Final2005ver1Solution-3 - Test Section AEM 221 Financial...

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Test #________ Section #__________ AEM 221 Financial Accounting Final Exam Fall 2005 Version 1 Name ______________________________________________________ Email Address ______________________________________________ 1. This exam consists of 20 multiple choice questions and 4 problems. There are 15 pages in this packet, including this cover page and the present value tables at the end ; please ensure that you have all of the pages. 2. Your answers to Section I should be transposed to an optical sheet. Failure to do so will result in zero credit for this section. 3. Your written work for Section II should be completed in the spaces provided. 4. You will lose a small amount of points for arithmetic errors; please be careful. 5. This exam is not to leave the testing room. The exam questions and answers will be posted to the course website in due course. Your score will be posted on the course website as the grading is completed. 6. Please be sure to write test number and your section number on the top left of your optical sheet, as well as your section number on the top of this page . 7. Read carefully and good luck! I hereby certify that I have not given or received assistance while taking this exam and have at all times abided by Cornell University’s Code of Academic Integrity. Signature: ______________________________________ Date: _____________ Points Scored Points Available Section I Multiple Choice 40 Section II Problem 1 Bonds Payable 7 Problem 2 More Bonds Payable 22 Problem 3 Cash Flow Statement 18 Problem 4 Capital Stock 13 Total Section II 60 TOTAL 100 1
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Test #________ Section #__________ SECTION I- MULTIPLE CHOICE QUESTIONS (40 POINTS) 1. If a bond is sold at 105% of par, its stated rate of interest would be A) higher than the market rate. B) lower than the market rate. C) equal to the market rate. D) unrelated to the market rate. E) None of the above is correct. 2. Which of the following statements is false ? A) Use of more debt in the company's capital structure usually reduces the rate of return generated for stockholders. B) Use of more debt in the capital structure can lead to positive financial leverage if we can generate a return on investment in assets greater than the cost of borrowing. C) Use of more debt increases the level of risk assumed by a company. D) Both B and C are false. E) All the above are false. 3. A company has a current ratio of 2.4 before paying off a large current liability with cash. Following this payment, the current ratio will be A) greater than 2.4. B) less than 2.4. C) equal to 2.4. D) greater than 2.4 or less than 2.4 depending upon the dollar amount involved. E) None of the above is correct. 4. The following is a partial list of account balances from the books of Ellsworth Enterprise at the end of 20D: Accounts Payable $22,500 Accounts Receivable 12,300 Accrued Vacation Liability 1,800 Cash 6,500 Deferred Revenue 800 Income Taxes Payable 1,200 Notes Payable (due in 2 years) 5,000 Based solely upon these balances, the amount of current liabilities appearing on
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This note was uploaded on 05/12/2009 for the course AEM 2210 taught by Professor Little,j. during the Fall '07 term at Cornell.

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Final2005ver1Solution-3 - Test Section AEM 221 Financial...

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