Question

In: Accounting

Bad Wolf Productions purchased property for $100,000. $20,000 of value was assigned to the land. The...

  1. Bad Wolf Productions purchased property for $100,000. $20,000 of value was assigned to the land. The buildings were assigned a 20-year useful life. Bad Wolf Productions uses the double-declining depreciation method. After year 4, assuming all entries were properly recorded, what is the value of Accumulated Depreciation?
    1. 18,549
    2. 34,390
    3. 14,840
    4. 27,512
  2. The income statement includes all information relevant to the profit and loss of an individual company throughout the year.
    1. True
    2. False
  3. Earnings management violates GAAP and is always the result of unethical practices.
    1. True
    2. False
  4. Changing from LIFO to FIFO will result in
    1. Restatement of prior period
    2. Recast of prior period
    3. No change in reporting
    4. Additional disclosures only
  5. Rose Tyler recently took over the monthly reporting for David and noticed that the Company has omitted amortizing prepaid insurance for the last 6 months. This will require
    1. Restatement of prior period
    2. Recast of prior period
    3. No change in reporting
    4. Additional disclosures only
  6. Calculate EPS given Net Income of $200,000, Preferred Dividend of $40,000, Common Stock Dividend of $30,000. Number of Preferred Shares is 100,000. Number of Common Shares is 200,000.
    1. $1.00
    2. $0.65
    3. $0.80
    4. $1.60
  7. The following would be represented as positive cashflow for Operating Activity using the indirect method
    1. Issuance of Debt
    2. Sale of Property
    3. Increase of Accounts Receivable
    4. Depreciation Expense
  8. The following would be represented as a negative cashflow for Operating Activity
    1. Loan to subsidiary
    2. Payment of dividend
    3. Decrease in Accounts Payable
    4. Increase in Inventories
  9. To determine which company has stronger liquidity, you would use the
    1. EPS
    2. Debt to assets
    3. Free Cash Flow
    4. Current Ratio
  10. Captain Jack’s Cracker Jack has awarded you the $1M prize. You have the option of receiving $650,000 now or $20,000 a year for the next 20 years, starting today. Your financial advisor has guaranteed a 3% rate of return.
    1. Take the $1M
    2. Take the $20,000/year
  11. If the Coupon Rate is 10% and the required rate of return on the investment is 5%, this is considered a
    1. Discount
    2. Premium
    3. Par Value
    4. Annuity Due
  12. A 5%, semiannual, $1M bond will make the following payments
    1. $50,000/year
    2. $25,000/6 months
    3. $100,000/2years
    4. None
  13. If the dividend in year 1 is expected to be $10 and grow by 5% each year. What is the most I’d be willing to pay today given a required rate of return of 10% and an expected sale value of $200 in year 3.
    1. 125.22
    2. 200.00
    3. 205.61
    4. 176.31

Solutions

Expert Solution

1. d) 27,512

Year Book Value Year Start Depreciation % Depreciation Expense Accumulated Depreciation Book Value year end
1                         80,000 10%                         8,000                                 8,000                      72,000
2                         72,000 10%                         7,200                               15,200                      64,800
3                         64,800 10%                         6,480                               21,680                      58,320
4                         58,320 10%                         5,832                               27,512                      52,488

2. False

3. False

4. d.Additional disclosures only

5. d.0.8

Net Income           200,000
Preferred Dividend             40,000
Net Income for Common shareholders           160,000
No. of Common shares           200,000
EPS                  0.8

6. c.Increase of Accounts Receivable

7. b.Payment of dividend

8.d.current ratio

9.a.Take the $1M

10.a.Discount

11.$25,000/6 months

12.76.31


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