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3A-W%2708-EXAM%231%e2%80%93KEY - a Econ 3A Financial...

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Unformatted text preview: a. Econ 3A - Financial Accounting - W'08 Exam #1 - 100 points (Show all your work. Use good form. Answer all questions in you bluebook.) ANSWER KEY PROBLEM 1 (40 points) (All except per share and percentage amounts are in millions.) For the year 2006, duPont reported sales of $27,421, net income of $3,148, and earnings per share of $3.41. Average common shares outstanding for the year were 920. What was the dollar amount, if any, that duPont paid in preferred dividends in 2006? Net income — Preferred dividends EPS = A verage common shares outstanding 3, 148 — X 3.41 = _ ________ 920 X = 1 1 (nearest million) Note: Sales are irrelevant For the year 2006, Colgate-Palmolive reported cash flow from operations of $1,821, capital expenditures of $476, princip_* payments on debt of $1,332, and dividends paid of $677. Compute Colgate’s free cash flow for 2006. *Also, is it principal or principle? Free cash flow = CFFO — Cap eX — Dividends Free cash flow: 1,821 — 476 — 677 Free cash flow = 668 Principal Note that principal payments on debt are irrele vant As of year-end 2006, Alcoa reported $37,183 of total assets. A credit analyst determined that liability holders had a 44% “equity cushion.” What dollar amount did Alcoa report for total liabilities at year-end 2006? An equity cushion of 44% means that the debt to total assets ratio was 56% Total liabilities Debt to TA : Total assets Econ 3A—W‘08 — Exam# 1 ANSWER KEY — p1 .56 X = 20,822 (rounded) What category of assets accounts for the greatest dollar amount of assets on the balance sheet of a typical railroad such as Burlington Northern Santa Fe? What valuation basis is used in the balance sheet for assets in that category? Do such reported values reflect current market values? Why or why not. PPE Cost, less accumulated depreciation Does NOT reflect market values Market values are not objectively measurable, Whereas cost is PricewaterhouseCoopers audited Bank of America’s 2006 financial statements. Complete the following partial sentences from its audit report: “We conducted our audits...in accordance with the standards of the “In our opinion, the accompanying...[financial statements] present fairly...financial position...in accordance with [US] ” To what qualitative characteristic does the audit function most relate? Public Company Accounting Oversight Board Generally accepted accounting principles (principles, not principals) Reliability PROBLEM 2 (60 points) The following transactions and events occurred during the first year (calendar year 2007) of Accounting Jokes Unlimited, Inc, a new internet-based supplier of accounting jokes. FAQ-*tbeovs» Stockholders contributed $10,000 in cash. Borrowed $30,000 from a bank with a good sense of humor. Paid cash of $25,000 for computers and other equipment. Billed Loster and other customers $40,000 for sales of accounting jokes. $33,000 was received in cash from customers billed in (d). Paid $23,000 in cash for expenses (salaries, supplies, interest, etc.). Repaid $15,000 to the bank. Paid the stockholders $2,000 in the form of a dividend. Required: Journalize each transaction, post the journal entries to the appropriate T- accounts, and from this information, prepare—in good form—a year-end balance sheet, and an income, a statement of retained earnings, and a statement of cash flows for the year. See Excel spreadsheet Econ 3A—W‘08 — Exam# 1 ANSWER KEY — p2 ...
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3A-W%2708-EXAM%231%e2%80%93KEY - a Econ 3A Financial...

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