Reference no: EM132878646

Questions -

Q1. Shareholders of Forest Glen Corporation have received $35,000 in dividends in the current year. At year end the corporation has total assets of $500,000, total liabilities equal to $300,000, and contributed capital totaling $100,000. If retained earnings at the beginning of the year were $80,000, what was Forest Glen's net income for the current year?

a. $80,000

b. $215,000

c. $55,000

d. $200,000

e. None of the above is correct

Q2. Firms usually use the Allowance Method to estimate an Allowance for Uncollectible Accounts that will be a contra account to the Accounts Receivable amount on the Balance Sheet. The Allowance Method involves estimating the Allowance for Uncollectible Accounts every period. As we talked in class, the major reason for creating the Allowance for Uncollectible Accounts is *

a. That depreciation expense varies from time to time

b. That at any balance sheet date, it is not known how much of the Accounts Receivable amount will be collected

c. To increase leverage

d. To allow managers discretion for setting up the accounting numbers to meet or beat analysts' forecasts

e. None of the above is correct

Q3. Assuming that the market value of a firm is held constant,

a. If the firm issues bonds exactly at the end of Year 11, the Market-to-Book ratio as of the end of Year 11 will increase

b. If the firm takes a long-term loan exactly at the end of Year 11, the Market-to-Book ratio as of the end of Year 11 will decrease

c. If it is a pharmaceutical company, the Market-to-Book ratio will be higher than 1.5 because of GAAP not recognizing internally generated intangibles

d. The Market-to-Book ratio is equal to one as long as the market value of the firm remains constant

e. None of the above is correct

Q4. Cannot-Count Corporation made an inventory valuation error-its 2016 year-end inventory was understated by $15,000. This error flew through the other accounts including the Income Statement and led to an incorrect reported Net Income for 2016 of $150,000. Ignore tax effects, if any. Reported 2016 Net Income for Cannot-Count Corporation should have been

a. $165,000

b. $135,000

c. $150,000

d. There is not enough information to solve this question

e. None of the above is correct