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ACCT 504 Accounting and Finance, Managerial Use and Analysis

Week 8 Final Exam Set 1

1. Question: (TCO A) An advantage of the corporate form of business is that _____. (Points : 5)

2. Question: (TCO A) When a corporation distributes a dividend, _____. (Points : 5)

3. Question: (TCOs A, B) Below is a partial list of account balances for Denton Company:

4. Question: (TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____. (Points : 5)

5. Question: (TCO D) In a period of increasing prices, which inventory cost flow assumption will result in the lowest amount of income tax expense? (Points : 5)

6. Question: (TCOs A, E) Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)

7. Question: (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)

8. Question: (TCO C) Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. 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)

9. Question: (TCO F) Which one of the following is not a tool in financial statement analysis? (Points : 5)

10. Question: (TCO F) In vertical analysis, the base amount for studying salary and wages expense is generally _____. (Points : 5)

11. Question: (TCO F) Ratios are most useful in identifying _____. (Points : 5)

12. Question: (TCO F) A common measure of liquidity is _____. (Points : 5)

13. Question: (TCO F) Return-on-assets ratio is most closely related to _____. (Points : 5)

14. Question: (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

15. Question: (TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report:…………Required: 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; Current Ratio, Days in Inventory, Average Collection Period, Return on Assets Ratio, Debt to Total Assets and Return on common stockholders’ equity ratio. (Make sure to show all your work)

16. Question: TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013:……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)

17. Question: (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:………Required:1) Please calculate the percentage increase or decrease in cash for the operating, investing, and financing sections 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)

18. Question: (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.”………Required: a. Go for it 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. Go for it 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)

19. Question: (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…………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)

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