TEST BANK FOR Financial & Managerial Accounting for MBAs, 6th Edition by Easton, Halsey, McAnally, Hartgraves & Morse graded A+

FINANCIAL & MANAGERIAL ACCOUNTING FOR MBAS
TEST BANK FOR Financial & Managerial Accounting for MBAs, 6th Edition

by Easton, Halsey, McAnally, Hartgraves & Morse graded A+

Testbankscove

, Financial & Managerial Accounting for MBAs, 6th Edition
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by Easton, Halsey, McAnally, Hartgraves & Morse
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Practice Quiz Solutions e e




Module 1 – Financial Accounting for MBAs
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1. Which of the following organizations does not contribute to the formation of GAAP?
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a. FASB (Financial Accounting Standards Board)
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b. IRS (Internal Revenue Service)
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c. AICPA (American Institute of Certified Public Accountants)
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d. SEC (Securities and Exchange Commission)
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Answer: b
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2. Rocky Beach reports the following dollar balances in its retained earnings account.
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($ millions)
e 2017 2016
Retained earnings…………. e 8,968.1 8,223.9

During 2017, Rocky Beach reported net income of $1,351.4 million. What amount of dividends, if
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any, did Rocky Beach pay to its shareholders in 2017?
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a. $607.2 million e

b. No dividends paid e e

c. $301.2 million e

d. $744.2 million e




Answer: a
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Computation of dividends e e

Beginning retained earnings, 2017 ............................................................................
e e e e $8,223.9
+ Net income .................................................................................................................
e e 1,351.4
– Cash dividends...........................................................................................................
e (?)
= Ending retained earnings, 2017 .................................................................................
e e e e $8,968.1

Thus, dividends were $607.2 million for 2017.
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Cambridge eBusiness ePublishers, e©2018
Practice eQuiz eSolutions, eModule 1-1
e1

,3. At the beginning of a recent year, The Walt Disney Company’s liabilities equaled $26,197
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million. During the year, assets increased by $400 million and year-end assets equaled $50,388
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million. Liabilities decreased $100 million during the year.
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What were beginning and ending amounts for Walt Disney’s equity?
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a. $26,197 million beginning equity and $24,291 million ending equity
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b. $23,791 million beginning equity and $27,042 million ending equity
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c. $23,791 million beginning equity and $24,291 million ending equity
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d. $27,042 million beginning equity and $25,183 million ending equity
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eAnswer: c e




Using the accounting equation at the beginning of the year:
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Assets($50,388 - $400) e e = Liabilities($26,197) + Equity(?)
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Thus: Beginning Equity
e e = $23,791
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Using the accounting equation at the end of the year:
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Assets($50,388) = Liabilities($26,197 - $100) + Equity(?) e e e e e

Thus: Ending Equity
e = $24,291 e e




4. Assume that Starbucks reported net income for a recent year of $564 million. Its
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stockholders’ equity is $2,229 million and $2,090 million, respectively.
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Compute its return on equity.
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a. 13.0%
b. 22.8%
c. 26.1%
d. 32.7%

Answer: c e




ROE e e= Net income / Average stockholders’ equity
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= $564 million / [($2,229 million + $2,090 million) / 2] = 26.1%
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5. Nokia manufactures, markets, and sells phones and other electronics. Assume that Nokia
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reported net income of €3,582 on sales of €34,191 and total stockholders’ equity of €14,576 and
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€14,871, respectively.
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What is Nokia’s return on equity?
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a. 24.3%
b. 42.3%
c. 17.7%
d. 10.5%

Answer: a e




Return on equity is net income divided by the average total stockholders’ equity.
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Nokia’s ROE: €3,582 / [(€14,576 + €14,871) / 2] = 24.3%.
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, 6. The total assets of Dell, Inc. equal $15,470 million and its equity is $4,873 million. What is
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the amount of its liabilities, and what percentage of financing is provided by Dell’s owners?
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a. $20,343 million, 24.0% e e

b. $10,597 million, 31.50% e e

c. $10,597 million, 68.5% e e

d. $20,343 million, 76.0% e e




Answer: b e




($ millions)
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Assets = Liabilities + Equity
$15,470 $10,597 $4,873

Dell receives more of its financing from nonowners ($10,597 million) versus owners ($4,873
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million). Its owner financing comprises 31.5% of its total financing ($4,873 million/ $15,470
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million).
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7. The total assets of Ford Motor Company equal $315,920 million and its liabilities equal
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$304,269 million. What is the amount of Ford’s equity and what percentage of financing is
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provided by its owners?
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a. $ 11,651 million, 3.9%
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b. $620,189 million, 49.1% e e

c. $620,189 million, 50.9% e e

d. $ 11,651 million, 3.7%
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Answer: d e




($ millions)
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Assets = Liabilities + Equity
$315,920 $304,269 $11,651

Ford receives more of its financing from nonowners ($304,269 million) versus owners ($11,651
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million). Its owner financing comprises 3.7% of its total financing ($11,651 million/ $315,920
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million). The relatively low level of equity capital is primarily the result of the fact that Ford is
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actually a blend of two companies: the automotive manufacturing company and the financial
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subsidiary. The financial subsidiary has a balance sheet similar to that of a bank, that is, relatively
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little equity capital. The blend of these two operating entities results in a balance sheet that is
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more dependent on borrowed funds than would be the case if Ford consisted solely of the
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manufacturing company.
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Cambridge eBusiness ePublishers, e©2018
Practice eQuiz eSolutions, eModule 1-3
e1