MGMT 200 PURDUE FINAL EXAM questions with complete verified solutions already graded A+

A company is deciding between two options: (1) purchase a piece of equipment for $10,000 or (2) lease the same piece of equipment for three years and then return the equipment to the owner. The lease payments are $182.53 per month and have a present value of $6,000. If the company decides to lease, for what amount would the leased asset be recorded at the beginning of the lease?

A) $10,000.

B) $6,000.

C) $4,000.

D) $6,571.

B) $6,000

**Because you record as an asset which is at present value

The entry to record a monthly payment on an installment note such as a car loan:

A) Increases expenses, decreases liabilities, and decreases assets.

B) Increases expenses, increases liabilities, and increases assets.

C) Increases expenses, decreases liabilities, and increases assets.

D) Increases expenses, increases liabilities, and decreases assets.

A) Increases expenses, decreases liabilities, and decreases assets.

Which of the following definitions describes a secured bond?

A) Matures on a single date.

B) Secured only by the "full faith and credit" of the issuing corporation.

C) Matures in installments.

D) Supported by specific assets pledged as collateral by the issuer.

*** a term is a single date

D) Supported by specific assets pledged as collateral by the issuer.

Mattison is trying to decide how much an investment of $10,000 today will grow to be in the future. Which of the following will she not need to help calculate that amount?

A) Future value table.

B) Present value table.

C) Number of compounding periods.

D) Interest rate.

B) Present Value

Which of the following stages of equity financing comes first in the traditional order of progression?

A) Investment by friends and family of the founders.

B) Initial Public Offering.

C) Investment by the founders of the business.

D) Outside investment by "angel" investors and venture capital firms.

C) Investment by the founders of the business.

1. founders

2. friends and family

3. angel

4. public

Issued stock refers to the number of shares:

A) Outstanding plus treasury shares.

B) Authorized.

C) In the hands of stockholders.

D) That may be issued under state law.

***authorized is the ones you can sell

A) Outstanding plus treasury shares

South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share. What is true about the journal entry to record the issuance?

A) Debit Common Stock $10,000.

B) Credit Additional Paid-in Capital $10,000.

C) Credit Common Stock $50,000.

D) Credit Additional Paid-In Capital $40,000

D) Credit Additional Paid-In Capital $40,000

When treasury stock is acquired, what is the effect on assets and stockholders' equity?

A) Assets and stockholders' equity increase.

B) Assets and stockholders' equity decrease.

C) Assets increase and stockholders' equity decrease.

D) Assets decrease and stockholders' equity increase.

B) Assets and stockholders' equity decrease.

Fashion, Inc. had a Retained Earnings balance of $12,000 at December 31, 2021. The company had an average income of $7,500 over the next 3 years, and an ending Retained Earnings balance of $15,000 at December 31, 2024. What was the total amount of dividends paid over the last three years?

A) $4,500.

B) $6,500.

C) $19,500.

D) $27,000.

12,000+7500x= 15000

X=dividends (3)

C) $19,500

Large stock dividends and stock splits are issued primarily to:

A) Lower the trading price of the stock per share.

B) Increase the number of authorized shares.

C) Increase legal capital.

D) Increase the number of outstanding shares.

A) Lower the trading price of the stock per share

The purchase of land is classified in the statement of cash flows as a(n):

A) Operating activity.

B) Investing activity.

C) Financing activity.

D) Noncash activity

B) Investing activity

Operating cash flows exclude:

A) Interest received.

B) Interest paid.

C) Dividends received.

D) Dividends paid

D) Dividends paid

The purchase of treasury stock is classified in the statement of cash flows as a(n):

A) Operating activity.

B) Investing activity.

C) Financing activity.

D) Noncash activity

C) Financing activity.

Arrow Printers paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and $6,000 in dividends on its common stock. Arrow would report cash outflows from activities, as follows:

A) Operating, $2,000; Financing, $16,000.

B) Operating, $0; Financing, $18,000.

C) Operating, $12,000; Financing, $6,000.

D) Operating, $18,000; Financing, $0.

***Paying interest is always operating.

C) Operating, $12,000; Financing, $6,000.

When using vertical analysis, we express balance sheet accounts as a percentage of:

A) Sales.

B) Total assets.

C) Total liabilities.

D) Total stockholders' equity.

B) Total assets

The type of analysis used to analyze trends in financial statement data over time is:

A) Horizontal analysis

B) Vertical analysis

C) Diagonal analysis

D) Both horizontal and vertical analysis

A) Horizontal analysis

Liquidity measures:

A) The company's ability to pay current obligations using current assets.

B) The company's ability to efficiently collect cash from customers.

C) The company's ability to generate profits on inventory sold.

D) The company's ability to return cash to stockholders.

A) The company's ability to pay current obligations using current assets

Assuming an acid-test ratio of 1.0, how will the purchase of inventory with cash affect the ratio?

A) Increase the acid-test ratio.

B) No change to the acid-test ratio.

C) Decrease the acid-test ratio.

D) Could either increase or decrease the acid-test ratio.

C) Decrease the acid-test ratio

All of the following are profitability ratios except:

A) Profit margin

B) Return on equity

C) Asset turnover

D) Current ratio

D) Current ratio

Which of the following items would be reported at the very bottom of the income statement just before net income?

A) Gain on the sale of long-term assets.

B) Discontinued operations.

C) Loss due to business restructuring.

D) Loss due to write-down of receivables.

B) Discontinued operations

What is the correct order to present the following items in the income statement?

A) Other revenues and expenses, income tax expense, discontinued operations, net income.

B) Other revenues and expenses, income tax expense, net income, discontinued operations.

C) Discontinued operations, net income, other revenues and expenses, income tax expense.

D) Discontinued operations, net income, income tax expense, other revenues and expenses.

A) Other revenues and expenses, income tax expense, discontinued operations, net income.

Which of the following is a result of aggressive accounting practices?

A) Lower income, higher assets, and higher liabilities.

B) Higher income, higher assets, and lower liabilities.

C) Lower income, lower assets, and higher liabilities.

D) Higher income, lower assets, and higher liabilities.

B) Higher income, higher assets, and lower liabilities.

Which of the following is a conservative accounting practice?

A) Change from double-declining balance to straight-line depreciation.

B) Record sales revenue before it is actually earned.

C) Adjust the allowance for uncollectible accounts to a larger amount.

D) Record inventory at market rather than lower of cost or market.

C) Adjust the allowance for uncollectible accounts to a larger amount.