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FINANCE – EXAM 3
FINANCE –EXAM 3
1. The Hasting Company began operations on January 1, 2003 and uses the FIFO method in costing its raw material inventory. An analyst is wondering what net income would have been if the company had consistently followed LIFO (instead of FIFO) from the beginning, 1/1/2003. He has the following information available to him:
What would net income have been in 2004 if Hastings had used LIFO since 1/1/2003?
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$ 110,000
$ 150,000
$ 170,000
$ 230,000
2. A customer is currently suing a company. A reasonable estimate can be made of the costs that would result from a ruling unfavorable to the company, and the amount involved is material. The company’s managers, lawyers, and auditors agree that there is only a remote likelihood of an unfavorable ruling. This contingency:
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Should be disclosed in a footnote.
Should be disclosed as a parenthetical comment in the balance sheet.
Need not to be disclosed.
Should be disclosed by an appropriation of retained earnings.
3. The ABC Company operates a catering service specializing in business luncheons for large corporations. ABC requires customers to place their orders 2 weeks in advance of the scheduled events. ABC bills its customers on the tenth day of the month following the date of service and requires that payment be made within 30 days of the billing date. Collections from customers have never been an issue in the past. ABC should recognize revenue from its catering services at the date when a:
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Customer places an order.
Luncheon is served.
Billing is mailed.
Customer’s payment is received.
4. On June 30, 2001, Cole Inc., exchanged 3,000 shares of Stone Corp. $30 par value common stock for a patent owned by Gore Co.. The Stone stock was acquired in 1999 at a cost of $80,000. At the exchange date, Stone common stock had a fair value of $45 per share, and the patent had a net carrying value of $160,000 on Gore’s books. Cole should record the patent at:
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$80,000
$90,000
$135,000
$160,000
5. On June 30, 2001, Cole Inc., exchanged 3,000 shares of Stone Corp. $30 par value common stock for a patent owned by Gore Co.. The Stone stock was acquired in 1999 at a cost of $80,000. At the exchange date, Stone common stock had a fair value of $45 per share, and the patent had a net carrying value of $160,000 on Gore’s books. Cole should record the patent at:
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$80,000
$90,000
$135,000
$160,000
6. On January 1, 1997, Phillips, Inc. leased a new machine from U.S. Leasing. The specific information on the lease is as follows:
On January 1, 1997, Phillips, Inc. should record a lease liability of:
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$275,000
$359,464
$0
$250,000
7. FRC Inc. acquired Marketing Inc on 1/1/2004. Marketing Inc. has 10,000 shares outstanding. Each share in Marketing Inc. was exchanged for half a share in FRC, Inc. Shares of FRC Inc., were trading at $100 per share at the date of the announcement of the transaction. Marketing Inc, had the following assets and liabilities that were assumed by FRC Inc.
The amount of Goodwill recognized by FRC, Inc. on January 1, 2004 is:
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$400,000
$360,000
$495,000
$455,000
8. ABC expenses stock options as required by GAAP. On January 1,2005, ABC granted 50 key executives 100 options each. Each option entitled the option holder to purchase 1 share of ABC common stock at $60 per share. The options will vest on January 1st 2008.
On the grant date, January 1st, 2005, the stock was quoted on the stock exchange at $63 per share. The fair value of the options on the grant date was estimated at $15 per option. The amounts of compensation expense ABC should recognize with respect to the options during 2005, 2006, and 2007 are:
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1.
2.
3.
4.
9. Which of the following situations will not cause a deferred income tax amount to be recorded?
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An expense that is recognized in 2005 for income tax purposes and in 2006 for financial statement purposes.
Interest income from municipal bonds that is recognized in 2005 for financial statement purposes but is tax exempt for income tax purposes.
A revenue is recognized in 2005 for income tax purposes and in 2006 for financial statement purposes.
None of the above situations would cause a deferred income tax amount.
10. In periods with rising prices and increasing quantities of inventories, which of the following relationships among inventory valuation methods is generally correct:
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FIFO has a higher inventory balance and a lower net income than LIFO.
FIFO has a higher inventory balance and a higher net income than LIFO.
LIFO has a higher inventory balance and a higher net income than FIFO.
LIFO has a higher inventory balance and a lower net income than FIFO.
11. Denny Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenues. This account had a balance of $900,000 at December 31, 2001 before year-end adjustment. Service contracts still outstanding at December 31, 2001 expire as follows:
What amount should be reported as Unearned Service Revenues in Denny’s December 31, 2001 balance sheet?
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$900,000
$600,000
$1,500,000
$300,000
12. ABC signed a 5-year operating lease agreement whereby WXY Rentals will provide a truck which cost WXY $20,000. The lease payments are $2,500, payable at the end of each year. The truck will revert to WXY at the end of five years. The truck has a 10-year useful life. At the inception of the lease, ABC should:
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make no journal entry
record rental expense of $2,500 for the first year’s rental
record the lease asset and a corresponding liability, at its current market value
record the lease asset and a corresponding liability, at the present value of the five equal annual lease payments.
13. Merry Co. purchased a machine costing $125,000 for its manufacturing operations and paid shipping costs of $20,000. Merry spent an additional $10,000 testing and preparing the machine for use. What amount should Merry record as the cost of the machine?
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$155,000
$145,000
$135,000
$125,000
14. Ignoring any related tax implications, what is the effect on a company’s balance sheet when depreciation expense is recognized?
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This transaction affects only the income statement, so no change on the balance sheet will occur.
Total assets and total stockholder’s equity will decrease by the same amount.
There will be no change in the total assets, liabilities and stockholders equity accounts.
Total liabilities will increase and total stockholder’s equity will decrease by the same amount.
15. The Hastco Company had the following balances in their stockholders’ equity accounts as of December 31, 2000:
Paid-in Capital: $53,000
Retained Earnings: $31,000
During the year ended December 31, 2000, The Hastco Company generated $36,000 in net income, and declared and paid $16,000 in Dividends. The ending balance in the retained earnings account at December 31, 1999 was:
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$11,000
$37,000
$5,000
$61,000
16. All of the following would qualify a lease as a capital lease except:
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The lease term is 80% of the asset’s estimated useful life.
The lease agreement contains a bargain purchase option.
The present value of the lease payments equals 70% of the fair market value of the leased asset.
Title to the leased asset transfers to the lessee at the end of the lease term.
17. Which of the following is/are criteria for recognizing revenue from a sale?
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Title and risks of ownership have been exchanged.
The company is reasonably assured of collecting the receivable.
The customer has, in turn, sold the product to its own customer.
Both title and risks of ownership have been exchanged and the company is reasonably assured of collecting the receivable.
18. Use the following information to answer the next two questions.
Downey Company bought a delivery truck for $62,000 on January 1, 2005. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000.
If Downey uses the straight-line method of depreciation, what is the depreciation expense for 2006 and book value at the end of 2006?
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$7,300 and $58,400
$6,500 and $60,000
$6,790 and $62,320
$6,500 and $66,500
19. Downey Company bought a delivery truck for $62,000 on January 1, 2005. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000.
If Downey uses the double declining-balance method, how much is the truck’s depreciation expense for2006?
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$11,680
$12,144
$10,400
$11,760
20. For accounting purposes, goodwill
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is recorded whenever a company achieves a level of net income that exceeds the industry average.
is recorded when a company purchases another business.
is expensed in the period it is recorded because benefits from goodwill are difficult to identify.
is never recorded
21. Goodwill should
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be written off as soon as possible against retained earnings.
absent impairment, not be written off because it has an indefinite life.
written off as soon as possible as an expense.
amortized over a maximum of forty years.
22. Freeman, Inc., reported net income of $40,000 for 2005. However, the company’s income tax return excluded a revenue item of $3,000 (reported on the income statement) because under the tax laws the $3,000 would not be reported for tax purposes until 2006. Assuming a 30% income tax rate, this situation would cause a 2005 deferred tax amount of
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$3,000 asset.
$3,000 liability
$ 900 asset.
$ 900 liability.
23. Before closing entries were recorded at the end of the accounting period (December 31, 2005), the following data were taken from the accounts of Buynow Corporation:
The total amount of owners’ equity that should be reported on the balance sheet dated December 31, 2005, after all the closing entries, is
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$ 338,000.
$128,000.
$300,000.
$304,000.
24. The major accounting difference between interest incurred during a period and cash dividends declared during the same period is:
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Interest decreases retained earnings while dividend declared increases retained earnings
Interest reduces net income while dividends declared do not affect net income
Interest does not affect net income while dividends reduce net income
There is no major difference. Both are treated identically for accounting purposes.
25. In December, a Global Grocer customer pays in time and receives a 2% discounts for prompt payment. The customer had purchased goods worth $500. Which of the possible answers below correctly states the journal entries to record the payment and the discount taken. Previously, Global Grocer had established an allowance for prompt payment discounts.
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Debit Accounts receivable ($500); Credit Cash ($490); credit allowance for discounts ($10).
Debit Cash ($500); Credit Accounts receivable ($500).
Debit Cash ($490); Debit Allowance for sales discounts ($10); Credit Accounts receivable ($500)
None of the above
26. Here is International Corp.’s income statement for the month of December.
What is the company’s December EBITDA to total interest coverage ratio?
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6.5x
18.5x
14.5x
20.2x
27. The following financial ratios are for Average Corp. and Superior Corp., two hardware stores.
Which of the following statements is inconsistent with the above ratios?
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Superior Corp has a higher return on equity primarily because it has a significantly higher net income margin
Average Corp. on a relative basis uses significantly more debt financing than Superior Corp.
Average Corp. utilizes its assets more effectively than Superior Corp.
Superior Corp. generates more income per dollar of sales than Average Corp.
28.On June 30, 2000, Microsoft Corporation was holding $4.8 billion of cash that it had collected from customers in advance for future software licenses and the future delivery of other products and services. In its financial statements, Microsoft classified and recorded this amount as:
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part of revenue on its income statement.
the asset Accounts Receivable on its balance sheet.
the liability Unearned Revenue on its balance sheet.
an expense on its income statement.
29. Which statement is false?
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An unrealized gain or loss on hold-to-maturity marketable securities is recognized in income.
An unrealized gain or loss on trading securities is recognized in income.
An unrealized gain or loss on a company’s common stock held by the owners’ of the company is not recognized by the company.
An unrealized gain or loss on available-for-sale marketable securities is not recognized in income.
30. International, Inc. established an allowance for bad debts at the end of October. In November, International wrote off a $500 account receivable because payment was considered to be remote. What would be the effect of the $500 account receivable write-off on International’s November financial statements?
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Assets would decrease, liabilities would remain constant and retained earning would decrease.
Assets would remain constant; liabilities would increase and retained earnings would decrease.
No change would be made in total assets, liabilities or shareholder’s equity.
Assets would decrease, liabilities would decrease and retained earnings would remain constant.
International Business Communications
Unit 1 db2
Primary Task Response: Within the Discussion Board area, write 400–600 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas.Consider an organization you work for, have worked for, or would like to work for. Then, identify a country in which they do business or might do business outside of the United States. You also may select a company in contemporary business news that conducts business globally.Discuss the key differences in cultural variables between the United States and the country that are important when conducting business in the selected country. What are the implications of these differences for the practice of business? Consider political, economic, legal, educational, and social systems of the selected country. Refer to Intellipath, MUSE, and Beyond the Book references in creating your response. Include a response to the following questions in your discussion writing at least one paragraph for each bullet point:Describe globalization and its benefits to business operations. What kind of management orientation style (ethnocentric, polycentric, regiocentric, geocentric) would you use to be most effective given the cultural attributes of the country? How would you overcome the anticipated barriers to communication? Provide specific examples.
Unit 2 – Individual Project
You are in the role of project manager for a coffee franchise global expansion project. You plan to expand into three different countries. The magnitude of the project requires you to prepare for the project kickoff meeting and business negotiations with the project team who are potential partners from Mexico, China, and Saudi Arabia. You understand that these cultures are vastly different. They have different business customs, social protocols, and languages, so conducting business with each country requires a customized approach.To prepare for your first outreach effort with each country, analyze the cultural similarities and differences that exist between the countries and the United States using Geert Hofstede’s Six Cultural Dimensions as discussed in class. Note that the three countries are characterized by collectivism while the United States has an individualist culture.Create a bar graph and/or table that summarizes the key cultural dimension comparison. Then, compare and contrast each country according to your findings. Discuss the implications of the relative cultural dimensions. How might they impact managing the global expansion project? Remember that you are adapting your approach from a United States centric view. (400-600 words).This assignment lays the foundation for IP4, where you will apply your findings to forming an effective global team.Step One: Visit Geert Hofstede Cultural Dimensions Step Two: Create a country comparison using the United States in first dropdown menu box to see the values for the six cultural dimensions. After selecting the United States, a second and a third country can be chosen in the second dropdown menu box. Keep the United States in the first box and then repeat for each country (Mexico, China, and Saudi Arabia) involved in the fast food expansion project to see a comparison of their scores.Step Three: Create a bar graph and/or table to highlight how the four countries compare to the United States by using the value scores under the comparison to create the bar chart. How to make a bar chart on Microsoft Word:Click “Insert” tab Click “Chart” in the Illustrations Group Select “Bar” Click “OK” to insert a chart and a spreadsheet will open alongside your Word document. The spreadsheet contains sample figures surrounded by a blue border. Column “A” contains data labels. The remaining columns contain data. Click a corner of the border. Drag it down or up to add or remove items from the graph.Step Four:Using your findings:Explain Hofstede’s cultural dimensions. Using the United States as a basis for comparison, evaluate each country’s similarities and differences relative to the franchise business deployment. Discuss the implications for your initial communications within each country. For example, what is the impact of collectivism relative to individualism regarding management communication?
unit 3 db
Primary Task Response: Within the Discussion Board area, write 400–600 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas.Idea:In preparing to launch the coffee franchises in China, Mexico, and Saudi Arabia, you are planning to visit each country to interview potential global team members. You know it is important to be aware of the value differences and social customs in each country to develop trusting relationships to avoid potential conflicts. Compare and contrast your approach to doing business and building relationships among the global team members. Apply the readings, Intellipath, and library resources to respond to the following:Discuss collectivism and how it applies to China, Mexico, and Saudi Arabia. Explain the role of relationship building in China, Mexico, and Saudi Arabia compared to the United States. Explain the cultural value differences in time (monochronic versus polychronic cultures), approaches to decision making (objective or subjective approach), and individualism that could potentially occur during global operations. What are some of the nonverbal behavior differences among the countries such as silence, eye contact, body movements, proxemics or interruptions that may affect doing business with your global team?
AEROSPACE ENGINEERING HW (Spacecraft Design)
1.Calculate the departure DV from Earth to Mars, assuming:
i)Hohmann transfer/patched conic approximation
ii)Departure from a 500 km circular orbit at Earth (ignore the Dv to launch from earth surface to LEO.)
2. At Mars, what is the required orbit insertion DV for capture into a 500 km altitude circular orbit? ●
3. What should the B-plane miss distance be to achieve the 500 km orbit altitude?
4. The spacecraft is intended to map the surface of Mars and is to be placed into a sun-synchronous orbit at Mars having a periapsis altitude of 500 km and period of 1/7 of a Martian day.
i) What is the Dv required to raise the orbit apoapsis from the circular parking orbit to the new elliptical orbit?
ii) What should the inclination be for the sun-synchronous orbit?
5. Since the spacecraft can only see (at best resolution) a small portion of the planet during a low altitude pass, it is planned to map essentially the entire planet by “walking” the periapsis around the planet. Each region of latitude will be mapped as the planet rotates beneath the orbit, and as the nodal line regresses. What initial value of the argument of periapsis should be selected to minimize the time required to conduct this mission? How long will it take to map the planet?
6.After the high-resolution mapping outlined in Problem 4 is completed, it is desired to change the plane of the orbit to an inclination of 90o so as to map the polar regions. What is the minimum DV required to effect this plane change in the most efficient manner? Explain.
