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Consider the following potential events that might have occurred to Global on December​ 30, 2016. For

each​ one, indicate which line items in​ Global's balance sheet would be affected and by how much. Also indicate the change to​ Global's book value of equity.

1) Global used $20.9 million of its available cash to repay $ 20.9 million of its​ long-term debt. ​(Select the best choice​ below.)

A.​Long-term liabilities would increase by $ 20.9 ​million, and cash would increase by the same amount. The book value of equity would be unchanged.

B.​Long-term liabilities would decrease by $20.9 million, and cash would decrease by the same amount. The book value of equity would be unchanged.

C.​Long-term liabilities would decrease by $20.9 ​million, and cash would decrease by the same amount. The book value of equity would change by $20.9.

D.​Long-term liabilities would decrease by $20.9 million, and cash would increase by the same amount. The book value of equity would be unchanged.


2) A warehouse fire destroyed $5.1 million worth of uninsured inventory. ​(Select the best choice​ below.)

A.Inventory would increase by $5.1​million, and the book value of equity would decrease by the same amount.

B.Inventory would increase by $5.1 ​million, as would the book value of equity.

C.Inventory would decrease by $5.1 ​million, and the book value of equity would be unchanged.

D.Inventory would decrease by $5.1 ​million, as would the book value of equity.


3) Global used $4.7 million in cash and $4.9 million in new​ long-term debt to purchase a $9.6

million building. ​(Select the best choice​ below.)

A.​Long-term assets would increase by $9.6 ​million, cash would increase by $4.7 million, and​ long-term liabilities would increase by $4.9

million. There would be no change to the book value of equity.

B.​Long-term assets would decrease by $9.6 ​million, cash would increase by $4.7

​million, and​ long-term liabilities would decrease by $4.9 million. There would be no change to the book value of equity.

C.​Long-term assets would increase by $9.6 ​million, cash would decrease by $4.7 ​million, and​ long-term liabilities would increase by $4.9

million. There would be no change to the book value of equity.

D.​Long-term assets would decrease by $9.6 ​million, cash would decrease by$ 4.7 ​million, and​ long-term liabilities would increase by $ 4.9million. There would be no change to the book value of equity.


4). A large customer owing $ 3.1million for products it already received declared​ bankruptcy, leaving no possibility that Global would ever receive payment. ​(Select the best choice​ below.)

A.Accounts receivable would increase by $3.1 ​million, as would the book value of equity.

B.Accounts receivable would decrease by $3.1 ​million, and the book value of equity would increase by the same amount.

C.Accounts receivable would decrease by $3.1 ​million, as would the book value of equity.

D.Accounts receivable would increase by $3.1million, and the book value of equity would decrease by the same amount.


5). ​Global's engineers discover a new manufacturing process that will cut the cost of its flagship product by more than 53 %​(Select the best choice​ below.)

A.This event would decrease inventory by over 53 %and the book value of equity would decrease by the same amount.

B.This event would decrease inventory by over 53% and the book value of equity would increase by the same amount.

C.This event would decrease inventory by over 53%

D. This event would not affect the balance sheet.


6). A key competitor announces a radical new pricing policy that will drastically undercut​ Global's prices. ​(Select the best choice​ below.)

A.This event would decrease the book value of equity.

B.This event would decrease inventory.

C.This event would not affect the balance sheet.

D.This event would affect the balance sheet in an unpredictable manner.

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