Final Part 1 Question 1 Under the corporate form of business organization Question 2 Accountants do not attempt to measure the change in a plant asset’s market value during ownership because Question 3 Budget reports provide the feedback needed by management to see whether actual operations are on course. Question 4 Intangible assets are rights, privileges, and competitive advantages that result from ownership of long-lived assets without physical substance. Question 5 A corporation is not an entity that is separate and distinct from its owners Question 6 The market rate of interest is often called the Question 7 A current liability is a debt that can reasonably be expected to be paid Question 8 A budget can be used as a basis for evaluating performance. Question 9 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. Question 10 Bonds with a face value of $400,000 and a quoted price of 104¼ have a selling price of Question 11 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. Question 12 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 Question 13 One objective of the income statement is to separate the results of continuing operations from those of discontinued operations. Question 14 All of the following are true regarding financial statement analysis ratios associated with liabilities except Question 15 A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions. Question 16 A master budget is most useful in evaluating a manager’s performance in controlling costs. Question 17 The master budget reflects management’s long-term plans encompassing five years or more. Question 18 The debt to assets ratio measures the percentage of the total assets provided by creditors Question 19 A company whose current liabilities exceed its current assets may have a liquidity problem. Question 20 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 Final Part 2 Question 1 A manager of a cost center is evaluated mainly on Question 2 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? Question 3 Ratios are used as tools in financial analysis Question 4 Which of the following is not typically a characteristic experienced by a company during the growth phase of the corporate life cycle? Question 5 A master budget consists of Question 6 The date on which a cash dividend becomes a binding legal obligation is on the Question 7 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? Question 8 All of the following statements regarding changes in accounting principles are true except which of the following? Question 9 On the basis of the budget reports, Question 10 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 Question 11 The primary purpose of the statement of cash flows is to Question 12 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? Question 13 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? Question 14 A flexible budget Question 15 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? Question 16 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? Question 17 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? Question 18 Which of the following income statement figures would probably be the best indicator of a company’s future performance? Question 19 Which one of the following is not a benefit of budgeting? Question 20 The single most important output in preparing financial budgets is the Question 21 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? Question 22 A critical factor in budgeting for a service firm is to Question 23 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 Question 24 Which one of the following items is not necessary in preparing a statement of cash flows? Question 25 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?
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