Points: 2) To determine the value of a LIFO layer, using dollar-value LIFO retail: a. Divide the LIFO layer by the layer-year price index and multiply by the layer-year cost-to-retail percentage. b. Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage. c. Multiply the LIFO layer by the layer-year price index and by the layer-year cost-to-retail percentage. d. Divide the LIFO layer by the layer-year cost-to-retail percentage and multiply by the layer-year price index. Save Answer 8. (Points: 2) Hawkeye Auto Parts uses the retail method to estimate inventories. Data for the first six months of 2011 include: beginning inventory at cost and retail were $55,000 and $100,000, net purchases at cost and retail were $785,000 and $1,300,000, and sales during the first six months totaled $800,000. The estimated inventory at June 30, 2011, would be: a. $330,000. b. $360,000. c. $362,300. d. None of the above is correct. Save Answer 9. (Points: 2) In determining the cost-to-retail percentage for the current year: a. Net markups are included. b. Net markdowns are excluded. c. Net sales are included. d. All of the above are correct. Save Answer 10. (Points: 2) Under the LIFO retail method, which of the following are not included in the denominator of the cost-to-retail conversion percentage? a. Freight-in b. Purchase returns c. Purchases d. Net markdowns
