Corporate Finance
Midterm Exam
Course Introduction
Corporate Finance explores the fundamental principles and techniques used in the financial management of corporations. This course covers topics such as capital budgeting, risk analysis, cost of capital, financing decisions, dividend policy, and corporate valuation. Students will learn how companies make decisions regarding investments, financing, and distributing earnings to maximize shareholder value. Emphasis is placed on both theoretical frameworks and practical applications, equipping students with the skills to analyze financial information, evaluate investment opportunities, and understand the strategic implications of financial decisions in a corporate context.
Recommended Textbook
Managerial Accounting 4th Edition by John Wild
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16 Chapters
2594 Verified Questions
2594 Flashcards
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Page 2
Chapter 1: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) The manufacturing statement is also known as the schedule of manufacturing activities or the schedule of cost of goods manufactured.
A)True
B)False
Answer: True
Q2) Newly completed units are combined with beginning finished goods inventory to make up total ending goods in process inventory.
A)True
B)False
Answer: False
Q3) For a manufacturer, the cost of goods sold can be computed by adding the beginning finished goods inventory to ________________________ and then subtracting the ending finished goods inventory.
Answer: cost of goods manufactured
Q4) A manufacturer's inventory that is not completely finished is called
.
Answer: goods in process
Q5) A _________________ cost contains a combination of fixed and variable costs. Answer: mixed
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Chapter 2: Job Order Costing and Analysis
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Sample Questions
Q1) The balance of the Factory Overhead account appears on the income statement.
A)True
B)False
Answer: False
Q2) Selwyn's Service applied overhead on the basis of direct labor costs during the current year.Overhead applied was $16,500.Actual overhead incurred was $17,200.
A.Prepare a journal entry to remove this difference assuming that it is not material.
B.Instead, assume actual overhead incurred was only $24,000.Describe (without computations)the alternative procedure that Selwyn might use to record this material difference.
Answer:
11ea83b1_f414_1bd0_b139_15f66207c877_TB6311_00_TB6311_00_TB6311_00_TB6311_00
B.Since the $7,500 difference is material, it should be allocated among Cost of Goods Sold, Finished Goods, and Goods in Process.
Q3) _______________________, or customized production, produces products in response to customer orders.
Answer: Job order manufacturing
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Page 4
Chapter 3: Process Costing and Analysis
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Sample Questions
Q1) Materials and labor costs that are clearly associated with a specific process are known as ___________________.Those costs that are not clearly associated with a specific process are called ________________.
Answer: direct costs, indirect costs.
Q2) Describe the flow of materials in a process cost accounting system, including accounts used.
Answer: When raw materials are purchased, they are debited to a Raw Materials Inventory account.When direct materials are needed in a production department, a materials requisition or materials consumption report is used to move the materials from the storeroom to the production department.Direct materials used are recorded with a debit to the Goods in Process Inventory for that department and a credit to Raw Materials Inventory.Indirect materials used in a department are recorded with a debit to Factory Overhead and a credit to Raw Materials Inventory.The Factory Overhead is subsequently allocated to the Goods in Process account for each production department.
Q3) The _____________ method of process costing assigns costs to units assuming a first-in, first-out flow of product.
Answer: FIFO
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Chapter 4: Activity-Based Costing and Analysis
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Sample Questions
Q1) The ________________________ overhead rate method uses multiple volume-based measures to allocate overhead costs to products.
Q2) Refer to the data in the preceding tables.How much overhead cost will be assigned to each product line using activity-based costing (ABC)?
A)Dog food: $462,500; cat food: $462,500.
B)Dog food: $860,000; cat food: $65,000.
C)Dog food: $60,000; cat food: $45,000.
D)Dog food: $800,000; cat food: $20,000.
E)Dog food: $320; cat food: $320.
Q3) Compute Aztec's departmental overhead rate for the mixing department based on direct labor hours.
A)$1.50 per DLH.
B)$5.00 per DLH.
C)$0.75 per DLH.
D)$0.50 per DLH.
E)$2.08 per DLH.
Q4) In competitive markets, price is established through the forces of _______________ and _______________.
Q5) The ________________________ is the target of the cost assignment.
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Chapter 5: Cost Behavior and Cost-Volume-Profit Analysis
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179 Verified Questions
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Sample Questions
Q1) A firm produces and sells a product with a contribution margin of $32 per unit.The firm is presently selling 90,000 units and earning $240,000 in after-tax income.Taxes are $80,000 at a 25% tax rate.If the firm desires to increase its after-tax income to $300,000, how many more units must it sell?
Q2) A special case of cost-volume-profit analysis is:
A)Least-squares point.
B)Step-wise point.
C)Composite margin point.
D)Break-even point.
E)Cost point.
Q3) A_______________ cost is one that remains unchanged in amount when volume of activity varies from period to period within a relevant range.A ______________ cost is one that changes in proportion to changes in volume of activity.
Q4) __________________ is the amount by which the unit selling price of a product exceeds its per unit variable cost.
Q5) The ratio of the volumes of the various products sold by a company is called the ______________________________.
Q6) Discuss how CVP analysis can be useful in planning.
Page 7
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Chapter 6: Variable Costing and Performance Reporting
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Sample Questions
Q1) Under variable costing, the product unit cost consists of _______________________,direct materials, and variable overhead.
Q2) Managers should accept special orders provided the special order price exceeds full cost.
A)True
B)False
Q3) Fomtech, Inc.had net income of $750,000 based on variable costing.Beginning and ending inventories were 50,000 units and 48,000 units, respectively.Assume the fixed overhead per unit was $.75 for both the beginning and ending inventory.What is net income under absorption costing?
A)$751,500
B)$676,500
C)$823,500
D)$748,500
E)$750,000
Q4) Assume a company sells a given product for $83 per unit.Variable selling costs are $20.75 per unit and variable production costs are $49.80 per unit.If the company breaks even when selling 300,000 units, what are total fixed costs?
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Page 8
Chapter 7: Master Budgets and Performance Planning
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Sample Questions
Q1) Budget preparation is best determined in a top-down managerial approach.
A)True
B)False
Q2) Merchandising companies prepare the production budget after preparing the sales budget.
A)True
B)False
Q3) What is a manufacturing budget?
Q4) There are at least five benefits from budgeting.Identify two of these benefits: (1)_______________________________________ (2)_______________________________________
Q5) What is a production budget?
Q6) A managerial accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is called a(n):
A)Rolling balance sheet.
B)Continuous balance sheet.
C)Budgeted balance sheet.
D)Cash balance sheet.
E)Operating balance sheet.
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Chapter 8: Flexible Budgets and Standard Costing
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Sample Questions
Q1) Which of the following variances is not used in a standard cost system?
A)Variable overhead spending variance.
B)Fixed overhead spending variance.
C)Variable overhead efficiency variance.
D)Fixed overhead efficiency variance.
E)Fixed overhead volume variance.
Q2) The following company information is available: \[\begin{array} { l l }
\text { Direct materials used for production } & 712 \text { pounds } \\ \text { Standard quantity for units produced } & 750 \text { pounds } \\
\text { Stardard cost per pound of direct material } & \$ 48 \\ \text { Actual cost per pound of direct material } & \$ 50 \end{array}\] The direct materials quantity variance is:
A)$1,824 favorable
B)$1,424 favorable
C)$400 favorable
D)$1,824 unfavorable
E)$1,424 unfavorable
Q3) Identify and explain the primary differences between fixed and flexible budgets.
Q4) Prepare the journal entry to record the direct materials purchases and the issuance of direct materials into production.
Page 10
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Chapter 9: Performance Measurement and Responsibility Accounting
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Sample Questions
Q1) What is the purpose of a responsibility accounting system?
Q2) The China Department of the Coulsen Department Store had sales of $282,000, cost of goods sold of $198,750, indirect expenses of $19,875, and direct expenses of $41,250 for the current period.What is the China Department's contribution to overhead as a percentage of sales?
Q3) In producing oat bran, the joint cost of milling the oats into bran, oatmeal, and animal feed is considered a direct cost to the oat bran, because the oat bran cannot be produced without incurring the joint cost.
A)True
B)False
Q4) Profit margin measures how efficiently an investment center generates sales from its invested assets.
A)True
B)False
Q5) A cost center does not directly generate revenues.
A)True
B)False
Q6) List the steps required to prepare a departmental income statement.
Q7) What is a cost center?
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Chapter 10: Relevant Costing for Managerial Decisions
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Sample Questions
Q1) A company has the choice of either selling 1,000 defective units as scrap or rebuilding them.The company could sell the defective units as they are for $4.00 per unit.Alternatively, it could rebuild them with incremental costs of $1.00 per unit for materials, $2.00 per unit for labor, and $1.50 per unit for overhead, and then sell the rebuilt units for $8.00 each.What should the company do?
A)Sell the units as scrap.
B)Rebuild the units.
C)It does not matter because both alternatives have the same result.
D)Neither sell nor rebuild because both alternatives produce a loss.Instead, the company should store the units permanently.
E)Throw the units away.
Q2) A markup percentage equals total costs divided by desired profit.
A)True
B)False
Q3) What is the difference between an opportunity cost and a sunk cost?
Q4) Incremental costs are also called out-of-pocket costs.
A)True
B)False
Q5) Explain and give several examples of qualitative decision factors.
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Chapter 11: Capital Budgeting and Investment Analysis
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Sample Questions
Q1) The process of analyzing alternative investments and deciding which assets to acquire or sell is known as:
A)Planning and control.
B)Capital budgeting.
C)Variance analysis.
D)Master budgeting.
E)Managerial accounting.
Q2) Which methods of evaluating a capital investment project ignore the time value of money?
A)Net present value and accounting rate of return.
B)Accounting rate of return and internal rate of return.
C)Internal rate of return and payback period.
D)Payback period and accounting rate of return.
E)Net present value and payback period.
Q3) Three widely used methods of comparing investment alternatives are payback period, net present value, and rate of return on average investment.
A)True
B)False
Q4) How can management evaluate the risk of an investment?
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Chapter 12: Reporting and Analyzing Cash Flows
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Sample Questions
Q1) When preparing the operating section of the statement of cash flows using the indirect method, a decrease in accounts receivable is subtracted from net income.
A)True
B)False
Q2) A statement of cash flows should reconcile the differences between the beginning and ending balances of:
A)Net income.
B)Equity.
C)Cash and cash equivalents.
D)Working capital.
E)Cash, cash equivalents and short-term investments.
Q3) Cash flows from interest received are reported in the statement of cash flows as part of:
A)Operating activities.
B)Financing activities.
C)Investing activities.
D)Noncash activities.
E)None of these as this is not reported in the statement of cash flows.
Q4) Explain how to determine cash flows from investing and financing activities.
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Chapter 13: Analyzing Financial Statements
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Sample Questions
Q1) A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75.The company's dividend yield equal is equal to 21.4%.
A)True
B)False
Q2) An extraordinary gain or loss is one that is both ________________ and _________________.
Q3) Profitability is the ability to generate positive market expectations.
A)True
B)False
Q4) General-purpose financial statements include the (1)___________________, (2)___________________, (3)_____________________________, (4)________________________ and (5)_____________________________.
Q5) A company's sales in 2012 were $280,000 and its sales in 2013 were $341,600.Using 2012 as the base year, what is the sales trend percent for 2013?
Q6) Explain the form and content of a complete income statement.
Q7) David and Tom Gardner created The Motley Fool to help investors.What do David and Tom believe is their mission?
Page 15
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Chapter 14: Time Value of Money
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Sample Questions
Q1) Annette has a loan that requires a $25,000 payment at the end of three years.The interest rate on the loan is 5%, compounded annually.How much did Annette borrow today?
Q2) Chad is setting up a retirement fund, and he plans on depositing $5,000 per year in an investment that will pay 7% annual interest.How long will it take him to reach his retirement goal of $69,080?
A)13.816 years
B)0.072 years
C)10 years
D)20 years
E)5 years
Q3) A company is setting aside $21,354 today and wishes to have $30,000 at the end of three years for a down payment on a piece of property.What interest rate must the company earn?
Q4) A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in seven years.The fund will earn 7% interest, and the company intends to put away a series of equal year-end amounts for seven years.What amount must the company deposit annually?
Q5) An _____________ is a series of equal payments occurring at equal intervals.
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Chapter 15: Basic Accounting for Transactions
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Sample Questions
Q1) Hamilton Industries has total liabilities of $105 million and total assets of $350 million.Its debt ratio is 333.3%.
A)True
B)False
Q2) Land and buildings are generally recorded in the same ledger account.
A)True
B)False
Q3) Management Services, Inc.provides services to clients.On May 1, a client prepaid Management Services $60,000 for a six-month contract in advance.Management Services' journal entry to record this transaction will include a:
A)Debit to Unearned Management Fees for $60,000.
B)Credit to Management Fees Earned for $60,000.
C)Credit to Cash for $60,000.
D)Credit to Unearned Management Fees for $60,000.
E)Debit to Management Fees Earned for $60,000.
Q4) Misa Chien and Jennifer Green founded Nom Nom Truck.What are some accounting challenges they faced when starting their business?
Q5) ___________________ is a promise of payment from customers to sellers.
Q6) Explain how accounts are used in recording information about transactions.
Page 17
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Chapter 16: Accounting for Partnerships
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Sample Questions
Q1) When the current value of a partnership is greater than the recorded amounts of equity, the current partners usually require any new partner to pay a bonus for the privilege of joining.
A)True
B)False
Q2) Juanita invested $100,000 and Jacque invested $95,000 in a new partnership.They agreed to a $50,000 annual salary allowance to Juanita and a $40,000 annual salary allowance to Jacque.They also agreed to an annual interest allowance of 10% on the partners' beginning-year capital balance, with the balance to be divided equally.Under this agreement, what are the income or loss shares of the partners if the annual partnership income is $102,000?
Q3) Durango and Verde formed a partnership with capital contributions of $150,000 and $190,000, respectively.Their partnership agreement called for Durango to receive a $50,000 annual salary allowance.They also agreed to allow each partner a share of income equal to 10% of their initial capital investments.The remaining income or loss is to be divided equally.If the net income for the current year is $120,000, what are Durango's and Verde's respective shares?
Q4) When a partner invests in a partnership, his/her capital account is __________ for the invested amount.
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