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Questions
Q:
Financial institutions that specialize in assisting corporations in primary market transactions are called _______.
A. mutual funds
B. investment bankers
C. pension funds
D. globalization specialists
Q:
Q:
Suppose the MRP of the 49th worker at a firm is $25 and that the market wage rate is $15. We know that if this firm operates in perfectly competitive product and labor markets,A) the firm is paying wages above the minimum wages.B) the firmʹs profits would increase if it fired some workers.C) the firm would be more profitable if it hired more workers.D) the firm should use more capital.
Q:
An intermediary that pools and manages funds for many investors is called ______.
A. an investment company
B. a credit union
C. an investment banker
D. a commercial bank
Q:
On January 2, 2012, Pal Corporation sold warehouse equipment to SimCo, a wholly-owned subsidiary. The equipment had an original cost of $130,000 and a net book value of $100,000 when it was sold to SimCo for $150,000. Both companies agreed that the equipment had a five-year remaining life and compute depreciation on the straight-line method. The equipment has no salvage value.Pal reported $470,000 in net income in 2012 (prior to reporting any income from SimCo), and SimCo reported $160,000 in net income.Required:1. Calculate consolidated net income for 2012.2. Determine the controlling share of net income for the year if Pal only owned 75% of SimCo.3. Determine the controlling share of net income for the year if Pal only owned 75% of SimCo AND the equipment transfer was upstream.
Q:
ʺAs compared to the benefits of economic and social regulation, the costs are minimal.ʺ Do you agree or disagree? Why?
Q:
Accounting scandals can often be attributed to a particular concept in the study of finance known as the _____ .
A. agency problem
B. risk-return trade-off
C. allocation of risk
D. securitization
Q:
Q:
Which of the following provides firms incentives to work together to develop one common product format?A) a Tweedle Dee-Tweedle Dum game B) a Battle of the Sexes gameC) prisonersʹ dilemma D) none of the above
Q:
Which of the following firms was not engaged in a major accounting scandal between 2000 and 2005?
A. General Electric
B. Parmalat
C. Enron
D. WorldCom
Q:
Q:
When U.S. Steel, a steel producer, bought control of iron ore companies at the beginning of the 20th century, the company was initiatingA) a horizontal merger. B) a vertical merger.C) a cartel. D) an expropriation.
Q:
Stone Harbor Products takes out a bank loan. It receives $100,000 and signs a promissory note to pay back the loan over 5 years. In this transaction, _____ .
A. a new financial asset was created
B. a financial asset was traded for a real asset
C. a financial asset was destroyed
D. a real asset was created
Q:
Q:
What is the most important characteristic of monopolistic competition? How do firms behave differently from perfect competitors?
Q:
Surf City Software Company develops new surf forecasting software. It sells the software to Microsoft in exchange for 1,000 shares of Microsoft common stock. Surf City Software has exchanged a _____ asset for a _____ asset in this transaction.
A. real; real
B. financial; financial
C. real; financial
D. financial; real
Q:
Q:
If a monopolist is producing the quantity at which marginal revenue equals marginal cost, it shouldA) continue to produce this amount if it wants to maximize profits. B) reduce output if it wants to maximize profits.C) increase price and keep output unchanged if it wants to maximize profits. D) increase output if it wants to maximize profits.
Q:
Individuals may find it more advantageous to purchase claims from a financial intermediary rather than directly purchasing claims in capital markets because:
I. Intermediaries are better diversified than most individuals.
II. Intermediaries can exploit economies of scale in investing that individual investors cannot.
III. Intermediated investments usually offer higher rates of return than direct capital market claims.
A. I only
B. I and II only
C. II and III only
D. I, II, and III
Q:
Venture capital is _________.
A. frequently used to expand the businesses of well-established companies
B. supplied by venture capital funds and individuals to start-up companies
C. illegal under current U.S. laws
D. most frequently issued with the help of investment bankers
Q:
Separate income statements of Plantation Corporation and its 90%-owned subsidiary, Savannah Corporation, for 2011 are as follows, prior to Plantation recording any income related to its subsidiary:Plantation SavannahSales Revenue $870,000 $230,000Gain on equipment 35,000Gain on land 20,000Cost of sales (470,000) (90,000)Other expenses (265,000) (60,000)Separate incomes $170,000 $100,000Additional information:1. Plantation acquired its 90% interest in Savannah Corporation when the book values were equal to the fair values.2. The gain on equipment relates to equipment with a book value of $95,000 and a 7-year remaining useful life that Plantation sold to Savannah for $130,000 on January 1, 2011. The straight-line depreciation method was used and the equipment has no salvage value.3. On January 1, 2011, Savannah sold land to an outside entity for $90,000. The land was acquired from Plantation in 2009 for $70,000. The original cost of the land to Plantation was $45,000.4. Savannah did not declare or distribute dividends in 2011.Required:1. Prepare elimination/adjusting entries on the consolidated worksheet for the year 2011.2. Prepare the consolidated income statement for the year ended December 31, 2011.
Q:
ʺBecause a firmʹs supply curve slopes upward, the long-run supply curve of an industry must also slope upward.ʺ Do you agree or disagree? Explain.
Q:
Which of the following is (are) true about hedge funds?
I. They are open to institutional investors.
II. They are open to wealthy individuals.
III. They are more likely than mutual funds to pursue simple strategies.
A. I and II only
B. I and III only
C. II and III only
D. I, II, and III
Q:
Piglet Incorporated purchased 90% of the outstanding stock of Sourgrape Company several years ago at book value. At January 1, 2010, Sourgrape sold land with a book value of $30,000 to Piglet at its fair market value of $40,000. At the same time, Sourgrape sold the building that was on the land to Piglet. The building had a book value of $80,000 and was sold at its fair value of $120,000. The building had a remaining useful life of 8 years and is depreciated using the straight-line method. The building has no salvage value. On January 1, 2012, Piglet sold the land and building to a third party. The sales price was allocated so that the land was sold for $50,000 and the building was sold for $150,000. Income statements for Piglet and Sourgrape for the year ended December 31, 2012 are summarized below:Piglet SourgrapeSales $252,000 $90,000Gain on sale of land and building 40,000Cost of sales (140,000) (40,000)Depreciation expense (60,000) (20,000)Other expenses (20,000) (10,000)Net income $72,000 $20,000Required:Prepare the eliminating/adjusting entries related to the land and building on the consolidated working papers on the following dates:1. December 31, 20102. December 31, 20113. December 31, 2012
Q:
For a perfectly competitive firm, profit maximization occurs whenA) marginal revenue equals average total cost.B) marginal revenue equals marginal cost.C) marginal cost is equal to average total cost.D) average total cost is at its minimum.
Q:
Prey Corporation created a wholly owned subsidiary, Sage Corporation, on January 1, 2010, at which time Prey sold land with a book value of $90,000 to Sage at its fair market value of $140,000. Also, on January 1, 2010, Prey sold to Sage equipment with a book value of $130,000 and a selling price of $165,000. The equipment had a remaining useful life of 4 years and is being depreciated under the straight-line method. The equipment has no salvage value. On January 1, 2012, Sage resold the land to an outside entity for $150,000. Sage continues to use the equipment purchased from Prey. Income statements for Prey and Sage for the year ended December 31, 2012 are summarized below:Prey SageSales $450,000 $100,000Gain on sale of land 10,000Cost of sales (220,000) (50,000)Depreciation expense (95,000) (32,000)Other expenses (37,000) (8,000)Net income $98,000 $20,000Required:At what amounts did the following items appear on the consolidated income statement for Prey and Subsidiary for the year ended December 31, 2012?1. Gain on Sale of Land2. Depreciation Expense3. Consolidated net income4. Controlling interest share of consolidated net income
Q:
Market signals will help to allocate capital efficiently only if investors are acting _____ .
A. on the basis of their individual hunches
B. as directed by financial experts
C. as dominant forces in the economy
D. on accurate information
Q:
Which of the following would be an example of a fixed cost?A) the electric and gas billsB) wages paid to temporary workersC) property insurance premiumsD) expenditures on imported raw materials
Q:
The stock market showed a PE for BluarCo equal to 17. What does PE mean?A) price-earnings ratio B) profit-earnings ratioC) perfect-earnings ratio D) price-equity ratio
Q:
Q:
In a perfectly efficient market the best investment strategy is probably _____ .
A. an active strategy
B. a passive strategy
C. asset allocation
D. market timing
Q:
The owner(s) of a corporationA) is the entrepreneur. B) are the shareholders. C) are the bondholders. D) is the CEO.
Q:
The efficient market hypothesis suggests that _______.
A. active portfolio management strategies are the most appropriate investment strategies
B. passive portfolio management strategies are the most appropriate investment strategies
C. either active or passive strategies may be appropriate, depending on the expected direction of the market
D. a bottom-up approach is the most appropriate investment strategy
Q:
Q:
Basket of goods A is on an indifference curve that lies further from the origin than basket B. From this we know thatA) the prices of the goods in A are more than the prices of the goods in B.B) the satisfaction from consuming A is more than the satisfaction from consuming B. C) the marginal utility from consuming A is more than the marginal utility from consuming B.D) all other consumers would also rank B above A.
Q:
Suppose an investor is considering one of two investments that are identical in all respects except for risk. If the investor anticipates a fair return for the risk of the security he invests in, he can expect to _____ .
A. earn no more than the Treasury-bill rate on either security.
B. pay less for the security that has higher risk.
C. pay less for the security that has lower risk.
D. earn more if interest rates are lower.
Q:
Separate income statements of Pingair Corporation and its 90%-owned subsidiary, Staunch Inc., for 2011 were as follows:Pingair StaunchSales Revenue $2,200,000 $1,000,000Cost of sales (1,400,000) (600,000)Other expenses (400,000) (200,000)Gain on equipment 80,000Income from Staunch 128,000Net income $608,000 $200,000Additional information:1. Pingair acquired its 90% interest in Staunch Inc. when the book values were equal to the fair values.2. The gain on equipment relates to equipment with a book value of $120,000 and a 4-year remaining useful life that Pingair sold to Staunch for $200,000 on January 2, 2011. The straight-line depreciation method is used. The equipment has no salvage value.3. Pingair sold inventory to Staunch in 2010 and 2011 as shown in the table below. (The 2010 ending inventory is sold in 2011.) 2010 2011Intercompany sales $300,000 200,000Original cost from third-party 180,000 120,000Percentage unsold at year-end 40 504. Staunch did not declare or pay dividends in 2010 and 2011.Required:1. Prepare adjusting/eliminating entries for the consolidation worksheet at December 31, 2011.2. Prepare a consolidated income statement for Pingair Corporation and Subsidiary for the year ended December 31, 2011.
Q:
QuantityTotal Utility00110225345460568672Refer to the above table. At what quantity does diminishing marginal utility set in?A) After 3. B) After 2. C) After 10. D) After 15.
Q:
After considering current market conditions, an investor decides to place 60% of her funds in equities and the rest in bonds. This is an example of _____ .
A. asset allocation
B. security analysis
C. top-down portfolio management
D. passive management
Q:
Q:
After much investigation, an investor finds that Intel stock is currently underpriced. This is an example of ______.
A. asset allocation
B. security analysis
C. top-down portfolio management
D. passive management
Q:
Snow Company is a wholly owned subsidiary of Penguin Corporation. On January 1, 2009, Penguin transferred equipment to Snow for $195,000. The equipment had originally cost $250,000, but at the time of transfer, had a $180,000 book value and a five year remaining life. Both companies use the straight-line method of depreciation and assume no salvage value for the equipment. Required: Prepare the consolidation worksheet entries for this asset on the following dates:1. December 31, 20092. December 31, 20103. December 31, 2011
Q:
MonthPXQXPYQYPZQZJan$10100$2050$25200Feb1090186025225Mar1070159025275Apr12501510025290May15251512025320In the above table, the cross price elasticity of demand for good Z with good Y when P Y rises from $15 to $18 isA) -2.20. B) +2.20. C) +1.10. D) -1.10.
Q:
Money market securities are characterized by:
I. Maturity less than 1 year
II. Safety of the principal investment
III. Low rates of return
A. I only
B. I and II only
C. I and III only
D. I, II, and III
Q:
Q:
A 6 percent increase in the price of neckties leads to a 3 percent decrease in the quantity demanded of neckties. The absolute price elasticity of demand isA) 3. B) 0.33. C) 0.5. D) 2.
Q:
Real assets represent about ____ of total assets for commercial banks.
A. 1%
B. 15%
C. 25%
D. 40%
Q:
Q:
Voluntary agreements about cleaning up pollution attempt toA) internalize externalities. B) internalize private costs.C) externalize social costs. D) externalize private costs.
Q:
Which of the following is not an example of a financial intermediary?
A. Goldman Sachs
B. Allstate Insurance
C. First Interstate Bank
D. IBM
Q:
All of the following are governmental efforts to decrease poverty EXCEPTA) Supplemental Security Income B) the earned income program.C) transfer payments. D) tariffs.
Q:
Q:
Liabilities equal approximately _____ of total assets for nonfinancial U.S. businesses.
A. 10%
B. 25%
C. 45%
D. 75%
Q:
Q:
Quantity of LaborHourly Wage RateTotal Marginal Wage Bill Factor Cost0-- -1$10 212 314 416 518 620 In the above table, what is the marginal factor cost of the 6th worker?A) $30 B) $18 C) $120 D) $20
Q:
In 2014 mortgages represented approximately __________ of total liabilities and net worth of American households.
A. 10%
B. 14%
C. 28%
D. 42%
Q:
Q:
The first labor unions in the United States wereA) public-sector unions. B) industrial unions. C) guilds. D) craft unions.
Q:
In 2014 real assets represented approximately __________ of the total asset holdings of American households.
A. 30%
B. 42%
C. 48%
D. 55%
Q:
If the demand for hamburgers increases, it is likely that the demand for fast -food employees willA) increase. B) decrease.C) stay the same. D) increase at first but then fall rapidly.
Q:
Q:
The combined liabilities of American households represent approximately __________ of combined assets.
A. 11%
B. 14%
C. 25%
D. 33%
Q:
ʺRegulations do not always have the intended result.ʺ Do you agree or disagree? Why?
Q:
On January 1, 2012 Saffron Co. recorded a $40,000 profit on the upstream sale of some equipment that had a remaining four-year life under the straight-line depreciation method. The equipment has no salvage value. Saffron had separate income of $100,000 in 2012. The parent company, Pommel Incorporated, owns 90% of Saffron. Pommel would report investment income from Saffron in 2012 ofA) $54,000.B) $63,000.C) $90,000.D) $126,000.
Q:
Which of the following is not a financial intermediary?
A. a mutual fund
B. an insurance company
C. a real estate brokerage firm
D. a credit union
Q:
Pogo Corporation acquired a 75% interest in Sperry Corporation on January 1, 2009 at a cost equal to book value and fair value. In the same year Sperry sold land costing $25,000 to Pogo for $50,000. On July 1, 2012, Pogo sold the land to an unrelated party for $85,000. What was the gain on the sale of the land on the consolidated income statement for 2012?A) $25,000B) $35,000C) $45,000D) $60,000
Q:
A Tweedle Dee-Tweedle Dum game situation occurs when
A) two firms choose incompatible product formats.
B) two firms choose compatible product formats.
C) two firms produces products that are complementary to each otherʹs products.
D) the game is a positive sum.
Q:
The 2002 law designed to improve corporate governance is titled the _____ .
A. Pension Reform Act
B. ERISA
C. Financial Services Modernization Act
D. Sarbanes-Oxley Act
Q:
Oligopolies can result from any of the following EXCEPTA) economies of scale. B) vertical mergers.C) government regulation. D) diseconomies of scale.
Q:
Q:
An example of a real asset is:
I. A college education
II. Customer goodwill
III. A patent
A. I only
B. II only
C. I and III only
D. I, II, and III
Q:
Q:
Compared with a monopolist, the demand curve faced by a monopolistically competitive firm isA) more elastic. B) more inelastic.C) perfectly elastic. D) perfectly inelastic.
Q:
The average rate of return on U.S. Treasury bills since 1926 was _________.
A. less than 1%
B. less than 3%
C. less than 4%
D. less than 7%
Q:
PQMRMC$720$12$2$621$14$5$522$16$10$423$18$15$324$20$20$225$22$26If a monopolist is producing the quantity at which price equals marginal cost, it shouldA) continue to produce this amount if it wants to maximize profits. B) reduce output if it wants to maximize profits.C) reduce price and keep output unchanged if it wants to maximize profits. D) increase output if it wants to maximize profits.
Q:
Petrol Company acquired an 90% interest in Seadig Corporation on January 1, 2010. On January 1, 2011, Seadig sold a building with a book value of $120,000 to Petrol for $150,000. The building had a remaining useful life of ten years and no salvage value. Straight-line depreciation is used. The separate balance sheets of Petrol and Seadig on December 31, 2011 included the following balances:Petrol SeadigBuildings $500,000 $230,000Accumulated Depr. - Buildings 180,000 79,000The consolidated amounts for Buildings and Accumulated Depreciation - Buildings that appeared, respectively, on the balance sheet at December 31, 2011, wereA) $700,000 and $256,000.B) $700,000 and $259,000.C) $730,000 and $256,000.D) $730,000 and $259,000.
Q:
The historical average rate of return on large company stocks since 1926 has been _____ .
A. 5%
B. 8%
C. 11.5%
D. 20%
Q:
Q:
The long-run industry supply curve in a decreasing-cost, perfectly competitive industry isA) negatively sloped. B) perfectly elastic.C) positively sloped. D) perfectly inelastic.
Q:
The success of common stock investments depends on the success of _________.
A. derivative securities
B. fixed-income securities
C. the firm and its real assets
D. government methods of allocating capital