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StudentID: gjan17gl50 Strengths and Improvement Opportunities FADM II End Term Exam Course: Financial Accounting for

StudentID: gjan17gl50

Strengths and Improvement Opportunities

FADM II End Term Exam

Course: Financial Accounting for Decision Making II - OL (GMBA Jan 17 Tri - I) Instructor: Suraj Gupta Questions: 41

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1
1

The stock of Zamona was trading at $890 per share on April 10. When the company announced that it had recently discovered a new technology for smart retail stores. The stock price immediately went up to $910 per share. The company had 10,000,000 shares outstanding. Indicate the effects of this discovery on Zamona's financial statements. (1 Mark)

1/1

A:

B:

C:

D:

2
2

On January 1, 2016 SEA Company issued $200,000 in bonds payable. The bonds were issued at face value and carried 5-year term to maturity. They had a 8% stated rate of interest that was payable in cash on January 10th of each year beginning January 10, 2017. Based on this information, the amount of total liabilities appearing on the December 31, 2016 balance sheet would be: (1 Mark)

1/1

A: $200,000

 

B: $216,000

C: $16,000. D: $232,000.

3
3

Paya Lebar Company has a line of credit with the East Asia State Bank. Paya Lebar agreed to pay interest at an

annual rate equal to 2% above the bank's prime rate. Funds are borrowed or repaid on the first day of each month and interest is paid in cash on the last day of each month. Borrowing is shown as a positive amount, and repayments are shown as negative amounts indicated by parentheses. Activity to date is given as follows: (2

 

0/2

 

Marks)

The total interest paid for the three months period is:

A: 2000 B: 2375 C: 1565

 

D: 1734

4
4

You are considering an investment in Wal-Mart stock and wish to assess the firm's long-term debt-paying ability and its use of debt financing. All of the following ratios can be used to assess solvency except: (1 Mark)

1/1

A: Number of times interest is earned. B: Debt to equity ratio. C: Debt to assets ratio.

 

D: Net margin.

 
5
5

The following balance sheet information is provided for Hard Rock Company: (1 Mark) Assuming 2015 cost of goods sold is $120,000, what is the company's inventory turnover for 2015?

1/1

A: 3.15 times

 

B: 3.4 times

C: 4.5 times D: 2.75 times

6
6

Gleneagles Company has cash of $60,000, accounts receivable of $80,000, inventory of $50,000, and equipment of $200,000. Assuming current liabilities of $50,000, and long-term liabilities of $100,000 this company's net working capital is: (1Mark)

1/1

A: 120,000

 

B: 140,000

C: 190,000 D: 160,000

7
7

Jurong Company collected $10,000 on account. What impact will this transaction have on the firm's current ratio? (1 Mark)

1/1

A: Increase it B: Decrease it C: Requires more information

D: No impact

8
8

The study of an individual financial statement item over several accounting periods is called: (1 Mark)

1/1

A: Horizontal analysis

B: Vertical analysis. C: Ratio analysis. D: Time and motion analysis.

9
9

Financial statement analysis involves forms of comparison including: (1 Mark)

1/1

A: Comparing changes in the same item over a number of periods. B: Comparing key relationships within the same year. C: Comparing key items to industry averages.

D: All of these answer choices are correct.

10
10

Labrador Company has a Debt -Equity Ratio of 1.5. The total liabilities for Labrador were $300. The company had earned a net income of $ 25 million for the year 2016. The return on equity (ROE) for the company is: (2 Marks)

0/2

A: 15% B: 12.5% C: 20% D: 10%

11
11

Common methods of financial statement analysis include all of the following except: (1Mark)

1/1

A: Horizontal analysis B: Vertical analysis C: Ratio analysis

D: Incremental analysis

12
12

Amazon has reported the following Sales and average account receivables for the period 2012 to 2016. (2 Marks) What is the Average days to collect receivables in the year 2015? Use 365 days in a year

0/2

A: 212 B: 150 C: 195 D: 237

13
13

Planman Consulting wants to have minimum net working capital of $ 5 million and a minimum current ratio of 1.5. The required amount of current assets and current liabilities of Planman would be: (2 Marks)

2/2

A:

B:

C:

D:

14
14

Alexandra Company is seeking a short-term loan from its local bank. The banker needs assurance that the company will be able to repay the loan. Which of the following ratios will be more useful to the bank to assess the payment capability of Alexandra. (1 Mark)

1/1

A: Earnings per share B: Dividend Yield

C: Times interest earned

D: Days to pay the accounts payables

15
15

Boeing Company reported the following revenue (USD billion) for the period 2012 to 2016. (2 Mark) Which of the following statements is incorrect?

2/2

A: The growth in sales from 2012 to 2013 is more than the growth in sales from 2013 to 2014 B: The growth in sales from 2014 to 2015 is the highest during the period C: The growth in sales from 2015 5o 2016 is the least during the period

D: The growth in sales from 2013 to 2014 is 8%

16
16

On the statement of cash flows, the sum of the three major components (operating activities, investing activities, financing activities) adds up to (1 Mark)

0/1

A: Net income for the period. B: Net change in the cash and cash equivalents

C: Closing cash balance for the period

D: Income before taxes

17
17

Which of the following items would be used to compute "Net Cash Flow from Investing Activities" on a Statement of Cash Flows? (1 Mark) One - Issue common stock Two - payment of principal on note payable Three - depreciation expense Four - sale of equipment for cash

1/1

A: One and Four B: One, Two, Three, and Four

C: Four only

D: Three only

18
18

On June 1, 2016, the Promenade Company purchased equipment for $80,000 making a down payment of $30,000 cash and signing a one-year note payable on the balance. The note carried an interest rate of 10%, and all interest was to be paid on the maturity date. Which of the following correctly shows the combined effect of the purchase as well as the accrual of interest on December 31, 2017? (Note: Ignore depreciation. Direct method is used) (2 Marks)

0/2

A:

B:

C:

D:

19
19

On October 1, 2016, the Tanah Merah Company purchased equipment for $50,000 making a down payment of $25,000 cash and signing a one-year note payable on the balance. The note carried an interest rate of 10%, and all interest was to be paid on the maturity date. Which of the following correctly shows the combined effect of the purchase as well as the accrual of interest on December 31, 2016? (Note: Ignore depreciation; Direct method is used).(2 Marks)

2/2

A:

B:

C:

D:

20
20

On December 31, 2016, Red Hill Company signed a contract to perform $55,000 worth of services for the Orchard Company over the next three years. Which of the following indicates the effects of this event on the income statement and statement of cash flows of Red Hill on December 31, 2016. (1 Mark)

0/1

A:

B:

C:

D:

21
21

On January 1, 2016, the Outram Company purchased equipment for $60,000 cash. The equipment will be depreciated on a straight-line basis for 10 years without any salvage value. On December 31, 2016, depreciation was recorded. Which of the following correctly shows the combined effect of these two events on the income statement and statement of cash flows? Outram uses the Direct Method. (1 Mark)

1/1

A:

B:

C:

D:

22
22

During 2016 Resorts World Sentosa Company had the following changes in account balances. Use this information to determine the Cash Flow from financing activities and Cash Flow from Investing Activities (2 Marks) Statement 1) The Accumulated Depreciation account had a beginning balance of $35,000 and an ending balance of $45,000. The increase was due to depreciation expense. Statement 2) The Long-Term Notes Payable account had a beginning balance of $60,000 and an ending balance of $75,000. The increase was due to issue of debt. Statement 3) The Equipment Account had a beginning balance of $20,000 and an ending balance of $80,000. The increase was due to the purchase of equipment. Statement 4) The Long Term Investments Account (Marketable Securities) had a beginning balance of $15,000 and an ending balance of $10,000. The decrease was due to the sale of investments at cost. Statement 5) The Dividends Payable account had a beginning balance of $15,000 and an ending balance of $10,000. There was $30,000 of dividends declared during the period. Statement 6) The Interest Payable account had a beginning balance of $5,250 and an ending balance of $1,250. The difference was due to the payment of interest.

0/2

A:

B:

C:

D:

23
23

Clarke Quay Company sold land that had cost $50,000 for $70,000 cash. Which of the following is the correct statement (1 Mark)

1/1

A: The $20,000 gain would be subtracted from net income in the operating activities section using the indirect method. B: 50,000 would appear as a cash inflow from investing activities and $20,000 would be added in the operating activities section using the indirect method.

C: The $20,000 gain would be subtracted from net income in the operating activities section using the indirect method and $70,000 would appear as a cash inflow from investing activities.

D: $70,000 would appear as a cash inflow from investing activities.

24
24

Which of the following statements is not true for Operating Activities section of a cash flow statement (1 Mark)

1/1

A: FASB recommended the direct method to prepare the Operating activities section of the cash flow statement B: Most companies follow indirect method to prepare the Operating activities section

C: Depreciation is not to be adjusted under the indirect method to prepare the Operating Activities section

D: Total Cash Flow from Operating activities should be the same under Direct and Indirect Methods

25
25

Which of the following is a Non-cash Investing and Non-cash financing activity (1 Mark)

1/1

A: Purchased equipment from a vendor for $ 1million and issued stock of the company in return

B: Issue of Common stock for $100 million to buy the new technology C: Borrowed $100 million from FNB Bank to construct new facility D: Issued $5 million preferred stock to the supplier to purchase raw material

26
26

Amazon has done the stock split for three times as shown in the following table. If you were holding 100 shares before the first stock split in 1998, how many shares would you be having after the last stock split in 1999. You did not make any additional purchase or sale of Amazon's stock during this period. (2 Marks)

2/2

A: 900 B: 1500 C: 700

D: 1200

27
27

Which of the following is not a valid reason for Stock-Split (1 Mark)

1/1

A: A corporation may split its stock in order to reduce the market value of stock. B: A lower price will make the shares more affordable to investors

C: A stock split is used to increase the earnings per share

D: A stock split increases the trading of the stock in the stock market

28
28

PSA Corporation had 40,000 shares of $20 par value common stock outstanding and declared a four-for-one stock dividend. How many new shares of stock would then be outstanding and what would be the par value of the new stock? (1 Mark)

1/1

A: 10,000 shares, and 5 par value

B: 200,000 shares, and 20 par value

C: 10,000 shares, and 20 par value D: 100,000 shares and 10 par value

29
29

Which of the following is the correct explanation for Par Value of a stock (1 Mark)

1/1

A: "Par value" is an arbitrary value assigned to stock when it is authorized.

B: Par value is arrived at after adding the retained earnings to paid-in capital C: Par value is the value of stock repurchased D: Par value is always above the market price of the stock

30
30

Which of the following statement is not correct for Cumulative Preferred Stock? (1 Mark)

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A: Cumulative preferred stock is stock whose dividends accumulate from year to year when dividends are not declared. B: Preferred Stock holders are granted 10 votes for every one preferred share held C: If dividends are declared, the preferred shareholders must first be paid both current year and any dividends in arrears before the common shareholders can be paid dividends.

D: Preferred Stock dividend is a fixed rate on par value

31
31

Harper Co. declared a 2-for-1 stock split. Before that announcement, Harper had 10,000,000 shares of outstanding common stock. The number of shares outstanding after the stock-split is implemented: (1 Mark)

1/1

A: 5,000,000 B: 10,000,000 C: 15,000,000

 

D: 20,000,000

32
32

On January 1, 2017 the Pasir Company borrowed $500,000 cash from SN Bank by issuing a five-year 10% term note. The principal and interest are repaid by making annual payments beginning on December 31, 2017. The annual installment on the loan would be $131,899. The amount of principal repayment included in the December 31, 2017 payment is: (1 Mark)

1/1

A: 81, 899

B: 92,362 C: 100,000 D: 85,321

33
33

The Hort Corporation issues a 10-year note payable on January 1, 2016 for $5,000. The interest rate is 6% and the annual payment of $1,156, due each December 31, includes both interest and principal. Which of the following answers correctly shows the effect of the issuance of the note on Hort's financial statements at the time of issue? (1 Mark)

1/1

A:

B:

C:

D:

34
34

Which of the following correctly describes an installment note? (1 Mark)

0/1

A: An installment note requires equal interest payments with the entire principal balance paid at maturity.

B: An installment note requires equal payments of interest and principal in which the amount of interest increases over the life of the note. C: An installment note requires equal payments of interest and principal in which the amount of interest decreases over the life of the note. D: The installment note requires decreasing payments of interest and principal in which the amount of interest remains constant over the life of the note.

35
35

Which of the following is not a feature of Line of Credit (1 Mark)

1/1

A: A line of credit enables firms to borrow a limited amount of funds on an as-needed basis. B: Applications need only be completed once; repayments and borrowings can be accomplished whenever the borrower desires C: The borrower has greater flexibility when a line of credit is established prior to the actual need

D: The borrower has to take the approval from SEC to create a line of credit

36
36

Which of the following repayment structures maintains the same interest payment every year? (1 Mark)

1/1

A: Bullet Structure

B: Amortization Structure C: Sinking Fund Structure D: None of the above

37
37

On January 1, 2016, Florence Co. issued $200,000 of bonds at the face value. Interest is paid in cash on December 31 of each year. Indicate the effects of the payment of interest on 31/12/2016. (1 Mark)

1/1

A:

B:

C:

D:

38
38

On January 1, 2015, Buono Vista Co. issued 8%, $200,000 of bonds payable at the face value. When the bonds matured on December 31, 2022, Buono repaid the bonds at face value. The interest was paid on 31st December every year. The effect of this transaction on the cash flow statement prepared on 31st December 2020 will be: (1 Mark)

1/1

A: $200,000 outflow in Operating Activities B: $200, 000 inflow in Financing Activities C: $216,000 outflow in Financing Activities

D: $ 16,000 outflow in Operating Activities

39
39

On January 1, 2015, Kent Ridge Co. issued 10%, $100,000 of bonds payable at the face value. When the bonds matured on December 31, 2022, the total cash outflow on December 31, 2022 will be: (1 Mark)

1/1

A: $100,000 B: $90,000

C: $110,000

D: $ 10,000

40
40

Bogle Company has 5 million equity shares outstanding on 31.12.2016. The company has declared a 2-for-1 stock dividend. The number of shares outstanding after the stock dividend is completed would be (1 Mark)

0/1

A: 2.5 million B: 5 million C: 15 million

D: 10 million

41
41

On January 1, 2016, Marina Bay Co. issued $300,000 of bonds with an interest rate of 10% p.a. paid at the end of each year. The following financial statements will be effected on December 31, 2016 (1 Mark)

1/1

A: Income Statement and Balance Sheet B: Income Statement Alone C: Balance Sheet Alone

D: Income Statement, Balance Sheet and Cash Flow Statement

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