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BADM622 MMW06 – Spring 2005 - Quiz #1 Page 1 of 10 Directions: This quiz has been made available to you on Thursday, March 3, 2005. This cover page and the completed answer sheets (pages 2 and 3) are to be emailed to me no latter than 4:00 p.m. on Tuesday March 8, 2005. Please use your 4 digit PIN as the file name (example: 1234.doc). If you cannot remember your PIN send me an email and I will refresh your memory. DO NOT RETURN PAGES 4 THROUGH 10 OF THIS EXAM. In addition to the emailed cover page and the answer sheets, you must submit a signed cover page via either a PDF file or fax (304-293-0635). DO NOT FAX YOUR ANSWER SHEETS. Be sure that your name or PIN appears on each page that you submit. There are 5 parts to the quiz. Each of the questions in Part 2 and Part 5 are worth 1 point each. All of the remaining questions on the quiz are worth 2 points each. There are a total of 90 possible points on the quiz. You may use your textbooks, class notes, and the instructor lecture notes for this quiz. You are not to discuss this exam with any of your classmates or any other person other than your instructor. I have zero tolerance with regards to academic dishonesty. Name (Print) _____________________________________________________ Last Name, First Name 4 digit PIN I hereby certify that I have completed this examination entirely on my own and without the assistance of any other person. I further certify that I did not received a copy of this exam in any form prior to March 3, 2005, and that I have not used any improper resources (including but not limited to exams from prior semesters or other classes) to complete this exam. Signature: _______________________________________________________ FAILURE TO FOLLOW THE ABOVE DIRECTIONS MAY RESULT IN A DEDUCTION OF UP TO 5 POINTS FROM YOUR QUIZ SCORE. BADM622 MMW06 – Spring 2005 - Quiz #1 Page 2 of 10 Answer Sheet. USE CAPITAL LETTERS FOR MULTIPLE CHOICE. PRINT ALL OTHER ANSWERS AS CLEARLY AS POSSIBLE. Part 2 Part 2 Part 1. Fin. Stmt. Component Fin. Stmt. Component 1) _____ 9) _____ __________ 15) _____ __________ 2) _____ 10) _____ __________ 16) _____ __________ 3) _____ 11) _____ __________ 17) _____ __________ 4) _____ 12) _____ __________ 18) _____ __________ 5) _____ 13) _____ __________ 19) _____ __________ 6) _____ 14) _____ __________ 20) _____ __________ 7) _____ 8) _____ Part 3 Part 4 21)__________ 26)__________ 31) ____________ 35) _______________ 22) __________ 27)__________ 32) ____________ 36) _______________ 23)__________ 28)__________ 33) ____________ 37) _______________ 24)__________ 29) __________ 34) ____________ 25)__________ 30) __________ Name (Type or Print) ______________________________ BADM622 MMW06 – Spring 2005 - Quiz #1 Page 3 of 10 Answer sheet (continued) Part 5. 38) ______________ 52)_______________ 39)_______________ 53)_______________ 40)_______________ 54)_______________ 41)_______________ 55)_______________ 42)_______________ 56)_______________ 43)_______________ 57)_______________ 44)_______________ 58)_______________ 45)_______________ 59)_______________ 46)_______________ 60)_______________ 47)_______________ 61)_______________ 48)_______________ 62)_______________ 49)_______________ 63)_______________ 50)_______________ 64)_______________ 51)_______________ 65)_______________ Name (Type or Print) ______________________________ BADM622 MMW06 – Spring 2005 - Quiz #1 Page 4 of 10 Part 1. Multiple Choice - Select the best response for each of the following questions. Indicate your response on the attached answer sheet. 1. Under which form of ownership structure would an individual owner be subject to the greatest financial risk with regards to the actions of the company? A. Sole proprietorship B. Partnership C. Corporation D. All of the above have equal risk. 2. Under which form of ownership structure would the owners of a company be most reliant on the financial statements of the company in understanding the results of operations and financial position of the company? A. Sole proprietorship B. Partnership C. Corporation D. All owners need financial statements to understand how a business is doing. 3. Which of the following equations accurately reflects the relationship between the components in each of the equations? A. Net Income = revenues less expenses plus gains less losses B. Assets = Liabilities + Owners Equity C. Owners Equity = Contributed Capital plus Retained Earnings plus Other Accumulated Comprehensive Income less Treasury Stock D. Retained Earnings = Retained Earnings at the beginning of the year plus net income earned during the year less dividends declared during the year. E. All of the above equations are correct. F. Only equations A and B above are correct. 4. Under which form of ownership structure would the distribution of profits of a company to the owners be considered an expense for the company? A. Sole proprietorship B. Partnership C. Corporation D. All of the above E. None of the above BADM622 MMW06 – Spring 2005 - Quiz #1 Page 5 of 10 5. In order for a set of financial statements to be complete in accordance with U.S. generally accepted accounting principles, the financial statements must include a balance sheet, an income statement, a statement of cash flows, a statement of changes in owners’ equity (or retained earnings) and which of the following: A. A narrative description by management of the results of operations and financial position of the company focusing on forward-looking information. B. Explanatory notes to the financial statements. C. A color glossy picture of the chairman of the board and chief executive officer of the company. D. A proxy statement E. A report from the independent accountants for the company. F. More than one of the above items is required. 6. By an Act of Congress, which of the following groups or agencies has the responsibility for establishing accounting standards in the United States? A. The American Institute of Certified Public Accountants. B. The Securities and Exchange Commission. C. The Financial Accounting Standards Board. D. The Generally Accepted Accounting Principles Board. E. The American Accounting Association. 7. Which of the following items would be included in current assets? A. Assets that are expected to be consumed in the operations of the company within the next six months. B. Assets that are expected to be converted to cash within the next 9 months. C. Assets that are expected to be converted to cash fifteen months after the balance sheet date. D. Assets that will be used by the company in many future fiscal years. E. A and B would be included as current assets. F. C and D would be included as current assets. 8. Transactions in which cash is exchanged after the earning process or economic substance occurs are referred to as which of the following? A. A cash basis transaction B. An accrued transaction C. A deferred transaction D. An adjusting entry transaction BADM622 MMW06 – Spring 2005 - Quiz #1 Page 6 of 10 Part 2. For each of the items listed below, first indicate on which of the financial statements the item will appear (BS for balance sheet, IS for Income Statement, OE for Statement of Changes in Owners’ Equity or CF for Statement of Cash Flows), and second for balance sheet and income statement items only, indicate if the item is a component of assets, liabilities, owners equity, revenues or expenses. Financial Statement Component Example: Cash BS Asset 9. Accounts receivable _____ __________ 10. Accounts payable _____ __________ 11. Inventory _____ __________ 12. Cost of goods sold _____ __________ 13. Dividends Paid _____ __________ 14. Treasury stock _____ __________ 15. Income taxes payable _____ __________ 16. Accumulated depreciation _____ __________ 17. Unearned (deferred) revenue _____ __________ 18. Accrued salaries payable _____ __________ 19. Property, plant & equipment _____ __________ 20. Dividends payable _____ __________ Be sure to record all of you answers on the answer sheet. BADM622 MMW06 – Spring 2005 - Quiz #1 Page 7 of 10 Part 3. Indicate the amount of revenue and/or expense that will be recognized in each of the following situations. Note that each of the situations are independent of the anothers unless specifically stated in the question. Your answers should be based solely on the information presented in each situation. Example: During the month of June a company provided $60,000 of consulting services and collected cash of $20,000 from customers. How much revenue should be recognized during the month of June? Answer. $60,000 revenue Or Answer. $20,000 revenue Or Answer. $40,000 revenue Note: record all of your answers on the answer sheet. 21. During the month of January, a newly formed company received capital contributions of $100,000 from investors, with a promise to receive an additional $200,000 in February. How much revenue should be recognized in January? 22. During the month of March a company purchased $85,000 of inventory paying cash, and purchased another $40,000 worth of inventory on account. How much expense should the company recognize in March as a direct result of these transactions. 23. At the beginning of the fiscal year a company had $150,000 of accounts receivable. During the fiscal year the company made cash sales of $1,500,000 and sales on account of $1,200,000. Accounts receivable at the end of the year was $250,000. How much sales revenue should be reported on the income statement for the fiscal year? 24. On March 31, 2002 a company paid $48,000 for a 12-month insurance policy covering the period April 1, 2002 through March 31, 2003. How much expense should the company recognize during the fiscal year ended December 31, 2002? 25. A company began the fiscal year with $68,000 of office supplies on hand. During the year the company purchased $270,000 of office supplies, paying cash of $245,000. The remaining $25,000 was still payable at the end of the fiscal year. Also at the end of the fiscal year, the company determined that there was only $30,000 of office supplies still on hand. How much Office Supplies Expense should the company recognize for the fiscal year? 26. In December of 2001, a company’s Board of Directors declared a $40,000 dividend payable to shareholders. $20,000 was paid in December and the remaining $20,000 was to be paid in June of 2002. How much expense will be recognized in December? BADM622 MMW06 – Spring 2005 - Quiz #1 Page 8 of 10 Part 3 Continued (use instructions from the previous page) Use the following for questions 27 and 28. During the month of July, a law firm provided $250,000 worth of legal services to clients at a cost to the firm of $100,000. The firm mailed invoices to the clients for these services in early August and received $200,000 in payments during August. The remaining $50,000 was received in early September. 27. How much revenue should the firm recognize in July? 28. How much expense should the firm recognize in July? 29. On September 1, 2002 a company borrowed $300,000 from a bank to provide needed working capital. The loan requires semi-annual payments of $50,000 plus interest at a rate of 5% per year. The first payment is due on March 1, 2003. How much interest expense will the company recognize during the fiscal year ended December 31, 2002? 30. In an effort to ensure satisfactory net income for the shareholders, the chief executive officer of a company decided that the company would not pay any bills that were received after December 15, 2002 until the following month. The Company’s fiscal year ends on December 31, 2002. As of December 31, 2002, a total of $80,000 of bills for services received in December was unpaid. In January the company received bills for an additional $20,000 worth of services received in December. Of the $100,000 in question, how much expense should be recognized in the fiscal year ended December 31, 2002? BADM622 MMW06 – Spring 2005 - Quiz #1 Page 9 of 10 Part 4. Use the following information to answer questions 31 through 37. Sandra’s Soccer Balls Inc. was founded on February 22, 2004, with a capital contribution of $5,000. The owners did not invest any additional funds in to the company. As of December 31, 2004, the Company had total assets of $35,000 and total liabilities of $18,000. Expenses from the date of incorporation through December 31, 2004 were $65,000 and the firm recognized net income of $12,000. (Answer questions 31 - 33) For the year ended December 31, 2005, the Company, recognized total revenues of $385,000. There were no additional capital contributions to the company by the owners during the year ended December 31, 2005. In December of 2005, the company made its first and only distribution of earnings to the owners, which amounted to $50,000. As of December 31, 2005 the Company had total assets of $325,000 and total retained earnings of $42,000. (Be sure to consider your answers for 31-33 when you attempt questions 34- 37) Note: You need not consider non-operating gains or losses, Treasury Stock or Other Accumulated Comprehensive Income/(Loss) for this problem. There were none. 31. What was the amount of total owners’ equity as of December 31, 2004? 32. What was the amount of retained earnings as of December 31, 2004? 33. What was the amount of total revenues recognized during the period ended December 31, 2004? 34. What was the amount of total owners’ equity as of December 31, 2005? 35. What was the amount of total liabilities as of December 31, 2005? 36. What was the net income recognized during the year ended December 31, 2005? 37. What was the total amount of expenses recognized during the year ended December 31, 2005? BADM622 MMW06 – Spring 2005 - Quiz #1 Page 10 of 10 Part 5 – Questions 38 through 65 relate to the Mylan Laboratories Inc. 2004 Annual Report to Shareholders, which can be downloaded from the course web sight or can be access on-line at http://www.mylan.com/shareholder/annuals/ Unless stated to the contrary, the questions relate to balances as of the end of the most recent fiscal year and/or activity for the year then ended. 38. Who are the independent auditors for Mylan? 39. On what pages of the annual report do Mylan’s complete US GAAP financial statements appear? 40. What is the last day of Mylan’s fiscal year? 41. What was the amount of total assets? 42. What was the amount of total liabilities? 43. How much working capital does Mylan have? 44. What is Mylan’s current ratio? 45. Compared to an industry norm current ratio of 2.5 to 1 is Mylan proportionately more liquid or less liquid? 46. What is Mylan’s debt to equity ratio? 47. Compared to the previous fiscal year does Mylan appear to have more or less financial flexibility as of the end of the most recent fiscal year? 48. Was Mylan’s comprehensive income more or less than its Net Income? 49. What was the percentage increase or decrease in Net Revenues from the previous fiscal year to the current fiscal year? 50. What was the gross profit as a percentage of net revenues? 51. Compared to the industry norm gross profit percentage of 72%, do Mylan’s products appear to be more or less valuable than those of the industry as a whole? 52. For every $1 of total revenue earned, how much did the company spend on selling and marketing? 53. What was Mylan’s effective tax rate? 54. What was Mylan’s profit margin? 55. What was the percentage change in diluted earnings per share from the prior year? 56. What was the return on equity for the most recent fiscal year? 57. What was the return on assets for the most recent fiscal year? 58. Did Mylan’s operating activities provide more or less cash flow than the previous year? 59. Did Mylan borrow any new amounts during the most recent fiscal year? 60. Did Mylan repurchase any shares of stock from investors during the most recent fiscal year? 61. What percentage of Mylan’s operating cash flows were used to pay dividends? 62. What percentage of Mylan’s operating cash flows were used to acquire capital assets? 63. Of Mylan’s total inventory how much was classified as finished goods? 64. Does Mylan have any “Goodwill” included in its financial statements? If yes is this an asset, liability or component of owners’ equity? 65. Does Mylan provide post-retirement medical benefits to its employees?