|
(TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5)
|
Reduced legal liability for investors
Harder to transfer ownership
Lower taxes
Most common form of organization
|
|
Question 2. 2. (TCO A) When a corporation distributes a dividend, _____. (Points : 5)
|
the most common form of distribution is a cash dividend
the Dividends account will be increased with a credit
the Retained Earnings account will be directly increased with a debit
the Dividends account will be decreased with a debit
|
|
Question 3. 3. (TCOs A, B) Below is a partial list of account balances for Cerner Company:
Cash $5,000
Prepaid insurance 500
Accounts receivable 2,500
Accounts payable 2,000
Notes payable 3,000
Common stock 1,000
Dividends 500
Revenues 15,000
Expenses 12,500
What did Cerner Company show as total credits? (Points : 5)
|
$21,500
$21,000
$20,500
$22,000
|
|
Question 4. 4. (TCOs B, E) Under the accrual basis of accounting, _____. (Points : 5)
|
cash must be received before revenue is recognized
net income is calculated by matching cash outflows against cash inflows
events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received
the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles
|
|
Question 5. 5. (TCO D) Three companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)
|
LIFO will have the highest ending inventory
FIFO will have the highest cost of goods sold
All three companies will have the same value for ending inventory.
average cost will have an ending inventory value that falls between FIFO and LIFO
|
|
Question 6. 6. (TCO A, E) Equipment was purchased for $17,000 on January 1, 2006. Freight charges amounted to $700 and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2007, if the straight-line method of depreciation is used? (Points : 5)
|
$6,680
$3,340
$2,860
$5,720
|
|
Question 7. 7. (TCOs D, G) Lopez Corporation issues 500 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 96. The journal entry to record the issuance will show a _____. (Points : 5)
|
debit to Cash of $500,000
credit to Discount on Bonds Payable for $20,000
credit to Bonds Payable for $480,000
debit to Cash for $480,000
|
|
Question 8. 8. (TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $240,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)
|
$240,000
$250,000
$310,000
$230,000
|
|
Question 9. 9. (TCO F) If you are comparing the 2010 income statement numbers with the income statement numbers from 2009 and 2008, you are conducting a _____. (Points : 5)
|
common-size analysis
horizontal analysis
vertical analysis
ratio analysis
|
|
Question 10. 10. (TCO F) Comparisons of data within a company are an example of the following comparative basis. (Points : 5)
|
Industry averages
Intercompany
Intracompany
Interregional
|
|
Question 11. 11. (TCO F) Ratios are most useful in identifying _____. (Points : 5)
|
trends
differences
causes
relationships among different numbers
|
|
Question 12. 12. (TCO F) A common measure of liquidity is _____. (Points : 5)
|
return on assets
current ratio
profit margin
debt to equity
|
|
Question 13. 13. (TCO F) Return-on-assets ratio is most closely related to _____. (Points : 5)
|
profit margin and debt-to-total-assets ratio
profit margin and asset-turnover ratio
times interest earned and debt-to-stockholders equity ratio
profit margin and free cash flow
|
|
Question 14. 14. (TCO G) To calculate the market value of a bond, we need to use the time-value-of-money concept called _____. (Points : 5)
|
compounding
extrapolation
discounting
None of the above
|
|
|
1.
(TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report:
|
Income Taxes Payable
|
$471
|
|
Short-term Investments and Marketable Securities
|
8,109
|
|
Cash
|
8,442
|
|
Other non-current Liabilities
|
10,449
|
|
Common Stock
|
1,760
|
|
Receivables
|
4,812
|
|
Other Current Assets
|
2,973
|
|
Long-term Investments
|
10,448
|
|
Other Non-current Assets
|
3,585
|
|
Property, Plant and Equipment
|
23,486
|
|
Trademarks
|
6,527
|
|
Other Intangible Assets
|
20,810
|
|
Allowance for Doubtful Accounts
|
53
|
|
Accumulated Depreciation
|
9,010
|
|
Accounts Payable
|
8,680
|
|
Short Term Notes Payable
|
17,874
|
|
Prepaid Expenses
|
2,781
|
|
Other Current Liabilities
|
796
|
|
Long-Term Liabilities
|
14,736
|
|
Paid-in-Capital in Excess of Par Value
|
11,379
|
|
Retained Earnings
|
55,038
|
|
Inventories
|
3,264
|
|
Treasury Stock
|
35,009
|
Other information taken from the Annual Report:
|
Sales Revenue for 2012
|
$48,017
|
|
Cost of Goods Sold for 2012
|
19,053
|
|
Net Income for 2012
|
9,019
|
|
Inventory Balance on 12/31/11
|
3,092
|
|
Net Accounts Receivable Balance on 12/31/11
|
4,920
|
|
Total Assets on 12/31/11
|
79,974
|
|
Equity Balance on 12/31/11
|
31,921
|
Required:
1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.
2. Using the Balance Sheet from your answer above, calculate the Current Ratio and Return on common stockholders’ equity ratio. (Make sure to show all your work).
(Points : 36)
|
|
Question 2. 2.
(TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013:
|
Accounts Payable
|
$38,080
|
|
Accounts Receivable
|
6,768
|
|
Cash
|
7,781
|
|
Common Stock
|
3,952
|
|
Cost of Goods Sold
|
352,488
|
|
Income Tax Expense
|
7,981
|
|
Interest Expenses
|
2,064
|
|
Membership Revenues
|
3,048
|
|
Net Sales
|
466,114
|
|
Operating, Selling and Administrative Expenses
|
88,873
|
|
Retained Earnings
|
72,978
|
Required:
Using the information provided above:
1. Prepare a multiple-step income statement
2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.
(Points : 36)
|
|
Question 3. 3. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:
|
Cash flow from operating activities
|
In millions
|
In millions
|
|
|
For the year ended 2012
|
For the year ended 2011
|
|
Net (loss) earnings
|
$(12,650)
|
$7,074
|
|
Depreciation and amortization
|
5,095
|
4,984
|
|
Impairment of goodwill and purchased intangible assets
|
18,035
|
885
|
|
Stock-based compensation expense
|
635
|
685
|
|
Provision for doubtful accounts
|
142
|
81
|
|
Provision for inventory
|
277
|
217
|
|
Restructuring charges
|
2,266
|
645
|
|
Deferred taxes on earnings
|
(711)
|
166
|
|
Excess tax benefit from stock-based competition
|
(12)
|
(163)
|
|
Other, net
|
265
|
(46)
|
|
Accounts and financing receivables
|
1,269
|
(227)
|
|
Inventory
|
890
|
(1,252)
|
|
Accounts payable
|
(1,414)
|
275
|
|
Taxes on earnings
|
(320)
|
610
|
|
Restructuring
|
(840)
|
(1,002)
|
|
Other assets and liabilities
|
(2,356)
|
(293)
|
|
Net cash provided by operating activities
|
10,571
|
12,639
|
|
Cash flows from investing activities:
|
|
|
|
Investment in property, plant, and equipment
|
(3,706)
|
(4,539)
|
|
Proceeds from sale of property, plant, and equipment
|
617
|
999
|
|
Purchases of available-for-sale securities and other investments
|
(972)
|
(96)
|
|
Maturities and sales of available-for-sale securities and other investment
|
662
|
68
|
|
Payments in connection with business acquisitions, net of cash acquired
|
(141)
|
(10,480)
|
|
Proceeds from business divestiture, net
|
87
|
89
|
|
Net cash used in investing activities
|
(3,453)
|
(13,959)
|
|
Cash flow from financing activities:
|
|
|
|
(Payments) issuance of commercial paper and notes payable, net
|
(2,775)
|
(1,270)
|
|
Issuance of debt
|
5,154
|
11,942
|
|
Payment of debt
|
(4,333)
|
(2,336)
|
|
Issuance of common stock under employee stock plans
|
716
|
896
|
|
Repurchase of common stock
|
(1,619)
|
(10,117)
|
|
Excess tax benefit from stock-based compensation
|
12
|
163
|
|
Cash dividends paid
|
(1,015)
|
(844)
|
|
Net cash used in financing activities
|
(3,860)
|
(1,566)
|
|
Increase (decrease) in cash and cash equivalents
|
3,258
|
(2,886)
|
|
Cash and cash equivalents at beginning of period
|
8,043
|
10,929
|
|
Cash and cash equivalents at end of period
|
$11,301
|
$8,043
|
Required:
1) Please calculate the percentage increase or decrease in cash for the total line of the operating, investing, and financing sections bolded above and explain the major reasons for the increase or decrease for each of these sections.
2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio.
(Points : 36)
|
|
Question 4. 4. (TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”
Assuming the goal is to maximize net income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported Net Income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet.
Required:
a. Goforit carries significant electronics inventory in a competitive environment where prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.
b. Goforit has a large investment in warehouse equipment including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: Straight line (SL) or double declining balance (DDB)?
(Points : 36)
|
|
Question 5. 5. (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.
|
Ratio Name
|
Johnson & Johnson
|
Pfizer
|
|
|
|
|
|
Profit margin
|
16.1%
|
24.7%
|
|
Inventory turnover ratio
|
3.1
|
1.7
|
|
Average collection period
|
59.4 days
|
69.1 days
|
|
Cash debt coverage ratio
|
.27
|
.16
|
|
Debt to Total assets
|
46.6%
|
127.5%
|
Required:
1) Please explain the meaning of each of the Pfizer ratios above.
2) Please state which company performed better for each ratio.
(Points : 36)
|
|
ranafa
acct504_final_exam_.docx
