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Unformatted text preview: October 24, 2007 Anderson ECON 136A 8AM MIDTERM #1 v. 1 Name _________________________ Complete questions #1-25 on green scantron and the rest in your blue book. WRITE YOUR NAME IN THE SPACE PROVIDED AND TURN THIS EXAM IN AT THE END OF THE CLASS... NOTE THERE IS A PROBLEM WHICH MUST BE COMPLETED IN THE SPACE PROVIDED TO ENSURE THIS!! 1. Which table would you use to determine how much you would need to have deposited three years ago at 10% compounded annually in order to have $1,000 today? a. Present value of an ordinary annuity of 1 b. Future value of 1 or present value of 1 c. Future value of an annuity due of 1 d. Future value of an ordinary annuity of 1 2. If a savings account pays interest at 4% compounded quarterly, then the amount of $1 left on deposit for 5 years would be found in a table using a. 20 periods at 1%. b. 5 periods at 4%. c. 5 periods at 1%. d. 20 periods at 4%. 3. On January 1, 2003, management purchased a fixed asset for $300,000 and estimated that it would have a useful life of 10 years with $30,000 salvage value and straight line depreciation. Before booking any depreciation during 2005, management revises their estimate, now believing that the asset will be used until the end of 2020, at which time it will have no salvage value. The proper amount of restatement to the 2004 financial statements, and 2005 depreciation expense to be reported are: a. $10,333 restatement, and $15,375 depreciation expense. b. $10,333 restatement, and $16,667 2005 depreciation expense. c. No restatement, and $16,667 2005 depreciation expense. d. No restatement, and $15,375 2005 depreciation expense.------------------------------ At Ivan Company, events and transactions during 2004 included the following. The tax rate for all items is 30%. (1) Depreciation for 2002 was found to be understated by $45,000. (2) A strike by the employees of a supplier resulted in a loss of $30,000. (3) The inventory at December 31, 2002 was overstated by $60,000. (4) A flood destroyed a building that had a book value of $600,000. Floods are very uncommon in that area. MIDTERM #1 v. 1--Page 2 4. The effect of these events and transactions on 2004 net income net of tax would be a. $514,500. b. $21,000. c. $441,000. d. $472,500. 5. The statement &quot;risk is commensurate with reward&quot; means that the higher the perceived risk, the: a. More likely an investor is to abstain from investment. b. Higher the interest rate c. Lower the interest rate d. No impact on the interest rate 6. Which table would show the largest factor for an interest rate of 8% for five periods? a. Present value of an annuity due of 1 b. Future value of an ordinary annuity of 1 c. Present value of an ordinary annuity of 1 d. Future value of an annuity due of 1 7. The term financial flexibility is impacted by: a. The willingness of management to accept risks; b. The number of divisions an entity has....
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This note was uploaded on 05/18/2011 for the course ECON 136A taught by Professor Anderson during the Spring '08 term at UCSB.
- Spring '08