Version A – 51 Questions
Questions Dealing with Talented TAs
Kellen, Meagan, Andrew, Ralph, Brenda, Christine, and Chris started a business selling a
new product - a "read-only" MP3 player (an MP3 player with music burned into
The user could only listen to the music that was on the player.
product configuration contained forty Grateful Dead concerts - almost 160 hours of
The business was started as an Internet business requiring a very small initial
Indeed, the partners pooled all their cash and came up with $15,000.
day the cash was raised, March 1, 2006, the company started business as a partnership
with the name Talented TAs (TTA).
In the first month TTA quickly acquired a server
and an initial stock of players.
The server was purchased for $4,000 cash and had an
expected useful life of two years.
At the end of the two years the server could be sold for
The initial 200 players were purchased from a supplier for $8,000 of which $3,000
was paid on delivery and the balance was due in 60 days.
Rent and utilities were $1,000
per month, prepaid at the beginning of the month.
The selling price of the product was
established at $100.
1) Suppose that as of March 31, 2006 TTA had sold 100 players from the initial
purchase, all for cash.
Assume that the next order from TTA's supplier was not due
to arrive until April 1st and the only non-current asset held by TTA was the server.
the player supplier is not paid early, what is the total book value of TTA's Liabilities
plus Shareholders’ Equity on March 31, 2006?
More than $26,000
b) Between $25,500 and $25,999
Between $25,000 and $25,499
d) Between $24,500 and $24,999
Less than $24,500
2) Suppose that instead of selling 100 players for cash, TTA had sold 50 players for cash
and 50 players to customers who would pay in 60 days.
What EBIT would TTA
show on the March 2006 one-month income statement?
More than $5,500
b) Between $5,000 and $5,499
Between $4,500 and $4,999
d) Between $4,000 and $4,499
Less than $4,000
3) Suppose TTA was able to sell 50 players for cash and 50 players to customers who
would pay in 50 days.
What would TTA show as cash on the March 31, 2006
More than $11,500
b) Between $11,000 and $11,499
Between $10,500 and $10,999
d) Between $10,000 and $10,499
Less than $10,000
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