.MGA 306 Final Exam Accounting, Finance, SPSS Multiple Choice Questions

MGA 306

Spring 2020

This is an open -book exam. The exam consists of 10 pages. Please print your name and sign below.

I affirm that I will not give or receive any unauthorized help on this exam and that all work will be my own. I know that the integrity of this exam and this class is up to me, and I pledge not to take any action that would break the trust of my classmates or professor, or undermine the fairness of this class.

Name _____________________________________________

Problem 1: Multiple Choice (3 points each, total 39 points) – Choose the BEST answer for each question.

1. Maxell Company uses the periodic FIFO method to assign costs to inventory and cost of goods sold. Given the following information, what would be reported as the cost of goods sold for the period?

Beginning Inventory, January 1, 2013: 100 units @ $5

January 2: Purchase 75 units @ $4

January 15: Sale 75 units@$9

January 26: Sale 50 units @ $10

A) $625.

B) $575.

C) $550.

D) $600.

2. In times of falling prices, choosing LIFO over FIFO as an inventory cost method would affect the financial statements as follows:

A) Cost of goods sold will be higher and ending inventory will be lower

B) Cost of goods sold will be lower and ending inventory will be lower

C) Cost of goods sold will be higher and ending inventory will be higher

D) Cost of goods sold will be lower and ending inventory will be higher

3. When the replacement cost of inventory drops below the cost recorded in the financial records, applying the lower of cost or market (LCM) rule causes:

A) a decrease in cost of goods sold.

B) no change in net income, other things being equal.

C) a reduction in the book value of total assets.

D) an increase in net income.

4. A company buys a piece of equipment for $48,000. The equipment has a useful life of ten years. Using the double-declining-balance method, the company's depreciation expense in the first year would be:

A) $9,600

B) $12,000

C) $4,800

D) $24,000

5. Acadia, Inc. recorded restructuring charges of $235,542 thousand during fiscal 2017 related entirely to anticipated employee separation payments. Acadia, Inc. had never before incurred restructuring charges. At the end of the year, the company’s balance sheet included a restructuring accrual of $29,643 thousand. The cash amount the company settled these restructuring charges during the year was:

A) $205,899 thousand

B) $235,542 thousand

C)  $265,185 thousand

D)  $  29,643 thousand

6. Which one of the following would be considered a contingent liability recorded on the balance sheet?

A) A company estimates that it will probably have to pay $55,000 to the Environmental Protection Agency for a chemical spill.

B) A company owes $15,000 on inventories purchased on credit.

C) A company has access to a line of credit with a bank in the amount of $100,000.

D) A company believes that it is reasonably possible it will lose a lawsuit and damages could be $80,000.

7. A corporation retired $200,000 of its 10% bonds payable. On the retirement date the book value of the bonds was $208,000. The corporation purchased them on the open market for $210,000. How much was the gain or loss on the retirement of the bonds?

A) There was a $10,000 loss.

B) There was a $2,000 loss.

C) There was a $10,000 gain.

D)  There was an $18,000 loss.

8. If a company issues 2,500 shares of common stock at a market price of $48 per share, which of the following is the correct balance sheet effect?

A) Increase cash by $120,000 and increase contributed capital by $120,000

B) Increase cash by $120,000 and increase earned capital by $120,000

C) Increase stock revenues by $120,000

D) Stock issuances are not reported on the balance sheet

9. Which of the following entries would be recorded when a company reissues 1,000 shares of

    treasury stock for $50 per share when they were repurchased at a cost of $47 per share and

    have a $1 par value?

  

10. As of 2017, Buttle Corp. has $10 par, 2% preferred stock, 6,500 shares outstanding, and $1 par common stock with 32,000 shares outstanding. The preferred stock is cumulative and preferred stockholders last received a dividend in 2014. If the company wants to distribute $4 per share to the common stockholders in 2017, what is the total amount of dividends that the company must pay at the end of the current year?

A) $129,300

B) $128,000

C) $    3,900

D) $131,900

11. All of the following are potentially dilutive in computing diluted EPS except:

A) Employee stock options

B) Convertible preferred stock

C)  Convertible bonds

D)  Treasure stock

12. Under the pre-2019 accounting standards, how are operating leases reported in the lessee’s balance sheet?

A) As an asset that is depreciated, similar to the company’s other assets.

B) As either a short-term or long-term liability, depending on the length of the lease

C) At the present value of the future minimum lease payments.

D) Operating leases are not reported on a company’s balance sheet.

13. FunTimes, Inc., reported the following items in the 2012 pension footnote (in millions).

     The company’s pension expense for the year is:

A)   $654 million

B)   $452 million

C)   $592 million

D)   $514 million

Problem 2: Fixed Asset Analysis and Impairment Charge (14 points)

1. The 2013 financial statements of Willamette Valley Vineyards include the following footnote:

Compute the average useful life for Willamette’s depreciable assets in 2013, and interpret this ratio.

1. Plastix Inc. bought a molding machine for $555,000 on January 1, 2016. The company expected to use this machine to extrude plastic toys for the next eight years. The salvage value of the machine at the end of eight year is $45,000.  On January 1, 2018, Plastix Inc.’s accountants estimate that the machine will generate $390,000 in future cash inflows from customers and the fair value of the machine is $345,000. Plastix uses straight-line depreciation.

1. What is the net book value of the machine on January 1, 2018?

 Ans: $ ________________

1. Is this machine impaired on January 1, 2018?  Why?

c.   If the machine is impaired, what is the impairment loss on January 1, 2018?

Ans: $ ________________ impairment loss

Problem 3: Bond Pricing and Amortization (13 points)

Innovative Component Inc. needed financing to build a new manufacturing plant. On January 1, 2014, Innovative Component issued $400,000 of 8% bonds that pay interests semiannually and mature in 10 years. The bonds were sold for $428,400 to yield a 7% annual rate.

1. Fill out the basic information needed for pricing the bonds Innovative Component issued in January 20014.

            Principal amount: __________________   

            Semiannual coupon rate: __________________ 

Semiannual market rate: ___________________ 

            Discount periods: _____________________ 

 b. Fill out the amortization table. Round every number to the nearest dollar amount.

1. After the issuance of bonds in 2014, the market price of the bonds increased in year 2016. How does the increase in market price affect Innovative Component’s interest expense reported on its income statement for the year of 2016?   

Increase        Decrease       No change            (Circle one)

Problem 4:  Contributed and Earned Capital (6 points)

Following is the stockholders’ equity section of the 2013 Kellogg Corporation balance sheet ($ in millions):

1. At what average price was the common stock issued as of 2013?

1. How many common shares were outstanding at year end 2013?

c.   What average price did Kellogg acquire its treasury stock as of year 2013?

Problem 5:  Dividends (10 points)

The following information is from 2013 statement of stockholders’ equity for Dynegy, Inc.

Assume the following transactions occurred during 2014.

May 6      Declared and issued a 7% stock dividend; the common stock market value was $18 per share.

Aug 25     Declared and paid a cash dividend of 75 cents per share

Dec. 6      Split stock 2-for-1

1. Prepare the journal entry to account for the transaction on May 6.

1. Prepare the journal entry to account for the transaction on August 25.

1. What is the effect of the stock split of Dec. 6 on the company’s total stockholders’ equity?

Increase        Decrease       No change            (Circle one)

Problem 6: Interpreting Pension Footnote (9 points)

The following pension information was disclosed by PACCAR Inc. in its 2016 annual report:

1. How much did PACCAR contribute to the pension plan during 2016?

1. What amount of pension benefits were paid to former PACCAR employees during 2016?

1. How did the benefits paid in (b) affect the pension obligation and the pension assets?

Benefits paid  Increase         Decrease      Do not affect     (Choose one)  pension obligation

Benefits paid  Increase         Decrease     Do not affect    (Choose one)  pension assets

1. What was the funded status of the pension plan in 2016?

             Ans: $ ________________ Underfunded    or    Overfunded   (Choose one)

Problem 7: Taxes (9 points)

MacBill purchased a sowing machine on January 1, 2019. For its sowing machines, MacBill uses straight-line depreciation for financial reporting purposes (US GAAP) and accelerated depreciation for tax purposes. Its useful life is 3 years. Assume income before depreciation is $1,000 in 2019. MacBill has a 30% income tax rate for all years. The depreciation table is as follows:

1. What is the tax expense on its income statements for the year 2019?

Ans: $ ________________

1. What is the cash amount paid for income taxes for the year 2019?

Ans: $ ________________

c.   How does depreciation affect deferred tax account during 2019?

Deferred tax asset           Deferred tax liability                   (Choose one)

Increase                           Decrease                                     (Choose one)

by the amount of $ ________________