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TEST BANK FOR Financial & Managerial Accounting for MBAs, 5th Edition by Easton, Halsey, McAnally, Hartgraves & Morse
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TEST BANK FOR Financial & Managerial Accounting for MBAs, 5th Edition by Easton, Halsey, McAnally, Hartgraves & Morse

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  • October 25, 2024
  • 160
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • 5th edition
  • test bank for financial managerial accounting f
  • financial managerial accounting for mbas
  • by easton halsey mcanally hartgraves morse

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  • MBA 7214
  • MBA 7214

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th
Financial & Managerial Accounting for MBAs, 5 Edition jj jj jj jj jj jj jj

by Easton, Halsey, McAnally, Hartgraves & Morse
jj jj jj jj jj jj jj




Practice Quiz Solutions jj jj




Module 1 – Financial Accounting for MBAs
jj jj jj jj jj jj




1. Which of the following organizations does not contribute to the formation of GAAP?
jj jj jj jj jj jj jj jj jj jj jj jj




a. FASB (Financial Accounting Standards Board)
j jj j jj

b. IRS (Internal Revenue Service)jj j jj

c. AICPA (American Institute of Certified Public Accountants)
jj j jj jj jj jj

d. SEC (Securities and Exchange Commission)
j j j j




Answer: b
jj jj




2. Rocky Beach reports the following dollar balances in its retained earnings account.
j jj jj jj jj jj jj jj jj jj jj




($ millions)
jj 2017 2016
Retained earnings…………. j 8,968.1 8,223.9

During 2017, Rocky Beach reported net income of $1,351.4 million. What amount of dividends, if
jj jj jj jj jj jj jj jj jj j j jj jj jj jj

any, did Rocky Beach pay to its shareholders in 2017?
jj jj jj jj jj jj jj jj jj jj




a. $607.2 million j

b. No dividends paid j jj

c. $301.2 million j

d. $744.2 million j




Answer: a
jj jj




Computation of dividends j jj

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

Thus, dividends were $607.2 million for 2017.
jj jj jj jj jj jj




Cambridge jjBusiness jjPublishers, jj©2018
Practice jjQuiz jjSolutions, jjModule jj1 1-1

,3. At the beginning of a recent year, The Walt Disney Company’s liabilities equaled $26,197 million.
jj jj jj jj jj jj jj jj jj jj jj jj jj jj

During the year, assets increased by $400 million and year-end assets equaled $50,388 million.
jj jj jj jj jj jj jj jj jj jj jj jj jj jj

Liabilities decreased $100 million during the year.
jj jj jj jj jj jj jj




What were beginning and ending amounts for W alt Disney’s equity?
jj jj jj jj jj jj j jj jj




a. $26,197 million beginning equity and $24,291 million ending equity
jj jj jj jj jj jj jj j

b. $23,791 million beginning equity and $27,042 million ending equity
jj jj jj jj jj jj jj j

c. $23,791 million beginning equity and $24,291 million ending equity
jj jj jj jj jj jj jj j

d. $27,042 million beginning equity and $25,183 million ending equity
jj jj jj jj jj jj jj jj




Answer: c
jj jj




Using the accounting equation at the beginning of the year:
jj jj jj jj jj jj jj jj jj




Assets($50,388 - $400) jj jj = Liabilities($26,197) + Equity(?)
j jj jj

Thus: Beginning Equity
j jj = $23,791 jj




Using the accounting equation at the end of the year:
jj jj jj jj jj jj jj jj jj

Assets($50,388) = Liabilities($26,197 - $100) + Equity(?) jj jj jj jj jj

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




4. Assume that Starbucks reported net income for a recent year of $564 million. Its
jj jj jj jj jj jj jj jj jj jj jj jj j j

stockholders’ equity is $2,229 million and $2,090 million, respectively.
jj jj jj jj jj jj jj jj jj




Compute its return on equity. jj jj jj jj




a. 13.0%
b. 22.8%
c. 26.1%
d. 32.7%

Answer: c j




ROE j j = Net income / Average stockholders’ equity
j j jj jj jj jj jj jj

= $564 million / [($2,229 million + $2,090 million) / 2] = 26.1%
jj jj jj jj jj jj jj jj jj jj jj jj




5. Nokia manufactures, markets, and sells phones and other electronics. Assume that Nokia reported
jj jj jj jj jj jj jj jj jj jj jj jj

net income of €3,582 on sales of €34,191 and total stockholders’ equity of €14,576 and €14,871,
jj jj jj jj jj jj jj jj jj jj jj jj j jj jj jj

respectively.
jj




What is Nokia’s return on equity?
jj jj jj jj jj




a. 24.3%
b. 42.3%
c. 17.7%
d. 10.5%

Answer: a jj




Return on equity is net income divided by the average total stockholders’ equity.
jj jj jj jj jj jj jj jj jj jj jj jj

Nokia’s ROE: €3,582 / [(€14,576 + €14,871) / 2] = 24.3%.
jj j j j j j j j j j j j




Cambridge jjBusiness jjPublishers, jj©2018
jj1-2 Financial jj& jjManagerial jjAccounting jjfor jjMBAs, jj5th
Edition

,6. The total assets of Dell, Inc. equal $15,470 million and its equity is $4,873 million. What is the
jj jj jj jj jj jj jj jj jj jj jj jj jj jj j j jj jj

amount of its liabilities, and what percentage of financing is provided by Dell’s owners?
jj jj jj jj jj jj jj jj jj jj jj jj jj jj




a. $20,343 million, 24.0% j jj

b. $10,597 million, 31.50% j jj

c. $10,597 million, 68.5% j jj

d. $20,343 million, 76.0% j jj




Answer: b jj




($ millions)
jj j


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

Dell receives more of its financing from nonowners ($10,597 million) versus owners ($4,873 million).
jj jj jj jj jj jj jj jj jj jj jj jj jj

Its owner financing comprises 31.5% of its total financing ($4,873 million/ $15,470 million).
jj jj jj jj jj jj jj jj jj jj jj jj jj




7. The total assets of Ford Motor Company equal $315,920 million and its liabilities equal $304,269
jj jj jj jj jj jj jj jj jj jj jj jj jj jj

million. What is the amount of Ford’s equity and what percentage of financing is provided by its
jj j j jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj

owners?
jj




a. $ 11,651 million,
j j 3.9% jj j j

b. $620,189 million, 49.1% j jj

c. $620,189 million, 50.9% j jj

d. $ 11,651 million,
j j 3.7% jj j j




Answer: d jj




($ millions)
jj j


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

Ford receives more of its financing from nonowners ($304,269 million) versus owners ($11,651
jj jj jj jj jj jj jj jj jj jj jj jj

million). Its owner financing comprises 3.7% of its total financing ($11,651 million/ $315,920 million).
jj jj jj jj jj jj jj jj jj jj jj jj jj jj

The relatively low level of equity capital is primarily the result of the fact that Ford is actually a blend
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj

of two companies: the automotive manufacturing company and the financial subsidiary. The financial
jj jj jj jj jj jj jj jj jj jj jj jj jj

subsidiary has a balance sheet similar to that of a bank, that is, relatively little equity capital. The
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj

blend of these two operating entities results in a balance sheet that is more dependent on borrowed
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj

funds than would be the case if Ford consisted solely of the manufacturing company.
jj jj jj jj jj jj jj jj jj jj jj jj jj jj




Cambridge jjBusiness jjPublishers, jj©2018
Practice jjQuiz jjSolutions, jjModule jj1 1-3

, 8. Following are selected ratios of Canary Corp. for 2017 and 2016.
jj jj jj jj jj jj jj jj jj jj




Return jjon jjAssets jj(ROA) jjComponent 2017 2016

Profitability jj(Net jjincome/Sales) j j …………… 26% 22%
Productivity jj(Sales/Average jjnet jjassets) j j ……. 1.2 1.1


Compute the company’s return on assets (ROA) for 2017.
jj jj jj jj jj jj jj jj




a. 30.0%
b. 19.2%
c. 12.1%
d. 31.2%

Answer: d jj




ROA = Profit margin  asset turnover. 2017 ROA = 26%  1.2 = 31.2%.
jj jj jj jj jj jj jj jj jj jj jj jj jj jj




9. Nickle Company reports net income of $800 million for its fiscal year ended January 2017. At the
jj jj jj jj jj jj jj jj jj jj jj jj jj jj j j jj

beginning of that fiscal year, Nickle Company had $5,000 million in total assets. By fiscal year-
jj jj jj jj jj jj jj jj jj jj jj jj jj j j jj jj

end 2017, total assets had grown to $6,500 million.
jj jj jj jj jj jj jj jj




What is Nickle’s return on assets (ROA)?
jj jj jj jj jj jj




a. 13.9%
b. 16.0%
c. 12.3%
d. 10.7%

Answer: a j j




Return on assets (ROA) jj jj jj = Net income / Average assets
jj jj jj jj

= $800 / [($5,000 + $6,500) / 2]
jj jj jj jj jj jj

= 13.9%


10. The following table contains financial statement information for Izzy Corporation.
jj jj jj jj jj jj jj jj jj




($ jjmillions) Total jjAssets Net jjIncome Sales Equity

2016 j j ………………………….. $105,000 $10,000 $95,000 $30,000
2017 j j ………………………….. $125,000 $11,000 $100,000 $31,000

Compute the return on equity (ROE) and return on assets (ROA) for 2017.
jj jj jj jj jj jj jj jj jj jj jj jj




a. 25.5% ROE, 10.0% ROA jj jj jj

b. 31.9% ROE, 11.2% ROA jj jj jj

c. 36.1% ROE, 9.6% ROA jj jj jj

d. 37.2% ROE, 13.1% ROA jj jj jj




Answer: c j j




2017 ROE = $11,000 / [($31,000+$30,000) / 2] = 36.1%
jj jj jj jj jj jj jj jj jj

2017 ROA = $11,000 / [($125,000+$105,000) / 2] = 9.6%
jj jj jj jj jj jj jj jj jj




Cambridge jjBusiness jjPublishers, jj©2018
jj1-4 Financial jj& jjManagerial jjAccounting jjfor jjMBAs, jj5th
Edition

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