Reference no: EM131531083

Assignment

PART 1

Question 1

A budget can be used as a basis for evaluating performance.

True

False

Question 2

A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions.

True

False

Question 3

The current cash debt coverage ratio is considered a better representative of liquidity than the current ratio because it involves the entire year rather than a balance at one point in time.

True

False

Question 4

Bonds with a face value of $400,000 and a quoted price of 104¼ have a selling price of

$417,000.

$416,100.

$401,700.

$416,000.

Question 5

One objective of the income statement is to separate the results of continuing operations from those of discontinued operations.

True

False

Question 6

Intangible assets are rights, privileges, and competitive advantages that result from ownership of long-lived assets without physical substance.

True

False

Question 7

On January 1, a machine with a useful life of five years and a residual value of $15,000 was purchased for $75,000. What is the depreciation expense for year 2 under straight-line depreciation?

$15,000.

$45,000.

$12,000.

$36,000.

Question 8

During 2014, Phelps Corporation reported net sales of $3,000,000, net income of $1,320,000, and depreciation expense of $80,000. Phelps also reported beginning total assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and accumulated depreciation of $500,000. Phelps's asset turnover ratio is

1.5 times.

1.2 times.

2.0 times.

2.4 times.

Question 9

Cash dividends are not a liability of the corporation until they are declared by the board of directors.

True

False

Question 10

The debt to assets ratio measures the percentage of the total assets provided by creditors.

True

False

Question 11

A master budget is most useful in evaluating a manager's performance in controlling costs.

True

False

Question 12

All of the following are true regarding financial statement analysis ratios associated with liabilities except

a high times interest earned ratio indicates that a company is more likely to meet interest payments as scheduled.

high liquidity ratios mean that lines of credit should be high to compensate.

if a company's current ratio is lower than the industry average, then it may lack liquidity.

unrecorded obligations causing sizeable differences between liquidity and solvency ratios can be ignored.

Question 13

A current liability is a debt that can reasonably be expected to be paid

within one year, or the operating cycle, whichever is longer.

between 6 months and 18 months.

out of currently recognized revenues.

out of cash currently on hand.

Question 14

The master budget reflects management's long-term plans encompassing five years or more.

True

False

Question 15

A company whose current liabilities exceed its current assets may have a liquidity problem.

True

False

Question 16

The book value of a plant asset is the difference between the

replacement cost of the asset and its historical cost.

cost of the asset and the amount of depreciation expense for the year.

cost of the asset and the accumulated depreciation to date.

proceeds received from the sale of the asset and its original cost.

Question 17

The market rate of interest is often called the

stated rate.

effective rate.

coupon rate.

contractual rate.

Question 18

Accountants do not attempt to measure the change in a plant asset's market value during ownership because

the assets are not held for resale.

plant assets cannot be sold.

losses would have to be recognized.

it is management's responsibility to determine fair values.

Question 19

Once cost is established for a plant asset, it becomes the basis of accounting for the asset unless the asset appreciates in value, in which case, market value becomes the basis for accountability.

True

False

Question 20

Which of the following is not properly classified as property, plant, and equipment?

Building used as a factory.

Land used in ordinary business operations.

A truck held for resale by an automobile dealership.

Land improvement, such as parking lots and fences.

Question 21

A corporation is not an entity that is separate and distinct from its owners.

True

False

Question 22

Budget reports provide the feedback needed by management to see whether actual operations are on course.

True

False

Question 23

Vertical analysis is a technique for evaluating a series of financial statement data over a period of time to determine the increase (decrease) that has taken place.

True

False

Question 24

Under the corporate form of business organization

a stockholder is personally liable for the debts of the corporation.

stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation.

the corporation's life is stipulated in its charter.

stockholders wishing to sell their corporation shares must get the approval of other stockholders.

Question 25

On January 1, 2014, Ermler Company, a calendar-year company, issued $1,000,000 of notes payable, of which $250,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2014, is

Current liabilities, $1,000,000.

Long-term debt , $1,000,000.

Current liabilities, $500,000; Long-term Debt, $500,000.

Current liabilities, $250,000; Long-term Debt, $750,000.

PART 2

Question 1

Zoum Corporation had the following transactions during 2014:

1 - Issued $125,000 of par value common stock for cash.

2 - Recorded and paid wages expense of $60,000.

3 - Acquired land by issuing common stock of par value $50,000.

4 - Declared and paid a cash dividend of $10,000.

5 - Sold a long-term investment (cost $3,000) for cash of $3,000.

6 - Recorded cash sales of $400,000.

7 - Bought inventory for cash of $160,000.

8 - Acquired an investment in Zynga stock for cash of $21,000.

9 - Converted bonds payable to common stock in the amount of $500,000.

10 - Repaid a 6 year note payable in the amount of $220,000.

What is the net cash provided by operating activities?

$305,000.

$290,000.

$240,000.

$180,000.

Question 2

A critical factor in budgeting for a service firm is to

hire professional staff to perform the budgeting work.

coordinate professional staff needs with anticipated services.

classify all personnel as either variable or fixed.

budget expenditures before anticipated receipts.

Question 3

Bogey Co. recorded operating data for its Cheap division for the year. Bogey requires its return to be 10%.

Sales $ 1,400,000

Controllable margin 160,000

Total average assets 4,000,000

Fixed costs 100,000

What is the ROI for the year?

4%

35%

6%

1.5%

Question 4

Laser Performance Inc. has the following information available (amount in thousands).

Net Income $30,000

Average Total Liabilities 80,000

Average Current Liabilities 36,000

Cash Provided by Operations 48,000

Cash Sales 130,000

Capital Expenditures 22,000

Dividends Paid 6,000

What is the current cash debt coverage?

1.333 times.

.600 times .

.833 times .

.369 times.

Question 5

The single most important output in preparing financial budgets is the

sales forecast.

determination of the unit cost of the product.

cash budget.

budgeted income statement.

Question 6

A manager of a cost center is evaluated mainly on

the profit that the center generates.

his or her ability to control costs.

the amount of investment it takes to support the cost center.

the amount of revenue that can be generated.

Question 7

If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to

decrease total assets and total stockholders' equity.

increase stockholders' equity and to decrease total liabilities.

decrease total retained earnings and increase total liabilities.

reduce the amount of retained earnings available for dividend declarations.

Question 8

Which one of the following items is not necessary in preparing a statement of cash flows?

Determine the change in cash.

Determine the cash provided by operations.

Determine cash from financing and investing activities.

Determine the cash in each of the bank accounts.

Question 9

Which of the following is not typically a characteristic experienced by a company during the growth phase of the corporate life cycle?

Cash from operations on the statements of cash flows will be less than net income on the income statement.

Collections on accounts receivable will lag behind sales.

Cash from investing is positive.

Cash from financing is positive.

Question 10

Which one of the following is not a benefit of budgeting?

It facilitates the coordination of activities.

It provides definite objectives for evaluating performance.

It provides assurance that the company will achieve its objectives.

It requires all levels of management to plan ahead on a recurring basis.

Question 11

A flexible budget

is prepared when management cannot agree on objectives for the company.

projects budget data for various levels of activity.

is only useful in controlling fixed costs.

cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results.

Question 12

The date on which a cash dividend becomes a binding legal obligation is on the

declaration date.

date of record.

payment date.

last day of the fiscal year end.

Question 13

Holden Packaging Corporation began business in 2014 by issuing 80,000 shares of $5 par common stock for $8 per share and 20,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $10. On its December 31, 2014 balance sheet, Holden Packaging would report

Common Stock of $800,000.

Common Stock of $400,000.

Common Stock of $640,000.

Paid-In Capital of $600,000.

Question 14

Which of the following income statement figures would probably be the best indicator of a company's future performance?

Total revenues

Income from operations

Net income

Gross profit

Question 15

Ratios are used as tools in financial analysis

instead of horizontal and vertical analyses.

because they can provide information that may not be apparent from inspection of the individual components of the financial statements.

because even single ratios by themselves are quite meaningful.

because they are prescribed by GAAP.

Question 16

Quincy Corp. earned controllable margin of $500,000 on sales of $6,400,000. The division had average operating assets of $5,200,000. The company requires a return on investment of at least 8%. How much is residual income?

$416,000

$84,000

$584,000

$512,000

Question 17

The primary purpose of the statement of cash flows is to

provide information about the investing and financing activities during a period.

prove that revenues exceed expenses if there is a net income.

provide information about the cash receipts and cash payments during a period.

facilitate banking relationships.

Question 18

A master budget consists of

an interrelated long-term plan and operating budgets.

financial budgets and a long-term plan.

interrelated financial budgets and operating budgets.

all the accounting journals and ledgers used by a company.

Question 19

If there were 60,000 pounds of raw materials on hand on January 1, 120,000 pounds are desired for inventory at January 31, and 410,000 pounds are required for January production, how many pounds of raw materials should be purchased in January?

350,000 pounds

530,000 pounds

290,000 pounds

470,000 pounds

Question 20

Cochran Corporation, Inc. has the following income statement (in millions):

COCHRAN CORPORATION, INC.

Income Statement

For the Year Ended December 31, 2014

Net Sales $240

Cost of Goods Sold 80

Gross Profit 160

Operating Expenses 65

Net Income $ 95

Using vertical analysis, what percentage is assigned to net income?

100%

60%

40%

33%

Question 21

Assume the following sales data for a company:

2015 $910,000

2014 $770,000

2013 700,000

If 2013 is the base year, what is the percentage increase in sales from 2013 to 2014?

130%

110%

30%

10%

Question 22

The following information pertains to Marsh Company. Assume that all balance sheet amounts represent average balance figures.

Total asset $400,000

Stockholders' equity-common 200,000

Total stockholders' equity 280,000

Sales revenue 120,000

Net income 25,000

Number of shares of common stock 8,000

Common dividends 9,000

Preferred dividends 6,000

What is Marsh's payout ratio?

60%.

36%.

24%.

7.5%.

Question 23

All of the following statements regarding changes in accounting principles are true except which of the following?

Most changes in accounting principles are only reported in current periods when the principle change takes place.

Changes in accounting principles are allowed when new principles are preferable to old ones.

Most changes in accounting principles are retroactively reported.

Consistency is one of the biggest concerns when a change in accounting principle is undertaken.

Question 24

On the basis of the budget reports,

management analyzes differences between actual and planned results.

management may take corrective action.

management may modify the future plans.

All of these.

Question 25

A comparison with other companies that provides insight into a company's competitive position is most commonly known as which of the following types of comparisons?

Industry average comparison

Intracompany comparison

Intercompany comparison

Comprehensive income comparison