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Questions
Q:
A perfectly competitive firm will maximize profits whenA) average cost is greater than marginal revenue.B) marginal cost is greater than marginal revenue. C) marginal cost is equal to marginal revenue.D) average cost is equal to average revenue.
Q:
The Sarbanes-Oxley Act tightened corporate governance rules by requiring all but which one of the following?
A. Required that corporations have more independent directors.
B. Required that the CFO personally vouch for the corporation's financial statements.
C. Required that firms could no longer employ investment bankers to sell securities to the public.
D. Required the creation of a new board to oversee the auditing of public companies.
Q:
Plenny Corporation sold equipment to its 90%-owned subsidiary, Sourdough Corp., on January 1, 2012. Plenny sold the equipment for $100,000 when its book value was $75,000 and it had a 5-year remaining useful life with no expected salvage value. Straight-line depreciation is used by both companies. Separate balance sheets for Plenny and Sourdough included the following equipment and accumulated depreciation amounts on December 31, 2012:Plenny SourdoughEquipment $850,000 $300,000Less: Accumulated depreciation (200,000) (60,000)Equipment-net $650,000 $240,000Consolidated amounts for equipment and accumulated depreciation at December 31, 2012 were respectivelyA) $1,125,000 and $255,000.B) $1,125,000 and $260,000.C) $1,150,000 and $255,000.D) $1,150,000 and $260,000.
Q:
Assume an upstream sale of machinery occurs on January 1, 2011. The parent owns 70% of the subsidiary. There is a gain on the intercompany transfer and the machine has five remaining years of useful life and no salvage value. Straight-line depreciation is used. Which of the following statements is correct?A) Noncontrolling interest share for 2011 is equal to: subsidiary income for 2011 multiplied by 30%.B) Noncontrolling interest share for 2011 is equal to: (subsidiary income for 2011 minus the gain on sale plus the excess depreciation expense) multiplied by 30%.C) Noncontrolling interest share for 2011 is equal to: (subsidiary income for 2011 minus the gain on sale) multiplied by 30%.D) Noncontrolling interest share for 2011 is equal to: (subsidiary income for 2011 plus the excess depreciation expense) multiplied by 30%.
Q:
Total fixed cost isA) the cost of buying and installing new machinery.B) the cost that does not change as output changes. C) the expenditure on imported raw materials.D) the wages paid to consultants.
Q:
Debt securities promise:
I. A fixed stream of income.
II. A stream of income that is determined according to a specific formula.
III. A share in the profits of the issuing entity.
A. I only
B. I or II only
C. I and III only
D. II or III only
Q:
Parrot Company owns all the outstanding voting stock of Southern Manufacturing. On January 1, 2012, Parrot sold machinery to Southern at its book value of $24,000. Parrot had the machinery three years before selling it and used an eight-year straight-line depreciation method, with zero salvage value. Southern will use the straight-line depreciation method, and assumes the machine has five years remaining and no salvage value. In the 2012 consolidating working papers, the depreciation expenseA) required no adjustment.B) decreased by $4,800.C) increased by $4,800D) increased by $8,000.
Q:
The price of the stock divided by the profits per share of stock is known as theA) price-earnings ratio. B) dividend.C) yield in percent per year.D) number of shares traded during the day.
Q:
Which one of the following firms falsely claimed to have a $4.8 billion bank account at Bank of America and vastly understated its debts, eventually resulting in the firm's bankruptcy?
A. WorldCom
B. Enron
C. Parmalat
D. Global Crossing
Q:
An advantage of a partnership over a proprietorship isA) limited liability.B) that profits are not taxed twice.C) the ability to take advantage of greater specialization. D) that it is easier to dissolve.
Q:
__________ portfolio construction starts with asset allocation.
A. Bottom-up
B. Top-down
C. Upside-down
D. Side-to-side
Q:
A set of indifference curves on a graph is calledA) a difference map. B) an indifference map.C) a budget map. D) a cluster.
Q:
An example of a derivative security is _________.
A. a common share of General Motors
B. a call option on Intel stock
C. a Ford bond
D. a U.S. Treasury bond
Q:
QuantityTotal Utility00110225335442547649Refer to the above table. At what quantity does diminishing marginal utility set in?A) After 0. B) After 1. C) After 2. D) After 10.
Q:
Security selection refers to _________.
A. choosing specific securities within each asset class
B. deciding how much to invest in each asset class
C. deciding how much to invest in the market portfolio versus the riskless asset
D. deciding how much to hedge
Q:
MonthPXQXPYQYPZQZJan$10100$2050$25200Feb1090186025225Mar1070159025275Apr12501510025290May15251512025320In the above table, the cross price elasticity of demand for good Y with good X when P X rises from $10 to $12 isA) +0.29. B) +1.83. C) +0.58. D) -0.58.
Q:
When the market is more optimistic about a firm, its share price will ______; as a result, it will need to issue _______ shares to raise funds that are needed.
A. rise; fewer
B. fall; fewer
C. rise; more
D. fall; more
Q:
In securities markets, there should be a risk-return trade-off with higher-risk assets having _________ expected returns than lower-risk assets.
A. higher
B. lower
C. the same
D. The answer cannot be determined from the information given.
Q:
A 3 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) 0.3. C) 1.0. D) 0.01.
Q:
Firms that specialize in helping companies raise capital by selling securities to the public are called _________.
A. pension funds
B. investment banks
C. savings banks
D. REITs
Q:
The marginal benefit of the pollution abatement curveA) has a zero slope. B) has a positive slope. C) slopes upward. D) slopes downward.
Q:
In a growing economy, it is possible to eliminateA) absolute poverty. B) relative poverty.C) both absolute and relative poverty. D) either absolute nor relative poverty.
Q:
Methods of encouraging managers to act in shareholders' best interest include:
I. Threat of takeover.
II. Proxy fights for control of the board of directors.
III. Tying managers' compensation to stock price performance.
A. I only
B. I and II only
C. II and III only
D. I, II, and III
Q:
Financial intermediaries exist because small investors cannot efficiently _________.
A. diversify their portfolios
B. gather information
C. assess and monitor the credit risk of borrowers
D. all of the options
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 5th worker?A) $22 B) $18 C) $90 D) $26
Q:
Upstream sale:
Plock's separate net income $400,000
Seraphim's separate net income 80,000
Less: Unrealized gain on vehicle (4,000)
Plus: Excess depreciation
Consolidated Net income
Noncontrolling interest share
($80,000 - 4,000 + 1,000) 25%
Controlling share of consolidated net income
Q:
Financial markets allow for all but which one of the following?
A. shift consumption through time from higher-income periods to lower
B. price securities according to their riskiness
C. channel funds from lenders of funds to borrowers of funds
D. allow most participants to routinely earn high returns with low risk
Q:
A craft labor union is made up ofA) groups of workers in an individual trade.B) all the workers in a firm such as General Motors.C) firms that employ similar labor skills.D) an organization that controls the labor market in a particular industry.
Q:
Plateau Incorporated bought 60% of the common stock of Sachet Company several years ago. At the time of purchase, the fair value and book value of Sachet's net assets were equal. The cost of the 60% investment was equal to 60% of the book value of Sachet's net assets. Plateau sells merchandise to Sachet at 125% above Plateau's cost. Intercompany sales from Plateau to Sachet for 2012 were $60,000. Unrealized profits in Sachet's December 31, 2011 inventory and December 31, 2012 inventory were $6,000 and $4,500, respectively. Sachet reported net income of $120,000 for 2012.
Required: In General Journal format, prepare consolidation working paper entries at December 31, 2012 to eliminate the effects of the intercompany inventory sales.
Q:
__________ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis.
A. Active
B. Momentum
C. Passive
D. Market-timing
Q:
Number of WorkersTotal OutputNumber of WorkersTotal Output0065401100760022208650332096904400107005475 According to the above table, if the wage rate is $400 a week and the price of the good produced is $5, the perfectly competitive firm should hireA) 3 workers. B) 4 workers. C) 5 workers. D) 6 workers.
Q:
Presented below are several figures reported for Plate Corporation and Saucer Industries as of December 31, 2011. Plate has owned 70% of Saucer for the past five years, and at the time of purchase, the book value of Saucer's assets and liabilities equaled the fair value. The cost of the 70% investment was equal to 70% of the book value of Saucer's net assets. At the time of purchase, the fair values and book values of Saucer's assets and liabilities were equal.
Plate Saucer
Inventory $120,000 $60,000
Sales 200,000 140,000
Cost of Goods Sold 130,000 80,000
Expenses 40,000 30,000
In 2010, Saucer sold inventory to Plate which had cost $40,000 for $60,000. 25% of this inventory remained on hand at December 31, 2010, but was sold in 2011. In 2011, Saucer sold inventory to Plate which had cost $30,000 for $45,000. 40% of this inventory remained unsold at December 31, 2011.
Required: Calculate following balances at December 31, 2011.
a. Consolidated Sales
b. Consolidated Cost of goods sold
c. Consolidated Expenses
d. Noncontrolling interest share of Saucer's net income
e. Consolidated Inventory
Q:
Commodity and derivative markets allow firms to adjust their _________.
A. management styles
B. focus from their main line of business to their investment portfolios
C. ways of doing business so that they"ll always have positive returns
D. exposure to various business risks
Q:
A common feature of regulated industries is cross-subsidization, which is a situation when one group of customers pays prices above costs while another group of customers pays prices below costs. The one group is subsidizing the other group. Is this practice more consistent with the capture hypothesis or the share-the-gains, share-the-pains theory? Explain.
Q:
The value of a derivative security _________.
A. depends on the value of another related security
B. affects the value of a related security
C. is unrelated to the value of a related security
D. can be integrated only by calculus professors
Q:
Pastern Industries has an 80% ownership stake in Sascon Incorporated. At the time of purchase, the book value of Sascon's assets and liabilities were equal to the fair value. The cost of the 80% investment was equal to 80% of the book value of Sascon's net assets. At the end of 2011, they issued the following consolidated income statement:
Sales $930,000
Cost of sales (470,000)
Operating expenses (202,000)
Noncontrolling interest share (23,000)
Controlling interest share $235,000
Shortly after the statements were issued, Pastern discovered that the 2011 intercompany sales transactions had not been properly eliminated in consolidation. In fact, Pastern had sold inventory that cost $80,000 to Sascon for $90,000, and Sascon had sold inventory that cost $50,000 to Pastern for $65,000. Half of the products from both transactions still remained in inventory at December 31, 2011.
Required: Prepare a corrected income statement for Pastern and Subsidiary for 2011.
Q:
Which of the following is the reason why the product incompatibility strategy worked for Appleʹs iPod in the media industry but did not work for Sonyʹs Beta videocassettes in the videocassette industry?A) Both media and videocassette industries were subject to positive market feedback.B) Both media and videocassette industries were subject to negative market feedback.C) The media industry was subject to positive feedback but the videocassette industry was subject to negative market feedback.D) The media industry was subject to negative market feedback but the videocassette industry was subject to positive market feedback.
Q:
__________ represents an ownership share in a corporation.
A. A call option
B. Common stock
C. A fixed-income security
D. Preferred stock
Q:
Proman Manufacturing owns a 90% interest in Sipp Company, purchased at a time when the book values of Sipp's recorded assets and liabilities were equal to fair values. During 2011, Sipp sold merchandise to Proman for $80,000 at a 20% gross profit. At December 31, 2011, 25% of this merchandise is still in Proman's inventory. Separate incomes for Proman and Sipp are summarized as follows:
Proman Sipp
Sales $900,000 $200,000
Cost of sales 400,000 100,000
Gross profit 500,000 100,000
Operating expenses 200,000 80,000
Separate income $300,000 $ 20,000
Required: Prepare a consolidated income statement for 2011 for Proman and subsidiary.
Q:
Monopolies and oligopolies both erect barriers to entry through the use ofA) price cutting. B) patents. C) franchising. D) advertising.
Q:
In a market economy, capital resources are primarily allocated by ____________.
A. governments
B. corporation CEOs
C. financial markets
D. investment bankers
Q:
On January 1, 2011, Palling Corporation purchased 70% of the common stock of Sam's Storage Systems for $320,000 when Sam's had Common Stock outstanding of $100,000 and Retained Earnings of $200,000. Any excess differential was attributed to goodwill.
At the end of 2011, Palling and Sam's had unrealized inventory profits from intercompany sales of $6,000 and $8,000, respectively. These year-end profit amounts were realized in 2012. At the end of 2012, Palling held inventory acquired from Sam's with a $10,000 unrealized profit. Palling reported separate income of $100,000 for 2012 and paid dividends of $30,000. Sam's reported separate income of $70,000 for 2012 and paid dividends of $20,000.
Required:
Compute the controlling interest share of consolidated net income for 2012.
Q:
The demand curve for the product of a monopolistic competitorA) is the same as the market demand curve. B) is horizontal.C) is vertical.D) slopes downward.
Q:
__________ portfolio construction starts with selecting attractively priced securities.
A. Bottom-up
B. Top-down
C. Upside-down
D. Side-to-side
Q:
PQMRMC$720$12$2$621$14$5$522$16$10$423$18$15$324$20$20$225$22$26Refer to the above table. Given the demand and cost schedules, what is the profit -maximizing price for this monopolist?A) $3 B) $4 C) $6 D) $7
Q:
Plover Corporation acquired 80% of Sink Inc. equity on January 1, 2010, when the book values of Sink's assets and liabilities were equal to their fair values. The cost of the investment was equal to 80% of the book value of Sink's net assets.
Plover separate income (excluding Sink) was $1,800,000, $1,700,000 and $1,900,000 in 2010, 2011 and 2012 respectively. Plover sold inventory to Sink during 2010 at a gross profit of $48,000 and one quarter remained at Sink at the end of the year. The remaining 25 percent was sold in 2011. At the end of 2011, Plover has $25,000 of inventory received from Sink from a sale of $100,000 which cost Sink $80,000. There are no unrealized profits in the inventory of Plover or Sink at the end of 2012. Plover uses the equity method in its separate books. Select financial information for Sink follows:
2010 2011 2012
Sales $790,000 $840,000 $940,000
Cost of Sales (420,000) (440,000) (500,000)
Gross Profit 370,000 400,000 440,000
Operating Expenses (300,000) (320,000) (350,000)
Net Income $ 70,000 $ 80,000 $ 90,000
Required:
Prepare a schedule to determine the controlling interest share of the consolidated net income for 2010, 2011, and 2012.
Q:
__________ is (are) real assets.
A. Bonds
B. Production equipment
C. Stocks
D. Life insurance
Q:
The long-run supply curve in a constant-cost, perfectly competitive industry isA) perfectly inelastic. B) upward sloping.C) downward sloping. D) perfectly elastic.
Q:
Papal Corporation acquired an 80% interest in Sandman Corporation at a cost equal to 80% of the book value of Sandman's net assets in 2010. At the time of the acquisition, the book values and fair values of Sandman's assets and liabilities were equal. During 2011, Papal recorded sales of $440,000 of merchandise to Sandman at a gross profit rate of 30%. Sandman's beginning and ending inventories for 2011 were $60,000 and $80,000, respectively. Income statement information for both companies for 2011 is as follows:
Papal Sandman
Sales Revenue $1,660,000 $580,000
Invest.income from Sandman 59,600
Cost of Goods Sold (1,060,000) (394,000)
Expenses (358,000) (104,000)
Net Income $301,600 $82,000
Required:
Prepare a consolidated income statement for Papal Corporation and Subsidiary for 2011.
Q:
_____ is a mechanism for mitigating potential agency problems.
A. Tying income of managers to success of the firm
B. Directors defending top management
C. Antitakeover strategies
D. All of the options.
Q:
A firm seeking to maximize economic profits should produce at the output at whichA) total revenue equals total cost.B) marginal revenue equals marginal cost. C) average revenue equals average cost.D) marginal revenue equals average revenue.
Q:
Pittle Corporation acquired a 80% interest in Seel Corporation at a cost equal to 80% of the book value of Seel's net assets several years ago. At the time of purchase, the fair value and book value of Seel's assets and liabilities were equal. Pittle purchases its entire inventory from Seel at 150% of Seel's cost. During 2011, Seel sold $490,000 of merchandise to Pittle. Pittle's beginning and ending inventories for 2011 were $72,000 and $66,000, respectively. Income statement information for both companies for 2011 is as follows:
Pittle Seel
Sales Revenue $ 820,000 $440,000
Investment income from Sitt 145,600
Cost of Goods Sold (460,000) (165,000)
Expenses (120,000) (95,000)
Net Income $ 385,600 $ 180,000
Required:
Prepare a consolidated income statement for Pittle Corporation and Subsidiary for 2011.
Q:
Which of the following is an example of an agency problem?
A. Managers engage in empire building.
B. Managers protect their jobs by avoiding risky projects.
C. Managers overconsume luxuries such as corporate jets.
D. All of the options are examples of agency problems.
Q:
Which of the following is NOT correct?A) MC = change in TC/change in Q B) ATC = TC/QC) AVC = TVC/Q D) ATC + AVC = AFC
Q:
Peel Corporation acquired a 80% interest in Sitt Corporation at a cost equal to 80% of the book value of Sitt several years ago. At the time of purchase, the fair value and book value of Sitt's assets and liabilities were equal. Sitt purchases its entire inventory from Peel at 150% of Peel's cost. During 2011, Peel sold $190,000 of merchandise to Sitt. Sitt's beginning and ending inventories for 2011 were $72,000 and $66,000, respectively. Income statement information for both companies for 2011 is as follows:
Peel Sitt
Sales Revenue $820,000 $440,000
Investment income from Sitt 146,000
Cost of Goods Sold (460,000) (165,000)
Expenses (120,000) (95,000)
Net Income $386,000 $180,000
Required:
Prepare a consolidated income statement for Peel Corporation and Subsidiary for 2011.
Q:
Security selection refers to the ________.
A. allocation of the investment portfolio across broad asset classes
B. analysis of the value of securities
C. choice of specific securities within each asset class
D. top-down method of investing
Q:
According to efficient market theory, which of the following can best predict the stock price of a particular company tomorrow?
A) a finance professor who knows a lot of investment theory
B) a stock trader who has traded stocks for more than 10 years
C) that companyʹs employee who has inside information about the company
D) none of the above: Everyone has an equal chance of predicting future stock prices
Q:
PreBuild Manufacturing acquired 100% of Shoding Industries common stock on January 1, 2010, for $670,000 when the book values of Shoding's assets and liabilities were equal to their fair values and Shoding's stockholders' equity consisted of $380,000 of Capital Stock and $290,000 of Retained Earnings.
PreBuild's separate income (excluding investment income from Shoding) was $870,000, $830,000 and $960,000 in 2010, 2011 and 2012, respectively. PreBuild sold inventory to Shoding during 2010 at a gross profit of $50,000 and 50% remained at Shoding at the end of the year. The remaining 50% was sold in 2011. At the end of 2011, PreBuild has $54,000 of inventory received from Shoding from a sale of $180,000 which cost Shoding $150,000. There are no unrealized profits in the inventory of PreBuild or Shoding at the end of 2012. PreBuild uses the equity method in its separate books. Select financial information for Shoding follows:
2010 2011 2012
Sales $890,000 $995,000 $1,020,000
Cost of Sales (420,000) (475,000) (505,000)
Gross Profit 470,000 520,000 515,000
Operating Expenses (350,000) (380,000) (390,000)
Net Income $120,000 $140,000 $125,000
Required:
Prepare a schedule to determine PreBuild Manufacturing's Consolidated net income for 2010, 2011, and 2012.
Q:
Which one of the following best describes the purpose of derivatives markets?
A. Transferring risk from one party to another.
B. Investing for a short time period to earn a small rate of return.
C. Investing for retirement.
D. Earning interest income.
Q:
Pexo Industries purchases the majority of their raw materials from a wholly-owned subsidiary, Springmade Chemicals. Pexo purchased Springmade to assure supply availability at a time when the materials were being rationed in the industry due to supply issues overseas. Pexo was able to purchase Springmade at the book value of Springmade's net assets. At the time of purchase, the book value and fair value of Springmade's net assets were equal. Pexo purchased $2,890,000 of materials from Springmade in 2011 alone. All intercompany sales are made at 120% of cost, although Springmade is able to mark up their products 80% to other outside buyers. Pexo carried inventory on their books at the beginning and end of the year in the amount of $450,000 and $480,000, respectively, all of which had been purchased from Springmade. Income statement information for both companies for 2011 is as follows:
Pexo Springmade
Sales Revenue $3,793,000 $4,441,000
Investment income from Springmade 245,000
Cost of Goods Sold (3,139,000) (3,270,000)
Expenses (257,000) (921,000)
Net Income $642,000 $250,000
Required:
Prepare a consolidated income statement for Pexo Corporation and Subsidiary for 2011.
Q:
Which of the following is not an advantage of a partnership?
A) Limited liability
B) Easy to form
C) Profits are subject to only personal taxation
D) Permits more effective specialization in occupations
Q:
Asset allocation refers to _________.
A. the allocation of the investment portfolio across broad asset classes
B. the analysis of the value of securities
C. the choice of specific assets within each asset class
D. none of the options
Q:
If an individualʹs total utility from consuming two goods decreases, then there must beA) a downward rotation of the individualʹs indifference curve.B) an inward rotation of the individualʹs indifference curve. C) an outward shift of the individualʹs indifference curve.D) an inward shift of the individualʹs indifference curve.
Q:
Preen Corporation acquired a 60% interest in Shino Corporation at a cost equal to 60% of the book value of Shino's net assets in 2010. At the time of acquisition, the book value and fair value of Shino's assets and liabilities were equal. During 2011, Preen sold $120,000 of merchandise to Shino. All intercompany sales are made at 150% of Preen's cost. Shino's beginning and ending inventories resulting from intercompany sales for 2011 were $60,000 and $36,000, respectively. Income statement information for both companies for 2011 is as follows:
Preen Shino
Sales Revenue $730,000 $262,000
Investment income from Shino 38,000
Cost of Goods Sold (319,000) (172,000)
Expenses (165,000) (40,000)
Net Income $284,000 $50,000
Required:
Prepare a consolidated income statement for Preen Corporation and Subsidiary for 2011.
Q:
__________ are examples of financial intermediaries.
A. Commercial banks
B. Insurance companies
C. Investment companies
D. All of the options
Q:
Perry Instruments International purchased 75% of the outstanding common stock of Standard Systems in 1997 when the book values and fair values of Standard's assets and liabilities were equal. The cost of Perry's investment was equal to 75% of the book value of Standard's net assets. Separate company income statements for Perry and Standard for the year ended December 31, 2011 are summarized as follows:
Perry Standard
Sales Revenue $2,400,000 $800,000
Investment income from Standard 142,000
Cost of Goods Sold (1,600,000) (400,000)
Expenses (450,000) (200,000)
Net Income $492,000 $200,000
During 2011, the companies began to manage their inventory differently, and worked together to keep their inventories low at each location. In doing so, they agreed to sell inventory to each other as needed at a markup of 10% of cost. Perry sold merchandise that cost $100,000 to Standard for $110,000, and Standard sold inventory that cost $80,000 to Perry for $88,000. Half of this merchandise remained in each company's inventory at December 31, 2011.
Required:
Prepare a consolidated income statement for Perry Corporation and Subsidiary for 2011.
Q:
QuantityTotal Utility00115235355475585690Refer to the above table. At what quantity does diminishing marginal utility set in?A) 1st. B) After 4. C) After 5. D) After 6.
Q:
Which of the following are financial assets?
I. Debt securities
II. Equity securities
III. Derivative securities
A. I only
B. I and II only
C. II and III only
D. I, II, and III
Q:
Pfeifer Corporation acquired an 80% interest in Stern Corporation several years ago when the book values and fair values of Stern's assets and liabilities were equal. At the time of acquisition, the cost of the 80% interest was equal to 80% of the book value of Stern's net assets. Separate company income statements for Pfeifer and Stern for the year ended December 31, 2011 are summarized as follows:
Pfeifer Stern
Sales Revenue $1,000,000 $600,000
Investment income from Stern 85,000
Cost of Goods Sold (600,000) (300,000)
Expenses (200,000) (200,000)
Net Income $285,000 $100,000
During 2010, Pfeifer sold merchandise that cost $120,000 to Stern for $180,000. Half of this merchandise remained in Stern's inventory at December 31, 2010. During 2011, Pfeifer sold merchandise that cost $150,000 to Stern for $225,000. One-third of this merchandise remained in Stern's December 31, 2011 inventory.
Required:
Prepare a consolidated income statement for Pfeifer Corporation and Subsidiary for 2011.
Q:
MonthPXQXPYQYPZQZJan$10100$2050$25200Feb1090186025225Mar1070159025275Apr12501510025290May15251512025320In the above table, the cross price elasticity of demand for good X with good Y when P Y falls from $20 to $18 isA) -2. B) 0. C) +1. D) -1.
Q:
__________ assets generate net income to the economy, and __________ assets define allocation of income among investors.
A. Financial, financial
B. Financial, real
C. Real, financial
D. Real, real
Q:
Psalm Enterprises owns 90% of the outstanding voting stock of Solomon Siding, which was purchased at a cost equal to 90% of the book value of Solomon's net assets many years ago. (At the time of purchase, the fair value and book value of Solomon's net assets were equal.) Psalm purchases merchandise from Solomon at 110% above Solomon's cost. In 2012, intercompany sales from Solomon to Psalm amounted to $362,000. Unrealized profits in Psalm's December 31, 2011 inventory and December 31, 2012 inventory were $82,000 and $26,000, respectively. Solomon reported net income of $980,000 for 2012.
Required:
1. Determine Psalm's income from Solomon for 2012.
2. In General Journal format, prepare consolidation working paper entries at December 31, 2012 to eliminate the effects of the intercompany inventory sales assuming the perpetual inventory method is used.
Q:
The actual value of the price elasticity of demand is alwaysA) positive because of the law of demand.B) negative because of the law of demand.C) positive because of diminishing marginal utility.D) negative because percentages can only be negative.
Q:
Which of the following is not a money market security?
A. U.S. Treasury bill
B. 6-month maturity certificate of deposit
C. common stock
D. All of the options.
Q:
The idea that it takes 90 percent of your time to clean up the last 10 percent of your house illustrates thatA) the marginal cost of cleaning up slopes downward. B) the marginal cost of cleaning up slopes upward.C) the marginal benefit of cleaning up is constant.D) the marginal benefit of cleaning up slopes upward.
Q:
Pirate Transport bought 80% of the outstanding voting stock of Seaways Shipping at book value several years ago. (At the time of purchase, the fair value and book value of Seaways' net assets were equal.) Pirate sells merchandise to Seaways at 120% above Pirate's cost. Intercompany sales from Pirate to Seaways for 2012 were $450,000. Unrealized profits in Seaways' December 31, 2011 inventory and December 31, 2012 inventory were $17,000 and $15,000, respectively. Seaways reported net income of $750,000 for 2012.
Required:
1. Determine Pirate's income from Seaways for 2012.
2. In General Journal format, prepare consolidation working paper entries at December 31, 2012 to eliminate the effects of the intercompany inventory sales assuming the perpetual inventory method is used.
Q:
The material wealth of society is determined by the economy's _________, which is a function of the economy's _________.
A. investment bankers; financial assets
B. investment bankers; real assets
C. productive capacity; financial assets
D. productive capacity; real assets
Q:
Which of the following statements is FALSE regarding the definition of poverty?A) A threshold income level is used to define poverty.B) Adjustments to the poverty level are made on the basis of changes in the Consumer Price Index.C) Real incomes in the United States have been growing at a compounded annual rate of almost 2 percent per capita.D) Poverty cannot be defined in relative terms.
Q:
Active trading in markets and competition among securities analysts helps ensure that:
I. Security prices approach informational efficiency.
II. Riskier securities are priced to offer higher potential returns.
III. Investors are unlikely to be able to consistently find under- or overvalued securities.
A. I only
B. I and II only
C. II and III only
D. I, II, and III
Q:
Salli Corporation regularly purchases merchandise from their 90%-owner, Playtime Corporation. Playtime purchased the 90% interest at a cost equal to 90% of the book value of Salli's net assets. At the time of acquisition, the book values and fair values of Salli's assets and liabilities were equal. Playtime makes their sales to Salli at 120% of cost. In 2012, Salli reported net income of $460,000, and made purchases totaling $172,000 from Playtime. Although Salli had no inventory on hand at the beginning of 2012 that they had purchased from Playtime, at year end, they had $51,600 of this merchandise in inventory.
Required:
1. Determine the unrealized profit in Salli's inventory at December 31, 2012.
2. Compute Playtime's income from Salli for 2012.