Question 1
ACCT 5060 Winter 2011 Name:__________________________________ 1. The four key behavioral considerations in management accounting and control system design include all of the following EXCEPT: a. integrating the organization?s pay scale b. using a mix of short- and long-term qualitative and quantitative performance measures c. empowering employees to be involved in decision making and MACS design d. developing an appropriate incentive system to reward performance 2. Pressures on managers to act unethically include all of the following EXCEPT: a. pressures to act in the long-run best interest of the shareholders b. solicitations for confidential information c. requests to falsify reports d. requests to bias information in favor of certain stakeholders 3. To the extent that an ethical hierarchy exists, _____ have the highest authority. a. societal norms b. legal rules c. organizational norms d. personal norms 4. When a manager?s and employee?s goals are aligned with organizational goals, it is referred to as: a. a diagnostic control system b. the intensity factor c. goal congruence d. monitoring 5. The roles of performance measurement systems in organizations include all of the following EXCEPT: a. motivate employees to help the organization achieve its strategic objectives b. help managers with resource allocation c. create value from intangible assets as well as their physical and financial assets d. communicate the company?s strategic objectives 6. The Balanced Scorecard is said to be ?balanced? because it measures: a. short-term and long-term objectives b. financial and nonfinancial objectives c. internal and external objectives d. All of the above are correct. 7. The ______________ perspective of the Balanced Scorecard asks, ?At which processes must we excel to satisfy our customers and shareholders?? a. learning and growth b. customer c. process d. shareholder 8. The __________ perspective of the Balanced Scorecard focuses on creating value for customers. a. Value b. Financial c. Stakeholder d. Customer 9. Measures of employees? skills and capabilities are included in the ________ perspective of the Balanced Scorecard. a. financial b. internal c. customer d. learning and growth perspective 10. A chain of cause-and-effect relationships that appropriately link the four balanced scorecard perspectives is: a. a high return on investment causes customer loyalty that results in skilled production workers that improve process quality b. skilled production workers help to produce process quality that results in customer loyalty that helps to increase return on investment c. customer loyalty results in a high return on investment that results in the ability to attract skilled production workers that improve process quality d. improved process quality results in a high return on investment that causes customer loyalty that results in the ability to attract skilled production workers 11. Participative budgeting is an approach to budgeting that a. is top-down in nature. b. allows top management to set the budget. c. discourages budget slack. d. is more likely to motivate people to work towards the organization's goals t than a top-down approach. 12. Which of the following is not included in the operating budget? a. Budgeted balance sheet b. Sales budget c. Selling and administrative budget d. Raw materials purchases budget 13. A primary financial budget is the a.. Production budget b. Cash budget c. Inventory budget d. Selling and administrative budget 14. Jackel Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Jackel Company's ending finished goods inventory policy is 10% of the following month's sales. What is budgeted finished goods inventory for May? a. 1,000 b. 1,300 c. 1,600 d. 2,100 15. In which order are the following developed? A = Production plan B = Materials purchasing plan C = Demand forecast D = Sales plan a. first to last: A, B, C, D b. first to last: C, D, A, B c. first to last: D, C, B, A d. first to last: C, A, D, B THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 16 -18. For the next six months, Berry Company projects the following information (in units). July Aug. Sept. Oct. Nov. Dec. Retail demand 100 100 150 150 200 200 Dealer demand 200 250 300 350 400 450 Shop capacity 500 500 500 500 500 500 Painting capacity 350 350 350 600 600 600 Demand drives production for that month and cannot be carried over from one month to another. Retail customers are satisfied first. 16. The production for July is projected to be: a. 100 units b. 300 units c. 350 units d. 500 units 17. The number of dealer units that will be produced and sold in September is: a. 300 units b. 350 units c. 500 units d. 200 units 18. Painting capacity appears to be: a. short-term capacity b. intermediate-term capacity c. long-term capacity d. total demand THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 19 -21 The following information for the second quarter of 2006 pertains to Huffman Company: Month Sales Purchases April $45,000 $24,000 May $60,000 $30,000 June $75,000 $42,000 ? Cash is collected from customers in the following manner: Month of sale 30% Month following the sale 70% ? 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. ? Labor costs are 20% of sales. Other operating costs are $22,500 per month (including $6,000 of depreciation). Both of these are paid in the month incurred. ? The cash balance on June 1 is $6,000. A minimum cash balance of $4,500 is required at the end of the month. Money can be borrowed in multiples of $1,500. * No loans outstanding on June 1. 19. How much cash will be collected from customers in June? a. $64,500 b. $70,500 c. $75,000 d. None of the above is correct. 20. How much cash will be paid to suppliers in June? a. $34,800 b. $28,000 c. $44,000 d. None of the above is correct. 21. How much cash will be disbursed for labor and operating costs in June? a. $31,500 b. $35,000 c. $44,200 d. $48,200 22. In __________, as one budget period passes, planners delete that budget period from the master budget and add another one. a. zero-based budgeting b. periodic budgeting c. incremental budgeting d. continuous budgeting THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 23 ? 25. Community Manufacturing Inc., developed the following standard costs for direct material and direct labor for one of their major products, the 30-gallon heavy-duty plastic container. Standard quantity Standard price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour During May, Community produced and sold 10,000 containers using 2,200 pounds of direct materials at an average cost per pound of $24 and 1,050 direct labor hours at an average wage of $14.75 per hour. 23. May?s direct material price variance was: a. $2,800 favorable b. $2,200 favorable c. $5,000 unfavorable d. None of the above is correct. 24. May?s direct material quantity variance was: a. $2,800 unfavorable b. $2,200 favorable c. $5,000 unfavorable d. None of the above is correct. 25. May?s direct labor rate variance was: a. $750.00 unfavorable b. $262.50 favorable c. $487.50 favorable d. indeterminable using the above information 26. Which of the following methods is calculated as annual net income as a percentage of the original investment in assets? a. Accounting rate of return b. Payback period c. Net present value d. Internal rate of return 27. Sorius Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net cash flows of $100,000. The equipment will have an initial cost of $400,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $75,000, what is the annual net income? Ignore income taxes. a. $25,000 b. $35,000 c. $165,000 d. $175,000 28. Peet's Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $100,000. The equipment will have an initial cost of $400,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $75,000, what is the payback period? Ignore income taxes. a. 3.25 years b. 4.00 years c. 4.75 years d. 7.00 years 29. Marchand Corp is considering the purchase of a new piece of equipment, which would have an initial cost of $500,000, a 7 year life, and $150,000 salvage value. The increase in cash flow each year of the equipment's life would be as follows: What is the payback period? a. 5.51 years b. 5.97 years c. 6.00 years d. 6.18 years 30. The idea that the value of money changes over time because it can be invested to earn interest is the a. net present value of money. b. accounting value of money. c. time value of money. d. investment value of money. 31. When making screening decisions using the net present value method, a project is acceptable if a. the NPV is greater than the hurdle rate. b. the NPV is greater than the IRR. c. the NPV is positive. d. the NPV is negative. 32. Minne Corp is considering the purchase of a new piece of equipment. When discounted at a hurdle rate of 8%, the project has a net present value of $24,580. When discounted at a hurdle rate of 10%, the project has a net present value of ($28,940). The internal rate of return of the project is a. zero. b. between zero and 8%. c. between 8% and 10%. d. greater than 10%. 33. An analysis that reveals whether changing the underlying assumptions would affect the decision is a a. net present value analysis. b. internal rate of return analysis. c. payback period analysis. d. sensitivity analysis 34. Jonas Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $120,000 over its estimated life, while the total cost to buy the equipment will be $75,000 over its estimated life. At Jonas's required rate of return, the net present value of the cost of leasing the equipment is $73,700 and the net present value of the cost of buying the equipment is $68,000. Based on financial factors, Jonas should a. lease the equipment, saving $45,000 over buying. b. buy the equipment, saving $45,000 over leasing. c. lease the equipment, saving $5,700 over buying. d. buy the equipment, saving $5,700 over leasing. 35. In a decentralized organization: a. local-division managers must receive higher approval for most business decisions b. company-wide standard operating procedures are common c. local-division managers have an opportunity to gain decision-making experience d. decisions are made by senior executives 36. All of the following are true of responsibility centers EXCEPT that they: a. operate like a small business b. promote the interests of the larger organization c. coordinate activities with other responsibility centers d. are best used in a centralized organization 37. Segment margin includes: a. all costs traceable to the segment b. the segment?s share of allocated corporate costs c. the segment?s share of allocated unavoidable costs d. All of the above are correct. 38 The primary goal of transfer pricing is to: a. motivate the decision maker to act in the organization?s best interests b. obtain a high transfer price for the supplying unit c. obtain a high transfer price for the receiving unit d. agree on a price for external sales 39. Return on investment (ROI) can be increased by: a. increasing sales b. decreasing operating assets c. decreasing operating income d. decreasing asset turnover 40. Randall Company makes and distributes outdoor play equipment. Last year sales were $2,400,000, operating income was $600,000, and the assets used were $3,000,000.The return on investment (ROI) is: a. 20% b. 80% c. 25% d. 125%
Question 3
FIN 620 Capital Markets, Institutions and Long-Term Financing Midterm Examination: Sessions 1-5 Each question is worth 10 Points. Place your final answers on the first worksheet, then show your work to each problem on a separate worksheet. 1. You have a sample of returns observations for a mutual fund. The 4 returns are 7.25%, 5.6%, 12.5%, 1.0%. What is the average return and variance of these returns? 2. A company is considering a new investment. The investment cost is expected to be $72 million and will return $13.5 million for 5 years in net cash flows. The ratio of debt to equity is 1 to 1. The cost of equity is 13%, the cost of debt is 9%, and the tax rate is 34%. Assuming average risk, what?s the appropriate discount rate? 3. A corporation has an equity beta of 1.2 and a debt beta of .8. The firm's market value debt to equity ratio is .6. The corporation has a zero tax rate. What is the asset beta? 4. Suppose a company's common stock has a beta of 1.6. If the risk-free rate is 5% and the market risk premium is 4%, what?s the expected return on the company?s common stock? For Questions 5 and 6 below: Information on shareholder's equity as currently shown on the books of a corporation is given as: Common shares ($2.00 par value) $350,000 Capital in Excess of Par 0 Retained Earnings 7,800,000 5. From this information, calculate the corporation's book value per share. 6. Rework the shareholder's equity as it appears on the books if the corporation issues 40,000 new shares of common at $70 per share. 7. A corporation is unlevered and is valued at $640,000. The corporation is currently deciding whether including debt in its capital structure would increase its value. The current cost of equity is 12%. Under consideration is issuing $300,000 in new debt with an 8% interest rate. The corporation would repurchase $300,000 of stock with the proceeds of the debt issue. There are currently 32,000 shares outstanding and effective marginal tax bracket is zero. What will the corporation?s new WACC be? 8. A corporation is unlevered and is valued at $640,000. The corporation is currently deciding whether including debt in its capital structure would increase its value. The current of cost of equity is 12%. Under consideration is issuing $300,000 in new debt with an 8% interest rate. The corporation would repurchase $300,000 of stock with the proceeds of the debt issue. There are currently 32,000 shares outstanding and its effective marginal tax bracket is 34%. What will the corporation?s new WACC be? 9. A corporation has promised payments to its bondholders that total $100. The company believes that there is an 85% chance that the cash flow will be sufficient to meet these claims. However, there is a 15% chance that cash flows will fall short, in which case total earnings are expected to be $65. If the bonds sell in the market for $84, what is an estimate of the bankruptcy costs for the corporation? Assume a cost of debt of 10%. 10. A company had net income of $200,000 for the year ending 2008. The company decided to pay out 30% of earnings per share as a dividend. The company has 50,000 shares issued and outstanding. What are the retained earnings for 2008?
Question 4
The JM Partnership was formed to acquire land and subdivide it as residential housing lots. On March 1, 2011, Jessica contributed land valued at $600,000 to the partnership in exchange for a 50% interest in JM. She had purchased the land in 2003 for $420,000 and held it for investment purposes (capital asset). The partnership holds the land as inventory. On the same date, Matt contributed land valued at $600,000 that he had purchased in 2001 for $720,000. He became a 50% owner. Matt is a real estate developer, but this land was held personally for investment purposes. The partnership holds this land as inventory. In 2012, the partnership sells the land contributed by Jessica for $620,000. In 2013, the partnership sells the real estate contributed by Matt for $580,000. a) What is each partner?s initial basis in his or her partnership interest? b) What is the amount of gain or loss recognized on the sale of the land contributed by Jessica? What is the character of this gain or loss? c) What is the amount of gain or loss recognized on the sale of the land contributed by Matt? What is the character of the gain or loss? d) How would your answer in (c) change if the property was sold in 2018? (SW-35),Thank you for helping me - I am having such a hard time with this chapter...,Thank you!!
