Q&A Hero

Q: The Federal Trade Commission regulates which of the following?A) Unfair trade practices by businesses B) Financial marketsC) Trade with third world countries D) The banking industry

Q: Which one of the following invests in a portfolio that is fixed for the life of the fund? A. mutual fund B.money market fund C. managed investment company D. unit investment trust

Q: Initial public offerings (IPOs) are usually ___________ relative to the levels at which their prices stabilize after they begin trading in the secondary market. A. overpriced B. correctly priced C. underpriced D. mispriced, but without any particular bias

Q: On January 1, 2011, Jeff Company acquired a 90% interest in Marian Company for $198,000 cash. On January 1, 2011, Marian Company had the following assets and liabilities: Book Value Fair Value Cash $5,000 $5,000 Accounts Receivable 30,000 35,000 Inventory 40,000 50,000 Plant Assets 60,000 80,000 Total Assets $135,000 $170,000 Liabilities $25,000 $25,000 Capital Stock 100,000 Retained Earnings 10,000 Total Liabilities & Stockholders' Equity $135,000 Push-down accounting is used for the acquisition. Required: 1. Assume both companies use the entity theory. Prepare the elimination entry(ies) on consolidating work papers on January 1, 2011. 2. Assume both companies use the parent company theory. Prepare the elimination entry(ies) on consolidating work papers on January 1, 2011.

Q: A market situation in which there are a few firms that recognize their mutual interdependence isA) monopolistic competition. B) oligopoly.C) monopoly. D) regulated monopoly.

Q: On January 1, 2011, Jeff Company acquired a 90% interest in Margaret Company for $198,000 cash. On January 1, 2011, Margaret Company had the following assets and liabilities: Book Value Fair Value Cash $5,000 $5,000 Accounts Receivable 30,000 35,000 Inventory 40,000 50,000 Plant Assets 60,000 80,000 Total Assets $135,000 $170,000 Liabilities $25,000 $25,000 Capital Stock 100,000 Retained Earnings 10,000 Total Liabilities & Stockholders' Equity $135,000 Push-down accounting is used for the acquisition. Required: 1. Assume both companies use the entity theory. a. Record the journal entry on Margaret's separate books on January 1, 2011. b. Record the journal entry on Jeff's separate books on January 1, 2011. 2. Assume both companies use the parent company theory. a. Record the journal entry on Margaret's separate books on January 1, 2011. b. Record the journal entry on Jeff's separate books on January 1, 2011.

Q: The bulk of most initial public offerings (IPOs) of equity securities goes to ___________. A. institutional investors B. individual investors C. the firm's current shareholders D. day traders

Q: IndustryRatio (percent)W72X30Y84Z55The most oligopolistic industry of those presented in the above table is likely to be industryA) W. B) X. C) Y. D) Z.

Q: On January 1, 2011, Penny Company acquired a 90% interest in Lampire Company for $180,000 cash. On January 1, 2011, Lampire Company had the following assets and liabilities: Book Value Fair Value Cash $10,000 $10,000 Accounts Receivable 30,000 35,000 Inventory 40,000 50,000 Plant Assets 60,000 80,000 Total Assets $140,000 $175,000 Liabilities $25,000 $25,000 Capital Stock 100,000 Retained Earnings 15,000 Total Liabilities & Stockholders' Equity $140,000 Push-down accounting is used for the acquisition. Required: 1. Assume both companies use the entity theory. Record the push-down adjustment on Lampire's separate books on January 1, 2011. 2. Assume both companies use the parent company theory. Record the push-down adjustment on Lampire's separate books on January 1, 2011.

Q: The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called ________. A. interest building B. book building C. market analysis D. customer identification

Q: In the short run, the profit-maximizing monopolistically competitive firm will produce the rate of output at whichA) P = MC. B) MR = MC. C) P = ATC. D) MR = ATC.

Q: Patch Corporation has a 50% undivided interest in Saric Corporation, a joint venture. Patch accounts for its interest in Saric by the equity method and also prepares consolidated financial statements for external reporting purposes. Patch follows specialized industry practices and uses proportionate consolidation for its interest in Saric. Separate financial statements for Patch and Saric are as follows: Patch Saric Consolidation Cash $30,000 $18,000 ________ Accounts receivable 70,000 42,000 ________ Inventories 80,000 72,000 ________ Investment in Saric 140,000 ________ Land 116,000 40,000 ________ Plant, property, equipment 200,000 128,000 ________ Total assets $636,000 $300,000 ________ Accounts payable $24,000 $20,000 ________ Common stock 340,000 0 ________ Retained earnings 272,000 ________ Venture capital ________ 280,000 ________ Total liab. & equity $636,000 $300,000 ________ Required: Prepare the consolidated balance sheet for Patch Corporation and its undivided interest in Saric Corporation.

Q: When matching orders from the public, a specialist is required to use the _______. A. lowest outstanding bid price and highest outstanding ask price B. highest outstanding bid price and highest outstanding ask price C. lowest outstanding bid price and lowest outstanding ask price D. highest outstanding bid price and lowest outstanding ask price

Q: Refer to the above figure. The profit-maximizing price for this firm isA) P1. B) P2.C) P3. D) P4.

Q: Johnsen Corporation paid $225,000 for a 70% interest in Jonas Corporation on January 1, 2011. On that date, Jonas's balance sheet accounts, at book value and fair value, were as follows: Book Value Fair Value Assets Cash $25,000 $25,000 Accounts receivable-net 45,000 55,000 Inventories 40,000 60,000 Plant, property and equipment-net 140,000 125,000 Total assets $250,000 $265,000 Equities Accounts payable $40,000 $40,000 Common stock 120,000 Retained earnings 90,000 Total liab. & equity $250,000 Required: 1. Prepare the journal entry necessary on January 1, 2011 on Jonas Corporation's books. Both companies use push-down accounting and the entity theory. 2. Prepare the balance sheet for Jonas Corporation immediately after the acquisition on January 1, 2011.

Q: The __________ was established to protect investors from losses if their brokerage firms fail. A. CFTC B. SEC C. SIPC D. AIMR

Q: In the long run in a perfectly competitive industry, A) opportunity costs are negligible.B) economic profits will be zero.C) some firms will be experiencing economic losses.D) only entrepreneurs will earn more than their opportunity costs.

Q: Pascal Corporation paid $225,000 for a 70% interest in Sank Corporation on January 1, 2011. On that date, Sank's balance sheet accounts, at book value and fair value, were as follows: Book Value Fair Value Assets Cash $25,000 $25,000 Accounts receivable-net 45,000 55,000 Inventories 40,000 60,000 Plant, property and equipment-net 140,000 125,000 Total assets $250,000 $265,000 Equities Accounts payable $40,000 $40,000 Common stock 120,000 Retained earnings 90,000 Total liab. & equity $250,000 Both companies use the parent company theory. Push-down accounting is used for the acquisition. Required: 1. Prepare the journal entry on January 1, 2011 on Sank Corporation's books. 2. Prepare a balance sheet for Sank Corporation immediately after the acquisition on January 1, 2011.

Q: Suppose that at the current level of output, price = $10, MC = $10, 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: Advantages of ECNs over traditional markets include all but which one of the following? A. lower transactions costs B. anonymity of the participants C. small amount of time needed to execute and order D. ability to handle very large orders

Q: Party Corporation acquired an 80% interest in Sang Corporation on January 1, 2011 for $20,000. Balance sheet and fair value information on this date is summarized as follows: Party Book Value Sang Book Value Sang Fair Value Current assets $15,000 $9,000 $9,000 Land and Building-net 35,000 7,000 7,000 Equipment 8,000 4,000 6,000 Total assets $58,000 $20,000 $22,000 Liabilities $27,000 $10,000 10,000 Capital stock 18,000 4,000 Retained earnings 13,000 6,000 Total liab. & equity $58,000 $20,000 Required: 1. Prepare an entry on the books of Sang Corporation to record the push-down adjustment under parent company theory. 2. Prepare an entry on the books of Sang Corporation to record a push-down adjustment under entity theory.

Q: On a given day a stock dealer maintains a bid price of $1,000.50 for a bond and an ask price of $1003.25. The dealer made 10 trades that totaled 500 bonds traded that day. What was the dealer's gross trading profit for this security?A. $1,375B. $500C. $275D.$1,450

Q: A firm has average fixed costs of $0.20 and average variable costs of $2.50 at an output of 500 units. The firmʹs total costs are thereforeA) $1,250. B) $1,350. C) $1,150. D) $1,500.

Q: Partridge Corporation purchased an 80% interest in Sandy Corporation for $840,000 on January 1, 2011. Sandy's balance sheet book values and accompanying fair values on this date are shown below. Parent Entity Company Theory Theory Push- Push- Down Down Book Fair Balance Balance Value Value Sheet Sheet Cash $30,000 $30,000 ________ ________ Receivables 200,000 200,000 ________ ________ Inventory 300,000 360,000 ________ ________ Land 50,000 90,000 ________ ________ Plant assets-net 250,000 300,000 ________ ________ Total Assets $830,000 $980,000 ________ ________ Current liabilities $180,000 $180,000 ________ ________ Other liabilities 120,000 100,000 ________ ________ Common Stock 400,000 ________ ________ Retained Earnings 130,000 ________ ________ ________ Total Liab. & Equity $830,000 ________ ________ ________ Required: Complete the push-down columns of Sandy Corporation's restructured balance sheet using entity theory and parent company theory.

Q: During the short run, a firm cannotA) increase its use of labor. B) change its plant size.C) purchase more raw materials. D) change its variable costs.

Q: If an investor places a _________ order, the stock will be sold if its price falls to the stipulated level. If an investor places a __________ order, the stock will be bought if its price rises above the stipulated level. A. stop-buy; stop-loss B. market; limit C. stop-loss; stop-buy D. limit; market

Q: On January 1, 2011, Parton Corporation acquired an 80% interest in Sandra Corporation for $184,000. Sandra's net assets on this date had a book value of $160,000 and a fair value of $210,000. The excess of fair value over book value at acquisition was attributable to $20,000 of understated plant assets with a remaining useful life of five years from January 1, 2011, and $30,000 to an understated patent with a remaining economic life of six years from January 1, 2011. Separate net incomes (excluding investment income) of Parton and Sandra for 2011 were $300,000 and $50,000, respectively. Required: 1. Compute goodwill at January 1, 2011 under the parent company theory and the entity theory. 2. Determine consolidated net income and noncontrolling interest share for 2011 under the parent company theory and the entity theory.

Q: Dividends are A) the portion of a corporationʹs profits that are distributed to stockholders. B) the portion of a corporationʹs revenues that are distributed to bondholders. C) bonuses given to managers of corporations, to ensure that the managers perform in the way that stockholders want. D) taxes on the profits of corporations.

Q: The term latency refers to _____. A. the lag between when an order is placed on the NYSE and when it is executed. B. the amount of time it takes to accept, process, and deliver a trading order. C. the time it takes to implement new rules and procedures for stock exchanges and computer trading systems. D. the lag between when an order is executed and when the investor takes possession of the securities.

Q: Patane Corporation acquired 80% of the outstanding voting common stock of Sanlon Corporation on January 1, 2011, for $500,000. Sanlon Corporation's stockholders' equity at this date consisted of $250,000 in Capital Stock and $100,000 in Retained Earnings. The fair value of Sanlon's assets was equal to the book value of the assets except for land with a fair value $40,000 greater than its book value, and marketable securities with a fair value $50,000 greater than its book value. Sanlon also had a valuable patent with a fair value of $25,000 and a book value of zero because its development costs were expensed as incurred. The fair value of Sanlon's liabilities is $10,000 higher than the $40,000 book value. Required: Calculate the amount of goodwill under the parent company and entity theories of consolidation.

Q: The term inside quotes refers to _____. A. the difference between the lowest bid price and the highest ask price in the limit order book. B. the difference between the highest bid price and the lowest ask price in the limit order book. C. the difference between the lowest bid price and the lowest ask price in the limit order book. D. the difference between the highest bid price and the highest ask price in the limit order book.

Q: If incomes fall, thenA) the budget constraint shifts inward.B) the budget constraint shifts out.C) there is no change in the budget constraint.D) there is no relationship between the budget constraint and income.

Q: An order to buy or sell a security at the current price is a ______________. A. limit order B. market order C. stop-loss order D. stop-buy order

Q: Olga buys a bag of potato chips every day after her economics class. The first potato chip always tastes wonderful. The second does not taste quite as good as the first. The third does not taste quite as good as the second. Olga is experiencingA) irrational behavior. B) the law of diminishing marginal utility.C) the income effect. D) the substitution effect.

Q: Pashley Corporation purchased 75% of Sargent Corporation on January 1, 2011, for $115,000. Balance sheets for the two companies on this date, prepared just prior to the purchase, are provided below. Pashley Sargent Sargent Book Values Book Values Fair Values Cash $165,000 $5,000 $5,000 Inventory 135,000 35,000 45,000 Buildings & equipment-net 250,000 60,000 95,000 Total assets $550,000 $100,000 $145,000 Common stock $150,000 $47,500 Retained earnings 400,000 52,500 Total equities $550,000 $100,000 Required: Prepare a consolidated balance sheet using the entity theory of consolidation.

Q: Restrictions on trading involving insider information apply to: I. Corporate officers and directors II. Major stockholders III. Relatives of corporate directors and officers A. I only B. I and II only C. II and III only D. I, II, and III

Q: PxQxPyQyPzQz$10100$2050$25200109018602522510701590252751250151002529015251512025320Refer to the above table. Based on the information in the table, we can say thatA) all three goods are substitutes for each other. B) all three goods are complements.C) X and Y are substitutes, Y and Z are complements, and X and Z are substitutes.D) X and Y are complements, Y and Z are substitutes, and X and Z are complements.

Q: Partel Corporation purchased 75% of Sandford Corporation on January 1, 2011, for $230,000. Balance sheets for the two companies on this date, prepared just prior to the purchase, are provided below. Partel Sandford Sandford Book Values Book Values Fair Values Cash $330,000 $10,000 $10,000 Inventory 270,000 70,000 90,000 Buildings & equipment-net 500,000 120,000 190,000 Total assets $1,100,000 $200,000 $290,000 Common stock $300,000 95,000 Retained earnings 800,000 105,000 Total equities $1,100,000 $200,000 Required: 1. Prepare a consolidated balance sheet using the entity theory of consolidation. 2. Prepare a consolidated balance sheet using the parent company theory of consolidation.

Q: Which one of the following is a false statement regarding NYSE specialists? A. On a stock exchange most buy or sell orders are executed via an electronic system rather than through specialists. B. Specialists cannot trade for their own accounts. C. Specialists maintain limit order books, which contain the outstanding unexecuted limit orders. D. Specialists stand ready to trade at narrower bid-ask spreads in cases where the spread has become too wide.

Q: On July 1, 2010, Parslow Corporation acquired a 75% interest in Sanderson Corporation for $150,000. Sanderson's net assets on this date had a book value of $140,000 and a fair value of $160,000. The excess of fair value over book value at acquisition was due to understated plant assets with a remaining useful life of five years from July 1, 2010. Separate net incomes (excluding investment income) of Parslow and Sanderson for 2011 were $400,000 and $20,000, respectively. Required: 1. Compute goodwill at July 1, 2010 under the parent company theory and the entity theory. 2. Determine consolidated net income and noncontrolling interest share for 2011 under the parent company theory and the entity theory.

Q: Wheat is sold in world markets, usually priced in terms of bushels. In the market for wheat, the price elasticity of demand for wheat would be expressed asA) the number of bushels of wheat sold.B) the number of whatever currency is used in purchasing the wheat.C) the number of dollars spent on wheat. D) a unitless number.

Q: Which one of the following types of markets requires the greatest level of trading activity to be cost-effective? A. broker market B. dealer market C. continuous auction market D. direct search market

Q: The marginal benefit 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: Use the following information to answer the question(s) below.On January 1, 2011, Penelope Company acquired a 90% interest in Leah Company for $180,000 cash. On January 1, 2011, Leah Company had the following assets and liabilities:Book Value Fair ValueCash $10,000 $10,000Accounts Receivable 30,000 35,000Inventory 40,000 50,000Plant Assets 60,000 80,000Total Assets $140,000 $175,000Liabilities $25,000 $25,000Capital Stock 100,000Retained Earnings 15,000Total Liabilities &Stockholders' Equity $140,000Push-down accounting is used for the acquisition.Assume the parent company theory is used. On January 2, 2011, Leah Company will report Goodwill of ________ and Accounts Receivable of ________ on Leah's balance sheet.A) $27,000; $30,000B) $27,000; $35,000C) $30,000; $30,000D) $45,000; $34,500

Q: Initial margin requirements on stocks are set by _________. A. the Federal Deposit Insurance Corporation B. the Federal Reserve C. the New York Stock Exchange D. the Securities and Exchange Commission

Q: Some economists argue that the official poverty figures overstate poverty in this country. Why?

Q: Purchases of new issues of stock take place _________. A. at the desk of the Fed B. in the primary market C. in the secondary market D. in the money markets

Q: Under push-down accounting, the ________ of the acquired subsidiary's assets and liabilities are reported on the financial statements of the ________. A) book value; subsidiary B) book value; parent C) fair value; subsidiary D) present value; parent

Q: In the above figure, what is the quantity of workers that would be hired by a monopsonist?A) Q1 B) Q2 C) Q3 D) Q4

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: 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 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: 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: 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: 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: 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: 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: 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: 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: Noncontrolling interest share is viewed as an expense under ________ theory. A) parent company B) entity C) contemporary D) joint venture

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: 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: 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: Refer to the above figure. The profit maximizing quantity for this firm isA) zero. B) Q1. C) Q2. D) Q3.

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: 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: 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: 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: 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: 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.