ACCT 2020 exam 4

You will need to use Appendix 9 (p. 523). For the next 2 years, a lease is estimated to have an operating net cash inflow of $6,500 per year. What is the lease's present value using a 10% discount rate?

$11,281

Robin Corp. is made up of Division X and Division Y. The Division X's divisional segment margin is $34,300 and Division Y's divisional segment margin is $86,700. The total amount of common fixed expenses not traceable to the individual divisions is $95,600. What is the company's net operating income?

$25,400

The following selected data pertain to the Orange Division of McMillan Co. for the year just ended: Sales - $400,000 Operating Income - $40,000 Average operating assets - $100,000 Imputed interest rate - 10% What was McMillan's residual income for the year?

$30,000

You will need to use Appendix 9 (p. 523). The treasure of a firm has the opportunity to purchase a 15% mortgage with five years remaining for $10,000. If the firm purchases the mortgage, it will receive five annual payments of $3,000 each. If the firm requires a 12% return on all cash investments, the NPV of the mortgage will be:

$814

Suzy's Service Center is a computer service center. For the month of May, Suzy had the following operating statistics: Sales - $450,000 Operating Income - $25,000 Net profit, after tax - $8,000 Total assets - $500,000 Current Liabilities - $200,000 Long-Term Liabilities - $100,000 Cost of capital - 6% Weighted-average cost of capital - 8.5% Based on the above information, Suzy has an EVA of

($17,500)

Hollingsworth Co. presents accounts receivables in its 2018 balance sheet at $120,000, while the 2017 balance sheet indicated that accounts receivables had a balance of $100,000. Hollingsworth's percentage change in receivables is:

(120,000 - 100,000) / 100,000 = 20% Increase

On July 14, Dalton Co. collected a receivable due from a major customer. Which of the following ratios is increased by this transaction?

Accounts receivable turnover.

You will need to use Appendix 9 (pp. 523). The expected annual net cash inflow from a project is $50,000 over the next 10 years. The required investment now in the project is $282,510. What is the internal rate of return on the project?

12%

An investment project is expected to yield $10,000 in annual revenues, will incur $2,000 in fixed costs per year, and requires an initial investment in inventory of $5,000. Given cost of goods sold is 60% of sales, what is the payback period in years?

2.50

The following information pertains to Dalton Co.'s Purple Division for the year just ended: Sales - $311,000 Variable Costs - $250,000 Fixed Costs - $50,000 Average assets - $40,000 Imputed interest rate - 10% Dalton's ROI was:

27.50%

The capital budgeting technique known as net present value uses:

Cash flow over the life of the project - Yes; Time value of money - Yes

A useful tool in financial statement analysis is the common-size financial statement. What does the tool enable the financial analyst to do?

Compare the mix of assets, liabilities, capital, revenue, and expenses within a company over time or between companies within a given industry without respect to relative size.

Which of the following is a strength of the payback method?

D It is easy to understand.

Which of the following is not a cost of decentralization?

Decreased cost of corporate-level staff services and management talent.

Non-financial performance measures are important to engineering and operations managers in assessing the quality levels of their products. Which of the following indicators can be used to measure product quality? I. Returns and allowances II. Number and types of customer complaints III. Production cycle time

I and II only.

Benchmarking allows an organization to:

Identify and adopt practices that lead to better performance.

A weakness of the internal rate of return approach for determining the acceptability of investments is that it:

Implicitly assumes that the firm is able to reinvest project cash flows at the project's internal rate of return.

If a company converts a short-term note payable into a long-term note payable, this transaction will

Increase both working capital and the current ratio

Employee satisfaction is:

Leading Indicator - Yes; Qualitative - Yes

Using the balanced scorecard approach, an organization evaluates managerial performance based on:

Multiple financial and non-financial measures

Which of the following measures is not related to the learning and growth perspective?

Order processing time

ROI is a popular measure employed to evaluate the performance of corporate segments because it incorporates all of the major ingredients of profitability (revenue, cost, and investment) into a single measure. Under which of the following combinations of actions regarding a segment's revenue, costs, and investment would a segment's ROI always increase?

Revenues - Increase; Costs - Decrease; Investment - Decrease

Robin Corp. has the following information for the year ended December 31: Operating income $900,000 Interest expense (100,000) Income before tax $800,000 Income tax expense (320,000) Net income $480,000 Preferred stock dividends (200,000) Net income available to common shareholders $280,000 Common stock dividends were $120,000. The times-interest-earned ratio is:

TIE = (Net Income + Interest Exp + Income tax) / Income tax (480,000 + 100,000 + 320,000) / 100,000 = 9.0

The net present value method of capital budgeting assumes that cash flows are reinvested at:

The discount rate used in the analysis.

The primary difference between centralization and decentralization is:

The extent of freedom of decision making by many levels of management.

Phil Co. reports inventory at $110,000, $112,000, and $116,000 on its balance sheet for 2016, 2017, and 2018, respectively. When Phil Co. examines the trend in inventory, 2018 will be:

Trend Analysis Current Year / Base Year 116,000/110,000 = 105.5%