Careers in managerial accounting (A+)

Careers in managerial accounting

400 words paper

Click here for the SOLUTION

Posted in Homework Help | Comments Off

Assume that the projections were the best the firm could accomplish in 2010 (A+)

Assume that the projections were the best the firm could accomplish in 2010. Is your group completely satisfied that the firm’s performance and financial condition will be ideal in 2010? If not, identify the steps that you would recommend that Southeast Chemicals might be able to implement in 2011 and beyond in order to improve their performance. Remember, there is no one way to do this – many paths could be taken. Be certain that your recommendations are realistic and could be accomplished within the time frame that you are suggesting! For example, you might believe that the firm’s investment in a given asset is too high. Tell me in detail how you plan to reduce the amount of capital tied up in that asset. If the asset happens to be accounts receivable, refrain from making statements such as: “we recommend that the firm offer a 2/10, net 30 discount so customers will pay faster.” The case does not stipulate the firms selling terms, therefore the firm might already be offering a discount of say, 2/10, net 30. If the aforementioned is the extent of your recommendation, it would reflect the fact that you did not give serious thought to this issue If accounts receivable are, in fact, a problem, I expect you examine how a firm could reduce their investment in receivables. This will take some research and you will need to explain in detail the changes you recommend as well as how you will implement them. Bear in mind that this is just an example of one asset. Your group might believe that the firm has issues with one or more assets. Similarly, your group might feel that the firm is going about obtaining the capital needed for growth in the wrong way. If so, explore other methods of raising capital and discuss the pros & cons of raising capital

Click here for the SOLUTION

Posted in Homework Help | Comments Off

Which one of the following statements concerning financial leverage is correct (A+)

Which one of the following statements concerning financial leverage is correct?

a) The benefits of leverage are unaffected by the amount of a firm’s earnings.

b) The use of leverage will always increase a firm’s earnings per share.

c) The shareholders of a firm are exposed to greater risk anytime a firm uses financial leverage.

d) Earnings per share are unaffected by changes in a firm’s debt-equity ratio.

e) Financial leverage is beneficial to a firm only when the firm has minimal earnings.

12. A 10-year bond pays 11 percent interest on a $1000 face value annually. If it currently sells for $1,195, what is its approximate yield to maturity?

a) 9.33%

b) 7.94%

c) 12.66%

d) 8.10%

13. Which of the following is true regarding bonds?

a) Most bonds do not carry default risk.

b) Municipal bonds are free of default risk.

c) Bonds are not sensitive to changes in the interest rates.

d) Moody’s and Standard and Poor’s provide information regarding a bond’s interest rate risk.

e) None of the above is true

14. Two years ago, MorningStar Company issued seven percent, 25-year bonds and Track, Inc. issued seven percent, 10-year bonds. Since their time of issue, interest rates have increased. Which of the following statements is true of each firm’s bond prices in the market, assuming they have equal risk?

a) Track’s decreased more than Morningstar’s

b) Morningstar’s increased more than Track’s

c) Morningstar’s decreased more than Track’s

d) They are both priced the same

15. A call provision in a bond agreement grants the issuer the right to:

a) Repurchase the bonds prior to maturity at a pre-specified price.

b) Replace the bonds with equity securities.

c) Repurchase the bonds after maturity at a pre-specified price.

d) Change the coupon rate, provided the bondholders are notified in advance.

e) Buy back the bonds on the open market prior to maturity.

1. Which of the following is true regarding put bonds?

a) Have coupons that depend on the company’s income

b) Can be exchanged for a fixed number of shares before maturity only

c) Can be exchanged for a fixed number of shares before maturity

d) Allow the holder to require the issuer to buy the bond back

2. The term debenture refers to

a) Long-term, secured debt.

b) Long-term, unsecured debt.

c) The after-acquired property clause.

d) A document covering the specific terms of the debt issue.

3. Company A has a bond outstanding with $90 annual interest payment, a market price of $820, and a maturity date in five years. Assume the par value to be $1,000. What is the bond’s current yield?

a) 9%

b) 14%

c) 11%

d) Cannot be determined

e) None of the above

4. (Which one of the following practices will reduce a firm’s collection float?

a) utilizing zero-balance accounts

b) depositing checks weekly, rather than daily

c) requiring all customers pay by check, rather than with cash

d) installing a lockbox system

e) paying all bills five days sooner

5. Storage and tracking costs, insurance and taxes, and losses due to theft are examples of:

a) Inventory depletion costs

b) Sunk costs

c) Inventory costs

d) None of the above

Click here for the SOLUTION

Posted in Homework Help | Comments Off

Which one of the following activities best exemplify working capital management (A+)

Which one of the following activities best exemplify working capital management?

a) Sale long-term bonds to raise funds for a new machine.

b) Determine the return of a potential project.

c) Calculate the cash flows for a project.

d) Manage payments to suppliers.

2. Market values reflect which of the following:

a) The amount someone is willing to pay today for an asset.

b) The value of the asset based on generally-accepted accounting principles.

c) The asset’s historical cost.

d) A and B only

e) None of the above

3. Use the following tax table to answer this question:

Taxable Income Tax Rate

$0- $50,000 15%

$50,001- 75,000 25

$75,001- 100,000 34

$100,001- 335,000 39

$335,001- 10,000,000 34

McKenzie, Inc. earned $144,320 in taxable income for the year. What is the company’s approximate average tax rate?

a) 27%

b) 29%

c) 31%

d) 33%

e) 35%

4. Regional Bank offers you an APR of 19 percent compounded semiannually, and Local Bank offers you an EAR of 19.50 percent for a new automobile loan. You should choose ______________ because its _______ is lower.

a) Regional Bank, APR

b) Local Bank, EAR

c) Regional Bank, EAR

d) Local Bank, APR

5. You deposited $11,000 in your bank account today. Which of the following will decrease the future value of your deposit, assuming that all interest is reinvested? Assume the interest rate is a positive value. Select all that apply:

a) a decrease in the interest rate

b) increasing the initial amount of your deposit

c) increasing the frequency of the interest payments

d) decreasing the length of the investment period

6. You want to have $15,000 for a down payment on a house five years from now. If you can earn 13 percent, compounded annually, on your savings, how much do you need to deposit today to reach your goal?

a) $7,858.11

b) $8,141.40

c) $9,803.58

d) $12,464.28

e) $14,213.25

7. Paper Pro needed a new store. The company spent $65,000 to refurbish an old shop and create the current facility. The firm borrowed 75 percent of the refurbishment cost at eight percent interest for 11 years. What is the amount of each monthly payment?

a) $91.05

b) $284.13

c) $556.50

d) $682.87

e) $731.60

8. Which type of loan is comparable to the present value of a future lump sum?

a) effective annual rate

b) amortized

c) interest-only

d) annual percentage

e) pure discount

9. Fanta Cola has $1,000 par value bonds outstanding at 12 percent interest. The bonds mature in 25 years. What is the current price of the bond if the YTM is 16 percent? Assume annual payments. (

a) $1315

b) $1300

c) $756

d) $1000

10. The market where one shareholder sells shares to another shareholder is called the _____ market.

a) primary

b) main

c) secondary

d) principal

e) dealer

Click here for the SOLUTION

Posted in Homework Help | Comments Off

A project has the following cash flows (A+)

A project has the following cash flows. What is the internal rate of return?

Year 0 1 2 3

Cash flow -$520,000 $112,900 $367,200 $204,600

a) less than 10%

b) approximately 14%

c) more than 16%

d) more than 18% but less than 20%

7. Which one of the following is a correct statement?

a) Current tax laws favor debt financing.

b) A decrease in the dividend growth rate increases the cost of equity.

c) An increase in the systematic risk of a firm will decrease the firm’s cost of capital.

d) A decrease in a firm’s debt-equity ratio will usually decrease the firm’s cost of capital.

e) The cost of preferred stock decreases when the tax rate increases.

8. The six percent preferred stock of FKH Manufacturing is selling for $62 a share. What is the firm’s cost of preferred stock, if the tax rate is 34 percent and the par value per share is $100?

a) 5.98%

b) 7.06%

c) 8.05%

d) 9.68%

e) 10.10%

10. Which of the following statements is true regarding the cost of capital?

a) The cost of capital should not consider any flotation costs.

b) All other being equal, it is preferable to use book value weights than market value weights.

c) The WACC is the most appropriate discount rate for all projects.

d) Depends primarily on the use of the funds, not the source.

11. Which of the following increases the cash account?

a) Goods are sold on credit

b) An interest payment on a notes payable is made

c) A payment due is received from a client

d) Raw materials are purchased and paid for with credit

12. Which of the following statements is true?

a) The optimal credit policy minimizes the total cost of granting credit.

b) Firms should avoid offering credit at all cost.

c) An increase in a firm’s average collection period generally indicates that an increased number of customers are taking advantage of the cash discount.

d) Character, refers to the ability of a firm to meet its credit obligations out its operating cash flows.

e) The optimal credit policy is the policy that produces the largest amount of sales for a firm.

13. All else constant, a decrease in the accounts receivable period will:

a) Lengthen the accounts payable period.

b) Shorten the inventory period.

c) Lengthen the operating cycle.

d) Shorten the cash cycle.

e) Shorten the accounts payable period.

14. The Yellow Box has the following estimated quarterly sales for next year. The accounts receivable period is 45 days. What is the expected accounts receivable balance at the end of the third quarter? Assume each month has 30 days.

Q1 Q2 Q3 Q4

Sales $1,200 $1,400 $1,800 $1,700

a) $600

b) $750

c) $900

d) $1,050

e) $1,200

15. Which one of the following actions best matches the primary goal of financial management?

a) increasing the net, working capital while lowering the long-term asset requirements

b) improving the operating efficiency, thereby increasing the market value of the stock

c) increasing the firm’s market share

d) reducing fixed costs and increasing variable costs

e) increasing the liquidity of the firm by transferring short-term debt into long-term debt

Click here for the SOLUTION

Posted in Homework Help | Comments Off

Which of the following statements is true regarding systematic risk (A+)

Which of the following statements is true regarding systematic risk?

a) is diversifiable

b) is the total risk associated with surprise events

c) it is not project or firm specific

d) it is measured by standard deviation

12. Which statement is not true regarding risk?

a) the expected return is always the same as the actual return

b) a key to assess risk is determining how much risk an investment adds to a portfolio

c) risks can not always be diversified

d) the higher the risk, the higher the return investors require for the investment

13. The stock of Chocolate Galore is expected to produce the following returns, given the various states of the economy. What is the expected return on this stock?

State of Economy Probability of State of Economy Rate of Return

Recession .02 -.06

Normal .88 .11

Boom .10 .17

a) 7.33 percent

b) 9.82 percent

c) 11.26 percent

d) 11.33 percent

e) 11.50 percent

14. You own a portfolio that consists of $8,000 in stock A, $4,600 in stock B, $13,000 in stock C, and $5,500 in stock D. What is the portfolio weight of stock D?

a) 17.68 percent

b) 17.91 percent

c) 18.42 percent

d) 19.07 percent

e) 19.46 percent

15. You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. The one stock has a beta of .80. What does the beta of the second stock have to be if you want the portfolio risk to equal that of the overall market?

a) 1.4

b) 1.6

c) 1.8

d) 2.0

e) 2.2

1. If the financial markets are strong form efficient, then:

a) Only the most talented analysts can determine the true value of a security.

b) Only company insiders have a marketplace advantage.

c) Technical analysis provides the best tool to gain a marketplace advantage.

d) No one person has an advantage in the marketplace.

e) Every security offers the same rate of return.


2. Royal Petroleum Co. can buy a piece of equipment that can be financed with debt at an after-tax cost of 8 percent and common equity at a cost of 20 percent. Assume debt and common equity each represent 50 percent of the firm’s capital structure. What is the weighted average cost of capital?

a) between 4% and 10%

b) between 11 and 12%

c) between 12 and 13%

d) exactly 14%

e) more than 14%

3. An issue of common stock is expected to pay a dividend of $4.80 at the end of the year. Its growth rate is equal to eight percent. If the required rate of return is 13 percent, what is its current price?

a) $103.68

b) $36.92

c) $96.00

d) none of these

4. Which of the following is true regarding the cost of debt?

a) It is the same as cost of equity.

b) It is the interest rate that the firm pays on current/existing borrowing.

c) An appropriate method to compute the cost of debt is using the YTM of current bonds outstanding.

d) All of the above are true.

5. Retained earnings has a cost associated with it because:

a) New funds must be raised.

b) There is an opportunity cost associated with stockholder funds.

c) Ke> g

d) Flotation costs increase the cost of funding.

Click here for the SOLUTION

Posted in Homework Help | Comments Off

Which of the following is true regarding the evaluation of projects (A+)

Which of the following is true regarding the evaluation of projects?

a) sunk costs should be included

b) erosion effects should not be considered

c) financing costs are not included

d) opportunity costs are irrelevant

2. There are several disadvantages to the payback method, among them:

a) Payback ignores the time value of money.

b) Payback can be used in conjunction with time adjusted methods of evaluation.

c) Payback is easy to use and to understand.

d) None of the above is a disadvantage.

3. A net present value of zero implies that an investment:

a) Has no initial cost.

b) Has an expected return that is less than the required return.

c) Should be rejected even if the discount rate is lowered.

d) Never pays back its initial cost.

e) Is earning a return that exactly matches the requirement.

4. Portman’s is considering adding a new product to its lineup. This product is expected to generate sales for three years, after which time the product will be discontinued. What is the project’s net present value, if the firm wants to earn a 12 percent rate of return?

Year 0 1 2 3

Cash flow -$62,000 $10,730 $20,190 $40,340

a) $7,611.08

b) $6,795.61

c) $1,084.41

d) $4,862.07

e) $9,682.26

5. Howard Company is considering a new project that will require an initial cash investment of $575,000. The project will produce no cash flows for the first three years. The projected cash flows for years 4 through 8 are $73,000, $112,000, $124,000, $136,000, and $145,000, respectively. How long will it take the firm to recover its initial investment in this project?

a) 5.81 years

b) 6.05 years

c) 6.96 years

d) 7.90 years

e) This project never pays back

6. The postponement of a project until conditions is more favorable:

a) Is a valuable option.

b) Is referred to as the option to extend.

c) Could not cause a negative net present value project to become a positive net present value project.

d) Will generally cause the internal rate of return for a project to decline.

7. ____________, refers to the situation a firm faces when it has positive net present value projects, but cannot obtain financing for those projects.

a) Capital planning.

b) Soft rationing.

c) Capital rationing.

d) Hard rationing.

e) A sunk cause.

8. ABC Cameras is considering an investment that will have a cost of $10,000 and the following cash flows: $6,000 in year 1, $4,000 in year 2 and $3,000 in year 3. Assume the cost of capital is 10%. Which of the following is true regarding this investment?

a) The net present value of the project is approximately $10,000

b) This project should be accepted because it has a positive net present value

c) This project’s payback period is 10 years or more

d) None of the above is true

10. Assume a corporation has earnings before depreciation, and a tax of $100,000, depreciation of $40,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company?

a) $82,000

b) $110,000

c) $42,000

d) none of these

Click here for the SOLUTION

Posted in Homework Help | Comments Off

Management Services, Inc. provides services to clients (A+)

Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $30,000 for 6-months contract in advance. Management Services’ general journal entry to record this transaction will include a

a) Debit to Management Fees Earned for $30,000.

b) Credit to Cash for $30,000.

c) Debit to Unearned Management Fees for $30,000.

d) Credit to Unearned Management Fees for $30,000.

e) Credit to Management Fees Earned for $30,000.


During the month of June, David Company had cash receipts of $5,600 and cash disbursements of $8,900. The June 30 cash balance was $2,600. What was the May 31 beginning cash balance?

a) $6,300.

b) $3,000.

c) $0.

d) $5,900.

e) $11,900.


Stride Rite has total assets of $455 million. Its total liabilities are $110 million. Its equity is $330 million. Calculate the debt ratio.

a) 113.6%.

b) 33.3%.

c) 72.5%.

d) 24.2%.

e) 29.6%.


Rocky Industries received its telephone bill in the amount of $300 and immediately paid it. Rocky’s general journal entry to record this transaction will include a

a) Credit to Telephone Expense for $300

b) Debit to Cash for $300

c) Debit to Telephone Expense for $300

d) Debit to Accounts Payable for $300

e) Credit to Accounts Payable for $300


The first step in the analyzing and recording process is to analyze each transaction and event from source documents.

a) True

b) False


On December 15, 2008, Ann Consulting Services signed a $40,000 contract with a client to provide Consulting services to the client in 2009. Which accounting principle would require Ann Consulting Services to record the Consulting fees revenue in 2009 and not 2008?

a) Cost principle

b) Going-concern principle

c) Revenue recognition principle

d) Business entity principle

e) Monetary unit principle


How would the accounting equation of Jesintha Company be affected by the billing of a client for $30,000 of consulting work completed?

a) +$30,000 accounts receivable, – $30,000 consulting revenue.

b) +$30,000 accounts receivable, +$30,000 consulting revenue.

c) +$30,000 accounts receivable, +$30,000 accounts payable.

d) +$30,000 accounts receivable, -$30,000 accounts payable.

e) +$30,000 accounts receivable, +$30,000 cash.


Expenses decrease retained earnings and are the costs acquired to earn revenues.

a) True

b) False

Click here for the SOLUTION

Posted in Homework Help | Comments Off

On December 31 the balance in the Prepaid Insurance account was $4,000 (A+)

On December 31 the balance in the Prepaid Insurance account was $4,000. This is the remaining balance of a twelve-month policy purchased on October 31 in the current year. How much did this policy originally cost?

a) $4,000

b) $4,364

c) $3,333

d) $4,800

e) $5,333


On April 1, 2009 a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2009?

a) $450.00.

b) $337.50.

c) $37.50.

d) $1350.00.

e) $387.50.


A company had revenue of $270,000, rent expense of $12,000, utility expense of $5,500, salary expense of $20,500, depreciation expense of $11,000, advertising expense of $6,500, dividends in the amount of $20,000, and a beginning balance in retained earnings of $19,900. What is the amount in the income summary account before it is closed for the period?

a) $55,500

b) $270,000

c) $234,400

d) $250,100

e) $214,500


MOP Co. leased a portion of its store to another company for eight months beginning on October 1, 2009 at a monthly rate of $1,000. This other company paid the entire $8,000 cash on October 1, which MOP Co. recorded as unearned revenue. The journal entry made by MOP Co. at year- end on December 31, 2009 would include:

a) A debit to Cash for $8,000.

b) A debit to Unearned Rent for $5,000.

c) A debit to Rent Earned for $3,000.

d) A credit to Rent Earned for $3,000.

e) A credit to Unearned Rent for $3,000.


Failure to record depreciation expense will overstate the asset and understate the expense.

a) True

b) False


A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is:

a) 2%

b) 200%

c) $8,000

d) 20%

e) 500%


Adjusting entries are made after the preparation of financial statements.

a) True

b) False


Adjusting entries are used to record the effects of internal economic (financial) transactions and events.

a) True

b) False


The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.

a) True

b) False


These transactions were completed by the art gallery opened by Thomas Buckner.

(1.) Started the gallery, Artery, by investing $38,000 cash and equipment valued at $10,000 in exchange for common stock.

(2.) Purchased $60 of office supplies on credit.

(3.) Paid $2,300 cash for the receptionist’s salary.

(4.) Sold a painting for an artist and collected a $4,700 cash commission on the sale.

(5.) Completed an art appraisal and billed the client $400.

What was the balance of the cash account after these transactions were posted?

a) $43,100.

b) $42,760.

c) $40,400.

d) $40,360.

e) $45,460.

Click here for the SOLUTION

Posted in Homework Help | Comments Off

The management of Revco Products is exploring four different investment opportunities (A+)

The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows:

Project Number 1 2 3 4

Investment required $(486,000) $(351,000) $(267,000) $(445,000)

(Present value of Cash inflows at

a 10% discount rate.) 558,900 428,220 333,750 498,400

Net present value $72,900 $77,220 $66,750 $53,400

Life of the project 6 years 3 years 12 years 6 years

Internal rate of return 11% 8% 18% 19%

The company’s required rate of return is 10%; thus, a 10% discount rate has been used in the present value computations above. Limited funds are available for investment, so the company can’t accept all of the available projects.

Requirement 1:

Compute the project profitability index for each investment project.

Requirement 2:

Rank the four projects according to preference, in terms of net present value, project profitability index and internal rate of return.

Net Present Value Project

Profitability Index Internal Rate of


First preference

Second preference

Third preference

Fourth preference

Click here for the SOLUTION

Posted in Homework Help | Comments Off