The greater the risk, the greater the return the investor expects.

Question 1.1. The greater the risk, the greater the return the investor expects. (Points : 1)

        True

        False

Question 2.2. Interest calculated on principal that includes previously earned interest is referred to as: (Points : 1)

        risk-free interest

        simple interest

        inflation interest

        compound interest

Question 3.3. The future value of a $14,000 investment at the end of 8 years with an interest rate of 5% compounded annually is: (Points : 1)

        $19,600

        $ 20,859.56

        $20,783.08

        $20,684.38

Question 4.4.

The present value of $210,000 received 10 years from today, assuming an interest rate of 5% compounded semiannually is:

 

(Points : 1)

        $18,292.30

        $79,146.79

        $128,156.90

        $128,921.78

Question 5.5. If you make 7 annual payments of $7,000 each that earns an 8% interest rate with the first payment on June 1, 2008 what amount will be available on June 1, 2014? (Points : 1)

        $62,459.62

        $59,120

        $49,560

        $71,818.61

Question 6.6. Julia Barton wishes to make 8 semi-annual withdrawals of $3,000 each beginning on July 1, 2008. Assuming a 4% interest rate, what amount must Ms. Barton deposit to achieve this goal? (Points : 1)

        $22,955.03

        $21,976.44

        $24,000.00

        $20,198.23

Question 7.7. Which of the following is the correct sequence in the capital budgeting process? (Points : 1)

        Selecting the appropriate investments, financing the selected investments, evaluating the investments, identifying long-term investment opportunities

        Evaluating the investments, selecting appropriate investments, financing the investments, identifying long-term investment opportunities.

        Identifying long-term investment opportunities, selecting appropriate investments, evaluating the investments, financing the selected investments

        Identifying long-term investment opportunities, selecting appropriate investments, financing the investment, evaluating the investments.

Question 8.8. Royce Company is considering the purchase of some new equipment that will cost the company $180,000. The equipment is estimated to have a 3 year life and no salvage value. The equipment is expected to generate the cash inflows described below over the life of the equipment. Royce's cost of capital is 10%.

Cash inflow in year 1    $110,000

Cash inflow in year 2    105,000

Cash inflow in year 3    95,000

The NPV of the investment in the equipment is:

(Points : 1)

        $101,818; accept proposal because NPV is positive

        $338,482; reject proposal because NPV is positive

        $78,152; accept proposal because NPV is positive

        <$52,908>; reject proposal because NPV is negative

Question 9.9. Companies acquire funds from three sources. Which of the following is not one of the sources? (Points : 1)

        Debt

        Owners contributions

        Bankruptcy

        Earnings generated by the company's operating activities

Question 10.10. Sage, Rosemary and Thyme are partners in the Music Company. Their partnership income sharing agreement provides that Sage and Thyme are to receive salary allowances of $29,700 and $16,800, respectively, and that any remaining income or loss is to be divided equally among all partners. If the company's income was $39,000, Thyme's share would be: (Points : 1)

        $14,300

        $13,000

        $29,800

        $16,800

Question 11.11.

    Boston Corp. just issued 10,000 shares of $ par value common stock for $9 per share. The journal entry to record this transaction is:

 

(Points : 1)

      

Cash         90,000     

     Common Stock              10,000

     Paid-in-Capital in Excess of Par - Common Stock              80,000

      

Cash         90,000     

Donated Capital              90,000

      

Cash         90,000     

Paid-in-Capital - Common Stock              90,000

      

Cash         90,000     

Common Stock              90,000

Question 12.12. The journal entry to record the declaration of a cash dividend is: (Points : 1)

      

Retained Earnings         xxxx     

Dividend Payable              xxxx

      

Retained Earnings         xxxx     

Cash              xxxx

 

      

Dividend Expense         xxxx     

Dividend Payable              xxxx

      

Dividends Payable         xxxx     

Cash              xxxx

Question 13.13. Julia Enterprises owns some equipment with an original cost of $120,800 and accumulated depreciation of $50,800. If the equipment is sold for $78,500 in cash, the entry to record this event is: (Points : 1)

      

Equipment         70,000     

Gain on Disposal of Equipment         8,500     

Cash              78,500

      

Cash         78,500     

     Equipment         70,000

     Gain on Disposal of Equipment         8,500

      

Cash         78,500     

Accumulated Depreciation         50,800     

     Equipment              120,800

     Gain on Disposal of Equipment              8,500

      

Cash         78,500     

Loss on Disposal of Equipment         42,300     

Equipment              120,800

Question 14.14. The journal entry to record a payment on an installment note would look like: (Points : 1)

      

Premium         xxxx     

     Notes Payable         xxxx     

     Cash              xxxx

 

      

Notes Payable         xxxx     

Interest Expense         xxxx     

Cash              xxxx

 

      

Interest Expense         xxxx     

     Discount on Notes Payable              xxxx

     Cash              xxxx

 

      

Notes Payable         xxxx     

Cash              xxxx

 

Question 15.15. Robinson Industries purchased a copier system with a cost of $57,000 and a salvage estimated at $5,000. It was expected that the copier would last four years. Calculate the depreciation expense at the end of year 1 using the straight-line method. (Points : 1)

        $12,500

        $14,250

        $15,750

        $13,000

Question 16.16. Comprehensive income includes all of the following except: (Points : 1)

        extraordinary items.

        losses

        expenses

        contributions by owners

Question 17.17. Which of the following statements is true? Earnings per share: (Points : 1)

        reflects the amount of a company's earnings belonging to both common and preferred shareholders on a per share basis

        is not a required disclosure on the face of the income statement

        is the amount that each stockholder will receive as dividends that period

        is a common size measure of a company's earnings performance for common stock

Question 18.18. Match each of the following accounts to its proper balance sheet classification. Use OOE for other owners' equity items that are not contributed capital or retained earnings.

(Points : 1)

Potential Matches:

1 : Goodwill

2 : Mortgage Payable

3 : Benefit Pension Plans

4 : Bonds Payable, due within one year

5 : Deferred Charges

6 : Investment in Kolinchak, Inc.

7 : Accounts Receivable

8 : Mining Property

9 : Treasury Stock

10 : Common Stock

    Answer

      : OL - Other Liabilities

      : PPE - Property, Plant and Equipment

      : CL - Current Liabilities

      : INT - Intangibles

      : INV - Investments

      : CC - Contributed Capital

      : CA - Current Asset

      : LTL - Long-term Liabilities

      : OOE - Other Owners' Equity

      : OA - Other Assets

Question 19.19. Which account would not be found on the Statement of Owners' Equity? (Points : 1)

        net income

        treasury stock

        bonds payable

        preferred stock

Question 20.20. The total of the operating, investing, and financing sections of the Statement of Cash Flows is equal to the change in cash from one Balance Sheet date to another. (Points : 1)

        True

        False

Question 21.21. Which of the following is not a primary purposes of the statement of cash flows? (Points : 1)

        to assess the entity's ability to generate positive future net cash flows

        to assess both the cash and noncash aspects of the entity's investing and financing transactions during the period

        to assess the reasons for differences between income and associated cash receipts and payments

        to assess management's success in limiting the income taxes paid to the federal government

Question 22.22. A variety of transactions follow. Identify each transaction as an operating, investing, or financing event.

(Points : 1)

Potential Matches:

1 : Purchased a building for $120,000

2 : Sold $50,000 of common stock

3 : Borrowed $50,000 on a long-term note payable

4 : Collected $67,000 on accounts receivable

5 : Paid $20,000 on accounts payable

6 : Sold $100,000 of land and building

    Answer

      : Financing Event

      : Investing Event

      : Operating Event

      : Financing Event

      : Investing Event

      : Operating Event

Question 23.23. Wolff Enterprises generated $657,830 of cash flows from operating activities, used $55,670 of cash flows in its investing activities, and received $32,540 of cash flows from financing activities during the fiscal year. Its weighted-average common shares outstanding were 500,000 and it has no preferred stock. What is Wolff's cash flow per share? (Points : 1)

        $1.27

        $0.65

        $1.32

        $1.20

Question 24.24. If sales for 2012 and 2011 were $924,000 and $880,000, respectively, then the percentage change shown in a horizontal analysis would be: (Points : 1)

        5%

        105%

        (5%)

        (8%)

Question 25.25. Knirsfla Imports has total shareholders' equity of $1,298,000 on September 30. The company issues only no-par common stock and had 300,000 shares outstanding on that date. During the fiscal year ended September 30, the company earned net income of $186,600 and paid dividends totaling $67,800. The stock was selling for $15 per share. Compute the Earings per share. (Points : 1)

        $0.85

        $0.23

        $0.39

        $0.62

                                        

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