Accounting and Financial Management: Final Assignment Questions and Answers Help

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INTRODUCTORY ACCOUNTING CONCEPTS

Debits and credits

What are the debits and credits for the following transactions?

1. Sell for cash payment of $60 and AR of $20 inventory with a COGS of $30

A.  Debit Cash $60

Debit Accounts receivable $20

Credit Inventory $30

Credit Owners equity $50

B.  Credit Cash $60

Credit Accounts receivable $20

Debit Inventory $30

Debit Owners equity $50

C.  Debit Cash $20

Debit Accounts receivable $60

Credit Inventory $50

Credit Owners equity $30

2.  Write down inventory by $70

A.  Debit Inventory $70

Credit Owners equity $70

B.  Credit inventory $70

Debit Owners equity $70

C.  Credit Inventory $70

Debit PPE $70

3.    Sell for $90 cash PPE that has a book cost of $50 and tax cost of $10. Show both book and tax debits and credits net of tax assuming 35% tax Which answer is correct?

A.

B.

C.

Accrual accounting

4.   Assume a fiscal year end of December

Company X purchases $100 worth of inventory on December 30, 2016. Company X purchases $100 worth of inventory on December 31, 2016. Company X purchases $100 worth of inventory on January 1, 2017.

Company X sells one-third of their inventory on December 31, 2017 and the other two- thirds of their inventory on January 1, 2018.

What amount, if any, would appear on the 2017 income statement (as cost of goods sold)?

What amount, if any, would appear on the 2017 cash flow statement (as increase in inventory)?

A.  COGS: $50; Cash flow: $50

B.  COGS: $60; Cash flow: $180

C.  COGS: $100; Cash flow: $0

D.  COGS: $100; Cash flow: $100

INCOME STATEMENT

Revenue – EBITDA

Table 1

5.  In the results in Table 1, is the increase in 2011 revenue price or volume driven?

A.  Price

B.  Volume

C.  Both price and volume

D.  Can’t be determined

6.  In Table 1, is sales growth rate increasing or decreasing?

A.  Increasing

B.  Decreasing

7.  Which is a cash costs in S,G&A

A.  Stock based pay

B.  Provision for doubtful accounts

C.  Depreciation and amortization

D.  Rent, insurance, salaries

8.  You must calculate EBITDA for Company X for 2017. What is the correct EBITDA for 2017?

A.  $137

B.  $143

C.  $147

D.  $135

Also Read: Financial Management Assignment Questions with Answers

EBIT – EPS

9.  You purchase a 5 year asset for $1,500.

Pretax pre-depreciation income is $500.

The tax rate is 35%.

In year 5 what is the $ difference between book and cash (tax) taxes?

A.  Book taxes are higher by $55.02

B.  Cash taxes are higher by $55.02

C.  Cash taxes are lower by $127.20

D.  Book taxes are lower by $127.20

Fully diluted EPS

10.  A company states 2 EPS numbers: $1.75/share and $1.65/share. Which is most likely the fully diluted EPS?

A.  $1.75

B.  $1.65

BS ASSETS

Current assets

11.  You purchase marketable securities for $1,000. 1 week later they are worth $900. You do make a change to the BS?

A.  True

B.  False

Get Answer on ACCT 606 Financial Management for Accountants

Accounts receivable

12.  Regarding accounts receivable, “Provision for doubtful accounts” represent a cash expense.

A.  True

B.  False

Aging of receivables

The following is true of Company X accounts receivable: (use for next 2 questions)

13.  Today is March 1, 2021. What % of receivables is between 31-60 days overdue?

A.  16%

B.  40%

C.  50%

D.  58%

Inventory

FIFO, LIFO

14.  You operate a convenience store. In 2017 you used FIFO inventory accounting. You bought a can of Coke on Jan 1 for $0.70, Jan 2 for $0.70 and Jan 3 for $0.80. You sold a can of Coke on Jan 5 for $1.00 and Jan 6 for $1.05. In 2011 you switch to LIFO inventory accounting and must restate 2010 to determine if a tax refund or payment is due. Is restated taxable income higher or lower using LIFO as applied to 2017?

A.  Lower by $0.10

B.  Higher by $0.10

C.  The same

D.  Lower by $0.20

Intangible assets and goodwill

15.  Goodwill is an intangible asset and valued just like patents and trademarks.

A.  True

B.  False

BS LIABILITIES

Current liabilities

Short term debt

16.  Notes payable often called revolving credit is NOT generally used for:

A.  Buying inventory

B.  Meeting payroll

C.  Making payments to suppliers

D.  Buying PPE

Also Read: ACCT 606 Financial Management for Accountants Assignment

Long term liabilities

Long term debt covenants (and default)

17.  A debt covenant states that the borrower must maintain the ratio of EBITDA/Interest expense > 2:1. If EBITDA is $100 and interest expense is $60, is the company in technical default?

A.  Yes

B.  No

C.  Can’t be determined

D.  Depends on other covenants

STOCKHOLDERS EQUITY

Preferred stock

18.  A company issues an 8% dividend paying preferred stock that matures with a change of control (must be paid off) and with a liquidation preference of $100,000,000 at a time when the company’s public equity value (stock price * shares outstanding) = $500,000,000. Five years later, the company is sold (a change of control requiring repayment of preferred) for $1,500,000,000. In this case the preferred would receive:

A.  $300,000,000 (1/5 * $1,500,000,000)

B.  $100,000,000

C.  $750,000,000

D.  $0

Common stock

19.  There are 100 shares of Company X. Company X will 1) raise new money by selling new shares and 2) current shareholders will sell 10 of their shares. The new owners will control 25% of the company. How many NEW shares will Company X issue? (Hint: 90 shares will own 75% of company at offering).

A.  10

B.  20

C.  25

D.  120

Retained earnings

20.  Retained earnings is not to be confused with cash. Retained earnings represents all wealth earned by company but not paid out. It is NOT cash but an accounting concept. If retained earnings at 12/31/18 is $400 and during 2014 the company 1) earns (net income) $130 and 2) pays a CASH dividend of $1 share (300 shares outstanding), how much will retained earnings be at 12/31/19?

A.  $400

B.  $620

C.  $230

D.  $830

21.  A company’s public equity (stock price * shares outstanding) = $1,000,000,000 while its book equity (Assets – Liabilities) = $400,000,000. What causes the difference?

A.  Market value of company Assets are worth more than book value on balance

B.  Future earning potential by effectively using the assets (making software within the office building) exceeds the current market value of the

C.  Investors are foolish and sometimes pay excessive prices for

D.  A or B

CASH FLOW STATEMENT

22.  Cash inflows less cash outflows excluding financing inflows will equal the change in the cash account on the BS from one period to the next.

A.  True

B.  False

23.  The cash flow statement is dividend into 3 parts – cash flow from 1) operations, 2) investing, 3) financing.

A.  True

B.  False

24.  CF from operations equals cash generated or used in the course of operating the It is derived from adding to net income non-cash components of net income including deferred taxes plus net change in working capital. Which of the 2 parts of CF from operations directly results from accrual accounting?

A.  Adding deferred taxes to non-cash components of net income

B.  Changes in working capital

25.  If cash flow from investing (purchase of property, plant and equipment) exceeds cash flow from operations, the company must either ________or                       .

A.  Not make the investment; go bankrupt

B.  Borrow; use balance sheet cash

C.  Lend; accumulate balance sheet cash

D.  It could never be the case that cash flow from investing exceeds cash flow from operations

26.  Which of the following line items directly affects all three statements (IS, BS, CF).

A.  Depreciation

B.  Net income

C.  COGS

D.  A & B

27.  Both of the following companies generate the same cash flow in Does that mean that they are equally successful?

A.  No, Company 1 generated more cash flow from operations. It is superior.

B.  No, Company 2 borrowed more money meaning it is a better credit risk.

C.  Company one was required to invest more, a negative.

D.  Both are equal

FINANCIAL STATEMENT ANALYSIS

28.  You analyze an income statement in a growing company in which gross margin is increasing while the operating income margin is This means that:

A.  Fixed costs grew faster than variable costs

B.  Variable costs grew faster than fixed costs

C.  Both variable and fixed costs grew at the same rate

D.  Prices declined

29.  You analyze a wholesale business that shows increasing days receivable. This means that:

A.  Customers are paying their bills faster

B.  The wholesaler may have switched to higher margin items

C.  Days payable will certainly also increase

D.  All business is cash on delivery

30.  Days inventory on hand is increasing from 30 to 40 but margins also increase from 15% to 30%. A plausible explanation for the increasing days inventory is:

A.  Selling higher margin harder to sell

B.  Raised prices on current merchandise making it harder to sell

C.  Selling lower margin but unpopular goods that take longer to sell

D.  A or B

E.  A or C

F.  B or C

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