Question 46
Valuable Corp.’s basic earnings per share (EPS) and diluted EPS for the year are different. Given this information, which of the following statements is least accurate?
A) All of Valuable's potentially dilutive securities are antidilutive.
B) Diluted EPS is less than basic EPS.
C) Valuable Corp.'s financial structure includes at least one potentially dilutive security.
D) Valuable Corp.'s capital structure may include both options and warrants.
Question 47
Jersey, Inc.’s financial information included the following for its year ended December 31:
♣ 160,000 shares of common stock were outstanding for the entire year.
♣ 18,000 shares of 10%, $100 par value cumulative preferred stock were outstanding for the entire year.
♣ Common stock dividends paid during the current year were $240,000.
♣ All preferred stock dividends were paid for the current year. Arrears of half of the preferred stock dividends that remained unpaid from the prior year were also paid in the current year.
♣ Net income was $720,000.
Basic earnings per share for Jersey, Inc. for the year ended December 31 are closest to:
A) $2.81.
B) $1.31.
C) $4.50.
D) $3.38.
Question 48
Galaxy Corp. reported the following information for its first year of operations ending December 31 (in $ millions):
Income Statement | |
Sales | 270 |
Cost of Goods Sold | (130) |
Gross Profit | 140 |
Other Expenses | (30) |
Operating Profit | 110 |
Interest Expense | (15) |
Earnings before Taxes | 95 |
Taxes | (35) |
Earnings after Taxes | 60 |
Balance Sheet | ||||
|
|
|
|
|
Cash | 50 |
| Accounts Payable | 60 |
Accounts Receivable | 50 |
| Long – Term Debt | 200 |
Inventory | 100 |
| Common Stock | 100 |
Property, Plant & Equip. (net) | 200 |
| Retained Earnings | 40 |
Total Assets | 400 |
| Total Liabilities & Equity | 400 |
Based on its first year of operations, Galaxy’s sustainable growth rate is closest to:
A) 42.7%.
B) 14.2%.
C) 28.6%.
D) 18.4%.
Question 49
Which of the following statements regarding an audit and a standard auditor’s opinion is most accurate?
A) The objective of an audit is to enable the auditor to provide an opinion on the numerical accuracy of the financial statements.
B) An unqualified opinion suggests that there are some exceptions to the accounting principles and explains these exceptions in the audit report.
C) The absence of an explanatory paragraph in the audit report relating to the going concern assumption suggests that there are no serious problems that require a close examination of that assumption by the analyst.
D) In order to provide an independent review of a company’s financial statements, an independent certified public accounting firm must be appointed by the company’s management.
Question 50
Income statement information for Quick Corp. for the years ended December 31, 20X0 and 20X1 was as follows (in $ millions):
20X0 | 20X1 | |
Sales | 30,000,000 | 32,000,000 |
Cost of Goods Sold | (16,000,000) | (17,000,000) |
Gross Profit | 14,000,000 | 15,000,000 |
Amortization of Franchise | (1,500,000) | (1,500,000) |
Other Expenses | (7,000,000) | (7,000,000) |
Net Income | 5,500,000 | 6,500,000 |
20X0 20X1
A) -$8,000,000 $8,000,000
B) -$9,500,000 $8,000,000
C) -$8,000,000 $6,500,000
D) -$9,500,000 $6,500,000
[此贴子已经被作者于2008-11-6 18:05:10编辑过]
答案和详解如下：
Answer 46
The correct answer was A) All of Valuable's potentially dilutive securities are antidilutive.
If all of Valuable’s potentially dilutive securities were antidilutive, then EPS would equal diluted EPS.
This question tested from Session 8, Reading 32, LOS i
Answer 47
The correct answer was D) $3.38.
Jersey, Inc.’s basic EPS = (net income – preferred dividends) / (weighted average number of common shares outstanding) was ($720,000 - $180,000)/160,000 = $3.38. Note that the unpaid preferred dividends from the previous year would have been charged to that year's earnings so they would not be double-counted.
This question tested from Session 8, Reading 32, LOS h, (Part 1)
Answer 48
The correct answer was C) 28.6%.
Sustainable growth rate = retention ratio × return on equity. Because this was Galaxy's first year of operations, we can determine its retention ratio directly from retained earnings: RR = 40 / 60 = 0.667. ROE = net income / equity = 60 / (100 + 40) = 0.429. Thus, g = RR × ROE = 0.667 × 0.429 = 0.286 = 28.6%.
This question tested from Session 10, Reading 41, LOS g
Answer 49
The correct answer was C)
A specific explanatory paragraph that makes reference to (questions) the going concern assumption may be a signal of serious problems and call for close examination by the analyst. Therefore, in the absence of such a paragraph, there is no need for a close examination of the going concern assumption by the analyst.
The objective of an audit is to enable the auditor to provide an opinion on the fairness and reliability of the financial statements. This is not the same as numerical accuracy. The auditor is generally only provides reasonable assurance that there are no material errors in the financial statements, not an opinion about their numerical accuracy.
It is a qualified opinion which suggests that there are some exceptions to the required reporting principles and explains these exceptions.
An independent certified public accounting firm must be appointed by the company’s board of directors and not by its management. Appointment of the auditors by management would reduce the level of perceived independence.
This question tested from Session 7, Reading 29, LOS d
Answer 50
The correct answer was A)
-$8,000,000 $8,000,000
If the franchise cost were expensed, amortization would be eliminated and franchise expense would be fully taken in 20X0. 20X0 net income would be $5,500,000 + 1,500,000 - $15,000,000= -$8,000,000, and 20X1 net income would be $6,500,000 + $1,500,000= $8,000,000.
This question tested from Session 9, Reading 36, LOS a
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