F06_Final_Solution

F06_Final_Solution - Financial Accounting Final Fall 2006...

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Financial Accounting Final Fall 2006 The final exam is closed book, however the cheat sheets are allowed. Calculators are permitted, however computers are not allowed. The test consists of 5 independent problems, most of which have multiple parts. The total points for the entire exam are 100. Please use the space provided on the exam for your answers. If you need extra space, please use the reverse sides of any page. If there is something written on the reverse sides of any page that you feel we need to see in order to grade your exam, please mention this in the space provided for each answer. You have 2 hours and 50 minute in which to complete the exam. Be sure to print your name on the cover sheet. It is also important that you print legibly. Anything we cannot read we cannot grade. If you have any questions during the test you may ask either your TA or professor. Talking to any other individual is not allowed and could subject you to a zero score. Good luck! Name (please print) Section Time 1. Multiple Choice 30 2. Person Corporation 15 3. La Verne Corporation 15 4. McKenna Group 20 5. Wal-Mart 20 100
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Question 1: Multiple Choice Choose the ONE BEST answer 1. A corporation issued common stock instead of debt to finance the purchase of property. Which statement is true? a. Ownership by existing stockholders will be diluted. b. The company’s debt/equity ratio will be higher. c. Income tax expense will be lower because expenses increase. d. Net income will be lower. 2. Cash dividends are paid based on the number of shares which are a. authorized. b. issued. c. outstanding. d. outstanding minus the number of treasury shares. 3. On January 1, 2002, Mike Corp. had 10,000 shares of $1 par value common stock issued and outstanding. The stock was selling at $10 per share. During 2002, Mike declared and issued a 10% stock dividend. The stock dividend causes a. total stockholders' equity to increase by $1,000. b. net income to decrease by $1,000. c. earnings per share to decrease by $10,000. d. no change in total stockholders' equity 4. Which one of the following is a characteristic of equity as opposed to debt? a. Voting rights are typically attached. b. There is a fixed maturity date. c. There is a legal contract. d. There is a fixed payment schedule. 5. If a company issues a note payable when the market rate of interest is greater than the stated rate, then a. the cash received will exceed the maturity value of the note. b. the note will be issued at a discount. c. the note will be issued at a premium. d. the cash received will be equal to the maturity value of the note.
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6. Operating leases are treated as a. increases in liabilities for both the lessor and the lessee. b.
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F06_Final_Solution - Financial Accounting Final Fall 2006...

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