B3. (Cash dividend versus share repurchase) Consider a firm that has decided to make, but has not yet announced, a large “bonus” cash dividend amounting in the aggregate to $5 million. The firm has 1 million shares outstanding that sell for $20 each. The firm has no debt; there are no taxes; and all transactions take place in a perfect capital market. Using calculations like those in the illustration of dividend irrelevance in a perfect capital market, show that shareholders will be indifferent between whether the firm pays out the “bonus” as a dividend or uses the money to buy back $5 million of its shares.
Click here for the solution: Consider a firm that has decided to make, but has not yet announced
Showing posts with label not. Show all posts
Showing posts with label not. Show all posts
Thursday, September 10, 2015
Wednesday, September 2, 2015
In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component?
MULTIPLE CHOICE
1) In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component? (CMA adapted, 6/96)
2) You have been asked to help a student health center determine which costs will vary with the number of students who come to the health center. The health center employs one doctor, three nurses, and several other employees. How would you classify (1) the nurse's salary and (2) film and other materials used in radiology to give X-rays to students? The nurse’s salary would be considered a ______, while the film and other materials would be considered a ______.
3) Given the following information:
Sales $5,000
Fixed Expenses 2,000
Variable Expenses 1,750
What would expected net income be if the company experienced a 10 percent increase in fixed costs and 10 percent increase in sales volume?
4) Pete's Pizza Place wishes to determine which of its costs will vary with the number of pizzas made. The Pizza Place has four pizza makers and ten other employees who take orders from customers and perform other tasks. The four pizza makers and the other employees are paid an hourly wage. How would one classify (1) the wages paid to the pizza makers and other employees and (2) materials (e.g., cheeses, sauce, etc.) used to make the pizza? The employees’ wages would be considered a ______, while the materials to make the pizza are a ______.
5) Which of the following statements is (are) true?
(1). An asset is a cost that will be matched with revenues in a future accounting period.
(2). Opportunity costs are recorded as intangible assets in the current accounting period.
6) If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars) decrease, what will be the effect on the contribution margin ratio and the breakeven point respectively? The contribution margin ratio will _____ and the breakeven point will _____.
7) Which of the following activities would not be considered a value-added activity?
8) The development of just-in-time (JIT) methods of production focused on
9) The field of accounting that depends on generally accepted accounting principles (GAAP) is called
10) Inventoriable costs:
Click here for the solution: In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component?
1) In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component? (CMA adapted, 6/96)
2) You have been asked to help a student health center determine which costs will vary with the number of students who come to the health center. The health center employs one doctor, three nurses, and several other employees. How would you classify (1) the nurse's salary and (2) film and other materials used in radiology to give X-rays to students? The nurse’s salary would be considered a ______, while the film and other materials would be considered a ______.
3) Given the following information:
Sales $5,000
Fixed Expenses 2,000
Variable Expenses 1,750
What would expected net income be if the company experienced a 10 percent increase in fixed costs and 10 percent increase in sales volume?
4) Pete's Pizza Place wishes to determine which of its costs will vary with the number of pizzas made. The Pizza Place has four pizza makers and ten other employees who take orders from customers and perform other tasks. The four pizza makers and the other employees are paid an hourly wage. How would one classify (1) the wages paid to the pizza makers and other employees and (2) materials (e.g., cheeses, sauce, etc.) used to make the pizza? The employees’ wages would be considered a ______, while the materials to make the pizza are a ______.
5) Which of the following statements is (are) true?
(1). An asset is a cost that will be matched with revenues in a future accounting period.
(2). Opportunity costs are recorded as intangible assets in the current accounting period.
6) If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars) decrease, what will be the effect on the contribution margin ratio and the breakeven point respectively? The contribution margin ratio will _____ and the breakeven point will _____.
7) Which of the following activities would not be considered a value-added activity?
8) The development of just-in-time (JIT) methods of production focused on
9) The field of accounting that depends on generally accepted accounting principles (GAAP) is called
10) Inventoriable costs:
Click here for the solution: In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component?
Sunday, August 23, 2015
GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types
MULTIPLE CHOICE
1. GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types?
2. In the Statement of Net Assets for proprietary funds, GASB requires a classified format where current assets, noncurrent assets, current liabilities and noncurrent liabilities are presented:
3. Funds that are used to account for activities similar to those often engaged in by profit-seeking businesses are:
4. The operations of agency funds will be included in which of the following statements?
Click here for the solution: GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types
1. GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types?
2. In the Statement of Net Assets for proprietary funds, GASB requires a classified format where current assets, noncurrent assets, current liabilities and noncurrent liabilities are presented:
3. Funds that are used to account for activities similar to those often engaged in by profit-seeking businesses are:
4. The operations of agency funds will be included in which of the following statements?
Click here for the solution: GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types
Saturday, August 22, 2015
Which of the following is NOT one of the purposes of internal control?
MULTIPLE CHOICE
1. Which of the following is NOT one of the purposes of internal control? (Points : 1)
2. Journal entries must be made to record the reconciling items on the bank side of the reconciliation. (Points : 1)
3. If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to cash. (Points : 1)
4. Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made? (Points : 1)
5. The Allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount of Uncollectible account expense reported on the income statement? (Points : 1)
6. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? (Points : 1)
7. Which of the following is NOT a key element of good internal control? (Points : 1)
8. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of Uncollectible accounts expense reported on the income statement? (Points : 1)
9. A petty cash fund was established with a $400 balance. It currently has cash of $10 and petty cash tickets as shown below.
Travel expense $120
Office supplies $200
Equipment rental expense $70
The journal entry to replenish the account would be which of the following: (Points : 1)
10. In a bank reconciliation, an NSF check will be shown on the bank side of the reconciliation. (Points : 1)
Click here for the solution: Which of the following is NOT one of the purposes of internal control?
1. Which of the following is NOT one of the purposes of internal control? (Points : 1)
2. Journal entries must be made to record the reconciling items on the bank side of the reconciliation. (Points : 1)
3. If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to cash. (Points : 1)
4. Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made? (Points : 1)
5. The Allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount of Uncollectible account expense reported on the income statement? (Points : 1)
6. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? (Points : 1)
7. Which of the following is NOT a key element of good internal control? (Points : 1)
8. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of Uncollectible accounts expense reported on the income statement? (Points : 1)
9. A petty cash fund was established with a $400 balance. It currently has cash of $10 and petty cash tickets as shown below.
Travel expense $120
Office supplies $200
Equipment rental expense $70
The journal entry to replenish the account would be which of the following: (Points : 1)
10. In a bank reconciliation, an NSF check will be shown on the bank side of the reconciliation. (Points : 1)
Click here for the solution: Which of the following is NOT one of the purposes of internal control?
Tuesday, July 7, 2015
Compute the effective cost of not taking the cash discount under the following trade credit terms
Problem 4: Compute the effective cost of not taking the cash discount under the following trade credit terms:
a. 2/10 net 40
b. 2/10 net 50
c. 3/10 net 50
d. 2/20 net 40
Problem 5: What conclusions can you make about credit terms from reviewing your answers to Problem 4?
Click here for the solution: Compute the effective cost of not taking the cash discount under the following trade credit terms
a. 2/10 net 40
b. 2/10 net 50
c. 3/10 net 50
d. 2/20 net 40
Problem 5: What conclusions can you make about credit terms from reviewing your answers to Problem 4?
Click here for the solution: Compute the effective cost of not taking the cash discount under the following trade credit terms
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