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Questions
Q:
More than ______ of all trading is believed to be initiated by computer algorithms.
A. 25%
B. 40%
C. 50%
D. 75%
Q:
A labor union that consists of workers from a particular industry is a(n) A) closed shop. B) industrial union.C) union shop. D) bilateral monopoly.
Q:
Which of the following statements about variable interest entities (VIE) is false?
A) Under GAAP, a VIE may be a corporation, partnership, limited liability company or trust.
B) Under GAAP, pension plans are excluded from VIE accounting.
C) A potential VIE must be a separate entity, not a subset, branch or division of another entity.
D) VIEs do not require the identification of a primary beneficiary.
Q:
Which one of the following is not an example of a brokered market?
A. residential real estate market
B. market for large block security transactions
C. primary market for securities
D. NASDAQ
Q:
As new substitutes for office productivity software are developed, the demand for workers in office productivity software production shouldA) become more elastic. B) become less elastic.C) be unchanged. D) change in an undetermined way.
Q:
With regard to a variable interest entity (VIE), Ann Company may meet the following two conditions:
Condition I
Ann Company has the power to direct VIE activities that significantly impact VIE's economic performance.
Condition II
Ann Company has an obligation to absorb losses and/or a right to receive significant benefits from the VIE.
Ann Company must consolidate a VIE if
A) Condition I is met only.
B) Condition II is met only.
C) either Condition I or Condition II is met.
D) both Condition I and Condition II are met.
Q:
As a result of flash crashes, the SEC is trying circuit breakers that will halt trading for 5 minutes if large stocks' prices change by more than _____ in a 5-minute period.
A. 10%
B. 20%
C. 30%
D. 40%
Q:
Which of the following would most likely promote competitive pricing of products?A) Robinson-Patman Act B) Wheeler-Lea ActC) Federal Trade Commission Act D) Clayton Act
Q:
Entities other than the primary beneficiary account for their investment in a variable interest entity using the
A) cost method.
B) equity method.
C) cost or equity methods.
D) consolidated method.
Q:
Rank the following types of markets from least integrated and organized to most integrated and organized:
I. Brokered markets
II. Continuous auction markets
III. Dealer markets
IV. Direct search markets
A. IV, II, I, III
B. I, III, IV, II
C. II, III, IV, I
D. IV, I, III, II
Q:
Under GAAP, the ________ will include the variable interest entity in consolidated financial statements.
A) special purpose entity
B) limited liability company
C) trust
D) primary beneficiary
Q:
Interdependence is the key characteristic ofA) perfect competition. B) monopolistic competition.C) oligopoly. D) monopoly.
Q:
The NYSE acquired the ECN _______, and NASDAQ recently acquired the ECN ________.
A. Archipelago; Instinet
B. Instinet; Archipelago
C. Island; Instinet
D. LSE; Euronext
Q:
IndustryRatio (percent)W72X30Y84Z55The most competitive industry of those presented in the above table is likely to be industryA) W. B) X. C) Y. D) Z.
Q:
Under parent company theory, noncontrolling interest is valued at ________ on the consolidated balance sheet. Under entity theory, noncontrolling interest is valued at ________ on the consolidated balance sheet.
A) fair value; present value
B) present value; fair value
C) book value; fair value
D) fair value; book value
Q:
The margin requirement on a stock purchase is 25%. You fully use the margin allowed to purchase 100 shares of MSFT at $25. If the price drops to $22, what is your percentage loss?
A. 9%
B. 15%
C. 48%
D. 57%
Q:
The above figure shows the situations of a monopolistic competitor in the short run. To maximize profits, the firm should produceA) 10,000 units. B) 12,000 units. C) 13,000 unit.D) somewhere between 10,000 and 12,000 units.
Q:
Noncontrolling interest share is viewed as an expense under ________ theory.
A) parent company
B) entity
C) contemporary
D) joint venture
Q:
Which one of the following statements about IPOs is not true?
A. IPOs generally have been poor long-term investments.
B. IPOs often provide very good initial returns to investors.
C. IPOs generally provide superior long-term performance as compared to other stocks.
D. Shares in IPOs are often primarily allocated to institutional investors.
Q:
Refer to the above figure. The profit maximizing quantity for this firm isA) zero. B) Q1. C) Q2. D) Q3.
Q:
Anthony and Cleopatra create a joint venture to distribute artifacts. Anthony contributes 70% and Cleopatra 30% of the cash for assets purchased from Tomb Company. How would Anthony report information about Cleopatra on Anthony's financial statements?
A) Not at all
B) In a footnote
C) As a liability
D) As a noncontrolling interest
Q:
A level _____ subscriber to the NASDAQ system may enter bid and ask prices.
A. 1
B. 2
C. 3
D. 4
Q:
Earth Company, Fire Incorporated, and Wind Incorporated created a joint venture to market their products on the internet. Earth owns 40% of the stock, Fire owns 45% of the stock and Wind owns the remaining 15%. Which firms should report their joint venture investments using the equity method?
A) Earth
B) Fire
C) Earth and Fire
D) Earth, Fire and Wind
Q:
Which of the following is true in perfect competition at long-run equilibrium?A) P = ATC = MC = MR B) ATC is minimizedC) economic profit is $0 D) all of the above
Q:
Private placements can be advantageous, compared to public issue, because:
I. Private placements are cheaper to market than public issues.
II. Private placements may still be sold to the general public under SEC Rule 144A.
III. Privately placed securities trade on secondary markets.
A. I only
B. I and III only
C. II and III only
D. I, II, and III
Q:
A parent company acquired 100% of the outstanding common stock of another corporation. The parent is going to use push-down accounting. The fair market value of each of the acquired corporation's assets is lower than its respective book value. The fair market value of each of the acquired corporation's liabilities is higher than its respective book value. The acquired corporation has a deficit in the Retained Earnings account. Which one of the following statements is correct?
A) The push-down capital account will have a credit balance after this transaction is posted.
B) The push-down capital account will have a debit balance after this transaction is posted.
C) The push-down capital account will have either a debit or a credit balance depending upon whether the asset adjustments exceed the liability adjustments, or vice versa.
D) Subsidiary Retained Earnings will have a deficit balance after this transaction is posted.
Q:
Suppose that at the current level of output, price = $10, MC = $14, AVC = $7, and ATC = $9.Which of the following is true?A) The firm should decrease output. B) The firm should shut down.C) The firm should increase output.D) The firm should maintain the current level of output.
Q:
A red herring becomes a prospectus when ____.
A. the preliminary registration statement is approved by the SEC
B. the IPO is complete
C. the offering is seasoned
D. the lockup period expires
Q:
Under parent company theory, the amount of consolidated net income is equal to the amount of ________ under entity theory.
A) noncontrolling interest share
B) noncontrolling interest income
C) income attributable to controlling stockholders
D) income attributable to noncontrolling stockholders
Q:
At an output at which ATC is greater than MC,A) the ATC curve is downward sloping. B) the ATC curve is upward sloping.C) the AFC curve is upward sloping. D) the AVC curve is upward sloping.
Q:
Barnegat Light sold 200,000 shares in an initial public offering. The underwriter's explicit fees were $90,000. The offering price for the shares was $35, but immediately upon issue, the share price jumped to $43. What is the best estimate of the total cost to Barnegat Light of the equity issue?
A. $90,000
B. $1,290,000
C. $2,390,000
D. $1,690,000
Q:
Under parent company theory, noncontrolling interest is classified on the consolidated balance sheet as ________. Under entity theory, noncontrolling interest is classified on the consolidated balance sheet as ________.
A) stockholders' equity; stockholders' equity
B) stockholders' equity; liability
C) liability; a liability
D) liability; stockholders' equity
Q:
A basic distinction between the long run and the short run is thatA) if a firm produces no output in the long run, it still incurs a cost.B) the opportunity costs of production are lower in the short run than in the long run. C) in the long run, some inputs are fixed, while in the short run, all inputs are variable.D) in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.
Q:
Explicit costs of an IPO tend to be around ______ of the funds raised.
A. 1%
B. 7%
C. 15%
D. 25%
Q:
The SEC requires push-down accounting for SEC filings of subsidiaries when the subsidiary has no substantial publicly-held debt or preferred stock outstanding andA) the parent has substantial ownership (5% or greater).B) the parent has substantial ownership (20% or greater).C) the parent has substantial ownership (50% or greater).D) the parent has substantial ownership (90% or greater).
Q:
Limited liability exists whenA) the liability of owners is limited to the value of the shares in the firm they own. B) the liability of owners is limited to the share of the debt they personally took on.C) partners specialize and each partner is responsible for the debts of his or her specialized area.D) bondholders must receive their payments before stockholders can earn any money.
Q:
Under firm-commitment underwriting, the ______ assumes the full risk that the shares cannot be sold to the public at the stipulated offering price.
A. red herring
B. issuing company
C. initial stockholder
D. underwriter
Q:
Use the following information to answer the question(s) below.Paris Corporation purchased 80% of the outstanding voting common stock of Sanders Corporation on January 1, 2011, at a cost of $400,000. The stockholders' equity of Sanders Corporation on this date consisted of $200,000 of Capital Stock and $100,000 of Retained Earnings. Book values were equal to fair values except for land and inventory. The book value of Sanders' land was $10,000, and fair value was $22,000. The book value of Sanders' inventory was $30,000, and fair value was $25,000.Assume Paris's inventory account had a book value of $40,000 and a fair value of $44,000 on January 1, 2011. Using the parent company theory, what was the amount reported on the consolidated balance sheet for inventories on January 1, 2011?A) $65,000B) $66,000C) $69,000D) $70,000
Q:
The possible combinations of goods that can be purchased with a specific income are called theA) budget constraint. B) indifference map.C) marginal rate of substitution.D) income-consumption curve.
Q:
Underwriting is one of the services provided by _____.
A. the SEC
B. investment bankers
C. publicly traded companies
D. FDIC
Q:
Increases in total utility from the consumption of a good decrease as more is consumed. This statement isA) the law of diminishing marginal utility. B) the law of average utility. C) the consumer optimum. D) false.
Q:
The non-European country with the highest average first-day returns in 2014 was _______.A. CanadaB. United StatesC. ChinaD. Jordan
Q:
Julie always purchases the soda with the lowest price. For Julie, the cross price elasticity of demand for brand X and brand Y will beA) equal to 0. B) negative. C) positive.D) impossible to determine without more information.
Q:
The term "underwriting syndicate" describes _______.
A. the issuing firm
B. the lead underwriter
C. the investment banks that participate in the underwriting
D. the private investors that purchase the shares
Q:
The less sensitive quantity demanded is to a change in price, theA) smaller a change in price must be to induce a certain change in quantity demanded.B) greater the absolute price elasticity of demand. C) smaller the absolute price elasticity of demand.D) closer the absolute price elasticity of demand is to one.
Q:
Privately held firms may have only _______ shareholders.
A. 10
B. 99
C. 250
D. 499
Q:
The marginal cost of pollution abatement is the
A) additional cost to clean up an additional unit of pollution.
B) additional benefit from cleaning up an additional unit of pollution.
C) total social costs of pollution clean-up divided by total social benefits.
D) total social costs of pollution clean-up divided by the total units of clean -up.
Q:
SIPC ensures investors against failure of a brokerage firm up to a limit of _______.
A. $100,000
B. $250,000
C. $500,000
D. $1,000,000
Q:
Use the following information to answer the question(s) below.Pascoe Corporation paid $450,000 for a 90% interest in Sarabet Corporation on January 1, 2011, when Sarabet's stockholders' equity consisted of $250,000 Common Stock and $50,000 Retained Earnings. The book values and fair values of Sarabet's assets and liabilities were equal when Pascoe acquired its interest.The separate net incomes (excluding investment income) of Pascoe and Sarabet for 2011 were $600,000 and $100,000, respectively. Dividends declared and paid during 2011 were $250,000 for Pascoe and $50,000 for Sarabet. Pascoe uses the entity theory in consolidating its financial statements with those of Sarabet.Pascoe's income from Sarabet under the equity method for 2011 wasA) $72,000.B) $87,500.C) $90,000.D) $100,000.
Q:
In 2013, NYSE Euronext was acquired by _______.
A. DOT
B. ICE
C. BATS
D. It was not acquired.
Q:
Attempts to alleviate poverty have included all of the following income -maintenance programs EXCEPTA) Social Security. B) temporary assistance to needy families. C) 401(k) plans. D) food stamps.
Q:
The market share held by the "Other" category (which includes dark pools) constitutes roughly ______% of trading volume in NYSE-listed shares.
A. 5%
B. 10%
C. 30%
D. 50%
Q:
In the above figure, what is the wage rate for the perfectly competitive market?A) W1 B) W2 C) W3 D) W4
Q:
In 2014, BATS advertised average latency times of approximately _______. A. 100 microseconds
A. 100 microseconds
B. 200 microseconds
C. 1 second
D. 5 seconds
Q:
Paroz Corporation acquired a 70% interest in Sandberg Corporation for $900,000 when Sandberg's stockholders' equity consisted of $600,000 of Capital Stock and $600,000 of Retained Earnings. The fair values of Sandberg's net assets were equal to their recorded book values. At the time of acquisition, on Paroz's books, Paroz will record
A) goodwill for $60,000 under the parent company theory.
B) goodwill for $85,714 under the entity theory.
C) investment in Sandberg for $1,285,714 under the entity theory.
D) investment in Sandberg for $900,000 under the entity and parent company theories.
Q:
An industrial union isA) a union composed of public employees.B) a union composed of workers who are in a specific geographic area.C) a union composed of workers who are employed in a particular industry.D) a union composed of workers who engage in a particular trade or skill.
Q:
The commission structure on a stock purchase is $20 plus $.02 per share. If you purchase four round lots of a stock selling for $56, what is your commission?
A. $20
B. $22
C. $26
D. $28
Q:
Whenever an input makes up a large percentage of a goodʹs final cost, an increase in that inputʹs price willA) affect total cost relatively more. B) not affect total revenues.C) affect only accounting profits. D) cause the firm to shutdown.
Q:
Use the following information to answer the question(s) below.Pasfield Corporation acquired a 90% interest in Santini Corporation for $90,000 cash on January 1, 2011. The following information is available for Santini at that time.Book Value Fair Value DifferenceCurrent assets $40,000 $50,000 $10,000Plant assets 60,000 75,000 15,000Liabilities (50,000) (50,000) 0Net assets $50,000 $75,000Under the entity theory, a consolidated balance sheet prepared immediately after the business combination will show noncontrolling interest ofA) $5,000.B) $7,500.C) $9,000.D) $10,000.
Q:
You sell short 300 shares of Microsoft that are currently selling at $30 per share. You post the 50% margin required on the short sale. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Microsoft is selling at $27? (Ignore any dividends.)
A. 10%
B. 20%
C. 6.67%
D. 15%
Q:
The primary antitrust statute in the United States is theA) NLRA of 1935. B) SEC Act of 1933.C) Sherman Antitrust Act of 1890.D) Federal Reserve Act of 1913.
Q:
Level 3 NASDAQ subscribers _____.
A. are registered market makers
B. can post bid and ask prices
C. have the fastest execution of trades
D. all of these options
Q:
Pretax operating incomes of Panitz Corporation and its 80%-owned subsidiary, Salazar Corporation, for the year 2011, are shown below.
Panitz and Salazar belong to an affiliated group. Salazar pays total dividends of $35,000 for the year. There are no unamortized book value/fair value differentials relating to Panitz's investment in Salazar. During the year, Panitz sold land to Salazar at a total loss of $15,000 which is included in its pretax operating income. Salazar still holds this land at the end of the year. The marginal corporate tax rate for both corporations is 34%.
Panitz Salazar
Sales revenue $890,000 $700,000
Loss on sale of land (15,000)
Cost of sales (400,000) (250,000)
Other expenses (350,000) (350,000)
Depreciation expense (50,000) (35,000)
Pretax operating income
(does not include Salazar investment income) $75,000 $65,000
Required:
1. Determine the separate amounts of income tax expense for Panitz and Salazar as if they had filed separate tax returns.
2. Determine Panitz's net income from Salazar.
Q:
Industry X comprises only very few large firms engaged in stiff competition with each other.Industry X can best be described asA) pure competition. B) monopolistic competition. C) pure monopoly. D) oligopoly.
Q:
An investor buys $16,000 worth of a stock priced at $20 per share using 60% initial margin. The broker charges 8% on the margin loan and requires a 35% maintenance margin. The stock pays a $.50-per-share dividend in 1 year, and then the stock is sold at $23 per share. What was the investor's rate of return?
A. 17.5%
B. 19.67%
C. 23.83%
D. 25.75%
Q:
How do economies of scale contribute to the development of an oligopoly?A) Economies of scale make it legally difficult for new firms to enter.B) Economies of scale make small -scale producers inefficient.C) Economies of scale are based on control of a key resource, without which other firms cannot enter an industry.D) Economies of scale are guaranteed when a patent is granted.
Q:
Pretax operating incomes of Pang Corporation and its 70%-owned subsidiary, Sala Corporation, for the year 2011, are shown below. Sala pays total dividends of $60,000 for the year. There are no unamortized book value/fair value differentials relating to Pang's investment in Sala. During the year, Pang sold land to Sala for a gain of $35,000 and Sala holds this land at the end of the year. The marginal corporate tax rate for both corporations is 34%.
Pang Sala
Sales revenue $900,000 $600,000
Gain on sale of land 35,000
Cost of sales (480,000) (325,000)
Other expenses (192,000) (78,000)
Pretax operating income (does not include investment income) $263,000 $197,000
Required:
1. Determine the separate amounts of income tax expense for Pang and Sala as if they had filed separate tax returns.
2. Determine Pang's net income from Sala.
Q:
The over-the-counter securities market is a good example of _________.
A. an auction market
B. a brokered market
C. a dealer market
D. a direct search market
Q:
Stello Corporation's stockholders' equity on December 31, 2010 was as follows:
10% cumulative preferred stock, $100 par value,
callable at $110, with no dividends in arrears $100,000
Common stock, $1 par value 300,000
Additional paid-in capital 40,000
Retained earnings 160,000
Total stockholders' equity $600,000
On January 1, 2011, Kaprelian Corporation paid $300,000 for a 90% interest in Stello's common stock. On January 1, 2011, the book values of Stello's assets and liabilities were equal to fair values. On January 2, 2011, Kaprelian Corporation paid $100,000 for a 90% interest in Stello's preferred stock.
Required:
1. Determine the book value of the common stockholders' equity for Stello Corporation on January 1, 2011.
2. Prepare the journal entry(ies) on January 1, 2011 for Kaprelian Corporation.
3. Prepare the journal entry(ies) on January 2, 2011 for Kaprelian Corporation.
4. For the year ending December 31, 2011, Stello Corporation reported net income of $50,000. Stello Corporation declared and paid dividends of $10,000 to preferred stockholders and $10,000 to common stockholders. Prepare the journal entries for Kaprelian Corporation relating to this information.
Q:
The above figure shows the situation of a monopolistic competitor in the short run. The maximum economic profits of the firm equalA) $50,000. B) $30,000. C) 15,000. D) zero.
Q:
The primary market where new security issues are offered to the public is a good example of _________.
A. an auction market
B. a brokered market
C. a dealer market
D. a direct search market
Q:
Sandy Corporation's stockholders' equity on December 31, 2010 was as follows:
10% cumulative preferred stock, $100 par value,
callable at $105, with one year dividends in arrears $100,000
Common stock, $1 par value 200,000
Additional paid-in capital 40,000
Retained earnings 160,000
Total stockholders' equity $500,000
On January 1, 2011, Bombard Corporation paid $200,000 for a 90% interest in Sandy's common stock. On January 1, 2011, the book values of Sandy's assets and liabilities were equal to fair values. On January 2, 2011, Bombard Corporation paid $120,000 for a 90% interest in Sandy's preferred stock.
Required:
1. Determine the book value of the common stockholders' equity for Sandy Corporation on January 1, 2011.
2. Prepare the journal entry(ies) on January 1, 2011 for Bombard Corporation.
3. Prepare the journal entry(ies) on January 2, 2011 for Bombard Corporation.
4. For the year ending December 31, 2011, Sandy Corporation reported net income of $50,000. Sandy Corporation declared and paid dividends of $20,000 to preferred stockholders and $10,000 to common stockholders. Prepare the journal entries for Bombard Corporation relating to this information.
Q:
If a monopolist produces to a point at which marginal revenue is more than marginal cost thenA) the firm should increase output.B) the firm should reduce output. C) the firm is maximizing profits.D) we do not know if the firm should increase or reduce without more information.
Q:
The New York Stock Exchange is a good example of _________.
A. an auction market
B. a brokered market
C. a dealer market
D. a direct search market
Q:
Paradise Corporation owns 100% of Aldred Corporation, 90% of Balme Corporation, 80% of Calder Corporation, 75% of Dale Corporation, 20% of East Corporation, and 8% of Faber Corporation. Paradise, Aldred, Balme and Calder belong to an affiliated group. All of these corporations are domestic corporations. During 2011, Paradise Corporation reports net income of $1,500,000. This net income includes the full amount of dividends received from Aldred and Faber, but does not include the dividends received from Balme, Calder, Dale, and East Corporations. All investees have paid out all of their net income in the form of dividends. Paradise's share of the various dividend distributions is as follows:
From Aldred: $90,000
From Balme: $92,000
From Calder: $88,000
From Dale: $66,000
From East: $50,000
From Faber: $40,000
Required:
Calculate the correct amount of taxable income for Paradise Corporation if a consolidated tax return is filed.
Q:
Which of the following is NOT correct for a perfectly competitive firm in long -run equilibrium?A) SAC = LAC B) MR = P = AR C) MC = MR > LAC D) LAC = P
Q:
Suppose that at the current level of output, price = $10, MC = $4, AVC = $7, and ATC = $11.Which of the following is true?A) The firm should decrease output. B) The firm should shut down.C) The firm should increase output.D) The firm should maintain the current level of output.
Q:
An investor puts up $5,000 but borrows an equal amount of money from his broker to double the amount invested to $10,000. The broker charges 7% on the loan. The stock was originally purchased at $25 per share, and in 1 year the investor sells the stock for $28. The investor's rate of return was ____.
A. 17%
B. 12%
C. 14%
D. 19%
Q:
Pane Corporation owns 100% of Alder Corporation, 85% of Ball Corporation, 70% of Cake Corporation, 40% of Dash Corporation, and 10% of Eager Corporation. All of these corporations are domestic corporations. Pane, Alder and Ball belong to an affiliated group. Pane's marginal income tax rate is 35%. All investees have paid out all their net income in the form of dividends. During 2011, Pane Corporation received the following cash dividends:
From Alder: $180,000
From Ball: $170,000
From Cake: $160,000
From Dash: $100,000
From Eager: $ 60,000
Required:
1. Compute the amount of the dividend income that would be excluded from taxation under the current Internal Revenue Code.
2. Compute Pane's current income tax liability for the dividend income received in 2011.
Q:
At an output at which MC is greater than ATCA) the ATC curve is downward sloping. B) the ATC curve is upward sloping.C) the AFC curve is upward sloping. D) the AVC curve is downward sloping.