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ACCT 212 ACCT212 Week 8 Final Exam Answers

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ACCT 212 ACCT212 Week 8 Final Exam Answers

When total expenses exceed total revenues, the result is a: (Points : 6)

Question 2. 2. The balance sheet lists: (Points : 6)

Question 3. 3. Which of the following is a limitation of internal control? (Points : 6)

Question 4. 4. In a bank reconciliation, outstanding checks would be added to the book balance. (Points : 6)

Question 5. 5. When preparing a bank reconciliation, which of the following items should be subtracted from the bank balance? (Points : 6)

Question 6. 6. Which account shows the amount of accounts receivable that the business does NOT expect to collect? (Points : 6)

Question 7. 7. Net accounts receivable is calculated as: (Points : 6)

Question 8. 8. Under the allowance method, the entry to reinstate an account previously written off: (Points : 6)

Question 9. 9. Under the aging-of-accounts-receivable method, the balance in: (Points : 6)

Question 10. 10. The cost of inventory includes the: (Points : 6)

Question 11. 11. The choice of an inventory costing method will affect: (Points : 6)

Question 12. 12. The inventory costing method by which the first costs into inventory are the first costs out to cost of goods sold is the: (Points : 6)

Question 13. 13. The economic resources of a business that are expected to produce a benefit in the future are: (Points : 6)

Question 14. 14. Payables are classified as: (Points : 6)

Question 15. 15. Revenues are: (Points : 6)

Question 16. 16. When cash is received by mail: (Points : 6)

Question 17. 17. All of the following are intangible assets EXCEPT: (Points : 6)

Question 18. 18. Allowance for Uncollectible Accounts is classified as a(n): (Points : 6)

Question 19. 19. Payables are classified as: (Points : 6)

Question 20. 20. The cost of the inventory that the business has sold to customers is called: (Points : 6)

Question 21. 21. Land is purchased for $62,500. Back taxes paid by the purchaser were $7,500; total costs to demolish an existing building were $11,000; fencing costs were $12,500; and lighting costs were $1,500. What is the cost of the land? (Points : 6)

Question 22. 22. Which of the following would not be included in the Machinery account? (Points : 6)

Question 23. 23. The process of allocating a plant asset’s cost to expense over the period the asset is used is called: (Points : 6)

Question 24. 24. Philly-Delta Corporation issues 100 shares of $1 par value common stock for $12 per share. This transaction will include a: (Points : 6)

Question 25. 25. Whyte Clinic purchases land for $120,000 cash. The clinic assumes $1,500 in property taxes due on the land. The title and attorney fees totaled $1,000. The clinic had the land graded for $2,200. What amount does Whyte Clinic record as the cost for the land? (Points : 6)

Question 26. 26. Burke Company purchases land for $85,000 cash. Burke assumes $2,500 in property taxes due on the land. The title and attorney fees totaled $1,000. Burke has the land graded for $2,200. They paid $10,000 for paving of a parking lot. What amount does Burke record as the cost for the land? (Points : 6)

ACCT 212 ACCT212 Week 8 Final Exam Essay Answers

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ACCT 212 Week 8 Final Exam Essay

(TCO 3) Upon completion of the closing entries, you reviewed the general ledger and noticed that balances remained in all asset, liability, and equity accounts. In addition, there were still balances in the revenue accounts, but not expenses or dividends. Should this be the case after the closing entries have been recorded and posted to the general ledger? Please include the reasons why in your answer. (10 points)

(TCO 2) As required to complete Course Project 1, one must follow the cycle that includes 10 steps to complete the accounting cycle. (1) Explain how information from the journal entries get into the ledger accounts (15 points) and (2) provide an example of information that would be transferred. (10 points)

(TCO 4) Inventory valuation methods determine the cost of goods sold and the inventory balance. (1) Describe the difference between the LIFO, FIFO and average cost methods of accounting for inventory (15 points). (2) Give an example of the application of each method — LIFO, FIFO and Average Cost (10 points).

(TCO 4) A retailer needs to determine the cost of the shoes the company purchased in order to determine the inventory value to report on its balance sheet in a particular period. (1) Discuss the steps involved in determining the cost of shoes inventory as reported on the company’s balance sheet (15 points), and (2) use an example to show the impact of purchase discounts and allowances received by the company on the cost of shoes inventory (10 points).

(TCO 1) To evaluate the financial operations and health of a business, ratio anaylysis is used. 1) What do profitability ratios indicate about the company? (10 points) 2) Please provide 2 examples of profitability ratios and the related formula and indicate how they can be used in the decision making process. (15 points)

ACCT 324 ACCT324 MidTerm Exam Answers

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ACCT 324 ACCT324 MidTerm Exam Answers

Multiple Choice 5 pts. each

1. Which of the following would be considered substantial authority for the assessment of additional tax under IRC § 6662?

2. What are pitfalls in interpreting the Internal Revenue Code?

3. In § 212(1), the number (1) stands for the _____.

4. Which item is not considered regulatory tax authority?

5. A taxpayer who loses in a U.S. District Court may appeal directly to the____.

6. A taxpayer may not appeal a case from which court?

7. Cash received by an individual _____

8. Which of the following is a taxable disposition (or are taxable dispositions) of an installment obligation?

9. Which of the following statements regarding a 52–53-week tax year is correct?

10. A C corporation is required to annualize its income _____.

11. William sold a capital asset on the installment basis and did not charge interest on the deferred payment due in 3 years. Which of the following is true?

12. The installment method can be applied to the following.

13. Which of the following is excludable from wage and salary taxable income?

14. Which of the following is not excludable from wage and salary taxable income?

15. Which of the following is not excludable from wage and salary taxable income?

16. Which of the following are not exclusions from taxable income?

True/False 5 pts. each

17. De minimis fringe benefits are those that are so immaterial that accounting for them is impractical.

18. De minimis fringe benefits are subject to strict antidiscrimination requirements.

19. True or False: In the case of a fringe benefit plan that is discriminatory (e.g., the plan favors officers over other employees), De minimis fringes may be excluded from gross income.

20. True or False:

In the case of an accrual basis taxpayer, an item of income is recognized when all the events have occurred to fix the taxpayer’s right to receive the income and the amount of the income can be determined with reasonable accuracy.

Short Answer 10 pts. Each

21. What are Adam Smith’s 4 Canons of Taxation?

22. What are the forms of Progressive Taxes?

23. What are some characteristics of a National Sales Tax?

24. What are the Deductions FOR AGI?

25. What is the role of the Senate Finance Committee in tax legislative process?

Yes/No 5 points each

26. Would you include inheritance of $75,000 in the calculation of AGI?

27. Would you include Child Support in the calculation of AGI? Explain

28. Would you include loan proceeds in the calc. of AGI? Explain

29. Would you include a gift the calc. of AGI? Explain

30. Would you interest income on municipal bonds in the calc. of AGI?

31. Would you include damages from personal injury in the calc. of AGI?

32. Would you include punitive damages in the calc. of AGI?

Problems 5 points each

33. Calculate AGI based on the following:

Gross income of $50,000.

Alimony$12,000

Charitable contributions $2,000

Contribution to a traditional IRA $3,000

Expenses paid on rental property$5,000

Interest and taxes on personal residence $7,000

State income tax $1,200

34. How much can a taxpayer who operates a laundry business deduct for the following expenses during the year?

•Parking ticket of $100 for one of his delivery vans that parked illegally

•Parking ticket of $50 when he parked illegally while attending a rock concert in Tulsa

•DUI ticket of $400 while returning from the rock concert

•Attorney’s fee of $500 associated with the DUI ticket

35. Calculate basis of machine for cost recovery based on the following:

On June 1 of the current year, Taxpayer converted a machine to rental property. At the time of the conversion, the machine was worth $90,000. Five years ago, Taxpayer purchased the machine for $120,000. The machine is still encumbered by a $50,000 mortgage. What is the basis of the machine for cost recovery?

ACCT 324 ACCT324 Week 8 Final Exam Answers

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ACCT 324 ACCT324 Week 8 Final Exam Answers

Short Answer- 20 Questions- 5 Points Each

1. Ch. 1- When was the first 1040 due under the Revenue Act of 1913?

2. For Ad Valorem tax purposes, what are some types of intangible personalty?

3. What is a Discriminant Index Formula (DIF) score?

4. Federal Tax Law generally originates in the

5. What are the Statutory Sources of the Tax Law?

6. What are the Administrative Sources of the Tax Law?

7. What are the Judicial Sources of the Tax Law?

8. How does IRC section 61(a) define gross income?

9. Explain the doctrine of Constructive Receipt

10. What is the taxable year?

11. Under what conditions are payments to an employee’s surviving spouse considered gifts?

12. What is the difference between deductions FOR AGI and Deductions FROM AGI?

13. Briefly explain the difference between business bad debts and non-business bad debts.

14. What is Section 1244 Small Business Stock, and, assuming certain conditions are met, how would you classify a loss from the sale of Section 1244 Small Business Stock?

15. Briefly define ACRS and MACRS.

16. What is Depletion?

17. According to Revenue Ruling 87–41, there are twenty factors that can be used to determine whether a worker is an employee or an independent contractor. List at least five of these.

18. Unreimbursed Employee Business Expenses are reported on what Schedule of Form 1040?

19. Income from rental activity is reported on what Schedule of 1040, and what Part?

20. Income from Partnerships and S-Corps is reported on what Schedule of 1040, what Part?

Computational Exercises– 10 Questions- 5 points each

21. (Ch. 15, CE 16). Andrew owns a lathe (adjusted basis of $40,000) that he uses in his business. He exchanges the lathe and $20,000 in cash for a new lathe worth $50,000. May Andrew avoid like-kind exchange treatment to recognize his realized loss of $10,000? Explain.

22. (Ch. 15, CE 19) Mandy and Timothy exchange equipment in a like-kind exchange. Mandy receives equipment with a fair market value of $28,000 and transfers equipment worth $20,000 (adjusted basis of $14,000) and cash of $8,000. What is Mandy’s realized and recognized gain?

23. (Ch. 15, CE 25) Constanza, who is single, sells her current personal residence (adjusted basis of $165,000) for $450,000. She has owned and lived in the house for 30 years. Her selling expenses are $22,500. What is Constanza’s realized and recognized gain?

24. (Ch. 15, Pr. 28) Kareem owns a pickup truck that he uses exclusively in his business. The adjusted basis is $22,000, and the fair market value is $14,000. Kareem exchanges the truck for a truck that he will use exclusively in his business.

What are Kareem’s realized and recognized gain or loss?

25. Same problem as above. What is Kareem’s basis in the new truck?

Multiple Choice- 5 points each

26. Which of the following would be considered substantial authority for the assessment of additional tax under IRC § 6662?

27. What are pitfalls in interpreting the Internal Revenue Code?

28. In § 212(1), the number (1) stands for the _____.

29. Which item is not considered regulatory tax authority?

30. A taxpayer who loses in a U.S. District Court may appeal directly to the____.

31. A taxpayer may not appeal a case from which court?

32. Cash received by an individual _____

33. Which of the following is a taxable disposition (or are taxable dispositions) of an installment obligation?

34. Which of the following statements regarding a 52–53-week tax year is correct?

35. A C corporation is required to annualize its income _____.

36. William sold a capital asset on the installment basis and did not charge interest on the deferred payment due in 3 years. Which of the following is true?

37. The installment method can be applied to the following.

38. Which of the following is excludable from wage and salary taxable income?

39. Which of the following is not excludable from wage and salary taxable income?

40. Which of the following is not excludable from wage and salary taxable income?

Long Answer

41.(17 points) What is Material Participation? What are the tests for material participation? If a taxpayer fails to materially participate in an activity, then how are losses classified?

42. (17 points) What is the Alternative Minimum Tax? What was Congress’ intent in enacting the AMT? What is the formula for AMT?

43. (16 points) Explain the difference between tax deductions and tax credits.

ACCT 504 ACCT504 Midterm Exam Answers

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ACCT 504 Midterm Exam (Keller Graduate School)

(TCO A) Which of the following accounts is recorded as part of stockholders’ equity on the Balance Sheet?

(TCO B) For 2014, CAP Corporation reported net income of $96,000; net sales $1,440,000; and weighted average shares outstanding of 9,600. There were no preferred dividends. What was the 2014 earnings per share?

(TCO C) Purchasing inventory is an example of a(n)

(TCO D) Dividends declared are reported on which of the following statements?

(TCO E) Which of the following describes the normal balance and classification of the Unearned Revenue account?

(TCO F) The accrual accounting term used to indicate recording an expense before paying cash for the item is

(TCO A) XYZ Company recorded the following events involving a recent merchandise purchase. 
 
- Received goods for $50,000, terms 2/10, n/30. 
- Returned $1,000 of the shipment for credit due to damaged goods. 
- Paid $1,500 for freight-in. 
- Paid the invoice within the discount period.
 
As a result of these events, the company’s merchandise inventory

(TCO B) In periods of rising prices, which of the following inventory methods results in the highest gross profit figure?

(TCO A) Which of the following is not a current liability?

(TCO E) Which of the following is an internal control procedure?

(TCOs A and E) Your friend, Ellen, has hired you to evaluate the following internal control procedures.
Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which internal control procedure relates to each of the internal controls.

For the weaknesses, you also need to state a recommendation for improvement.

(1) The cashier counts the total receipts and reconciles the receipts with the cash register total.
(2) Electronic documents are password-protected.
(3) The accountant is completely independent of the sales department.
(4) Invoices are not numbered.
(5) Large purchase orders must be approved by a manager.

(TCOs B and D) Please prepare the following journal entries. Indicate which account should be debited and which account should be credited, along with the dollar amount of the debit and credit.
 
(1) Investors invest $300,000 in exchange for 30,000 shares of common stock.
(2) Company made payment on account for $500.
(3) Employees work Monday through Friday and are paid on Friday. Salary expense is $20,000 per day, and December 31 falls on a Tuesday.
(4) Company purchased Supplies for $2,000.
(5) The company needs to record Supplies used for $500.

(TCOs B and D) The following items are taken from the financial statements of Ashe Company for 2012:

(TCO D) The following items are taken from the financial statements of BGS Company for 2012:

ACCT 505 ACCT505 Week 4 Midterm Answers

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ACCT 505 Week 4 Midterm

Question 1.1. (TCO A) The variable portion of advertising costs is a (Points : 6)

Question 2.2. (TCO A) A cost incurred in the past that is not relevant to any current decision is classified as a(n) (Points : 6)

Question 3.3. (TCO A) Depreciation of office buildings and office equipment is also known as (Points : 6)

Question 4.4. (TCO C) When the activity level is expected to increase within the relevant range, what effects would be anticipated with respect to each of the following? (Points : 6)

Question 5.5. (TCO B) When manufacturing overhead is applied to production, it is added to (Points : 6)

Question 6.6. (TCO B) Under a job-order costing system, the product being manufactured (Points : 6)

Question 7.7. (TCO B) The FIFO method only provides a major advantage over the weighted-average method in that (Points : 6)

Question 8.8. (TCO C) The contribution margin equals (Points : 6)

Question 9.9. (TCO C) To obtain the break-even point in terms of dollar sales, total fixed expenses are divided by which of the following? (Points : 6)

Question 10.10. (TCO D) Under variable costing, (Points : 6)

Page 2

Question 1.1. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just-completed year.

Sales

$950

Purchases of raw materials

$225

Direct labor

$250

Manufacturing overhead

$295

Administrative expenses

$150

Selling expenses

$140

Raw materials inventory, beginning

$30

Raw materials inventory, ending

$45

Work-in-process inventory, beginning

$20

Work-in-process inventory, ending

$55

Finished goods inventory, beginning

$100

Finished goods inventory, ending

$135

Prepare a Schedule of Cost of Goods Manufactured statement in the text box below. (Points : 15)

ACCT 505 ACCT505 Week 8 Final Exam Answers

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ACCT 505 Week 8 Final Exam

1. (TCO E) Designing a new product is a(n) (Points : 5)

2. (TCO G) Given the following data, what would ROI be?

3. (TCO C) Longiotti Corporation produces and sells a single product. Data concerning that product appear below.

4. TCO B) Maverick Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below.

5. TCO D) Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below.

6. TCO I) (Ignore income taxes in this problem.) Bill Anders retires in 8 years. He has $650,000 to invest and is considering a franchise for a fast-food outlet. He would have to purchase equipment costing $500,000 to equip the outlet and invest an additional $150,000 for inventories and other working capital needs. Other outlets in the fast-food chain have an annual net cash inflow of about $160,000. Mr. Anders would close the outlet in 8 years. He estimates that the equipment could be sold at that time for about 10% of its original cost. Mr. Anders’ required rate of return is 16%.

Required:

Part A: What is the investment’s net present value when the discount rate is 16%?

Part B: Refer to your calculations. Is this an acceptable investment? Why or why not?

7. TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just-completed year.

8. TCO F) Walker Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $43,000. Budgeted cash receipts total $117,000 and budgeted cash disbursements total $122,000. The desired ending cash balance is $55,000. The company can borrow up to $100,000 at any time from a local bank, with interest not due until the following month.

9. (TCO F) Bella Lugosi Holdings, Inc. (BLH), has collected the following

operating information for its current month’s activity. Using this information,

prepare a flexible budget analysis to determine how well BLH performed in

terms of cost control.

10. (TCO H) Lindon Company uses 7,500 units of Part Y each year as a component in the assembly of one of its products. The company is presently producing Part Y internally at a total cost of $119,000 as follows.

11. TCO B) Sandler Corporation bases its predetermined overhead rate on the estimated machine hours for the upcoming year. Data for the upcoming year appear below

ACCT 557 ACCT557 Week 4 Midterm Answers

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ACCT 557 Week 4 Midterm

1. (TCO A) In selecting an accounting method for a newly-contracted long-term construction project, the principal factor to be considered should be

2. (TCO A) Tim Construction Co. began operations in 2014. Construction activity for three different multi-year contracts, each begun in 2014, is shown below. Tim uses the completed contract method.

Contract

Contract Price

Billings
Through
12/31/14

Collections
Through
12/31/14

Costs to
12/31/14

Estimated
Costs to
Complete

1

$5,200,000

$3,500,000

$2,600,000

3,000,000

1,000,000

2

3,600,000

1,500,000

1,000,000

800,000

1,600,000

3

3,300,000

1,900,000

1,800,000

2,250,000

1,200,000

What amount of gross profit should Tim recognize on the Income Statement of 2014 related to Contract 3?

3. (TCO B) In Year 2, Ajax, Inc. reported taxable income of $400,000 and pretax financial statement income of $300,000. The difference resulted from $60,000 of nondeductible premiums on Ajax’s officers’ life insurance and $40,000 of rental income received in advance. Rental income is taxable when received. Ajax’s effective tax rate is 30%. In its Year 2 income statement, what amount should Ajax report as current tax expense (income taxes payable)?

4. (TCO B) Deferred tax amounts that are related to specific assets or liabilities should be classified as current or noncurrent on the balance sheet based on:

5. (TCO C) Presented below is pension information related to Woods, Inc. for the year 2016.

Service cost $84,000 
Interest on projected benefit obligation $76,000 
Interest on vested benefits $30,000 
Amortization of prior service cost due to increase in benefits $14,000 
Gain on plan assets $21,000

The amount of pension expense to be reported for 2016 is

6. (TCO C) Presented below is pension information related to Woods, Inc. for the year 2016.

Service cost $135,000 
Interest on projected benefit obligation $46,000 
Interest on vested benefits $30,000 
Amortization of prior service cost due to increase in benefits $14,000 
Loss on plan assets $21,000

The amount of pension expense to be reported for 2016 is

7. (TCO D) Lease methods of accounting include which of the following:

8. (TCO D) Which one of the following is a criterion for designating a lease as a capital lease?

9. (TCO D) Advantage(s) of leasing versus buying equipment is (are)

10.

(TCO A) Tim Construction Co. began operations in 2014. Construction activity for three different multi-year contracts, each begun in 2014, is shown below. Tim uses the percentage-of-completion method.

Contract

Contract Price

Billings
Through
12/31/14

Collections
Through
12/31/14

Costs to
12/31/14

Estimated
Costs to
Complete

1

$5,200,000

$3,500,000

$2,600,000

3,000,000

1,000,000

2

3,600,000

1,500,000

1,000,000

800,000

1,600,000

3

3,300,000

1,900,000

1,800,000

2,250,000

1,200,000

What amount of gross profit should Tim recognize on the Income Statement of 2014 related to Contract 2?

11. (TCO D) Lease A does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75% of the estimated economic life of the leased property. Lease B does not contain a bargain purchase option, but the lease term is equal to 90% of the estimated economic life of the leased property. How should the lessee classify these leases?

ACCT 557 ACCT557 Week 8 Final Exam Answers

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ACCT 557 Week 8 Final Exam

(TCO A) Amazon Building, Inc. won a bid for a new warehouse building contract.

(TCO B) At the beginning of 2012, Annie, Inc. has a deferred tax asset of $7,500 and deferred tax liability of $10,500. In 2012, pretax financial income was $826,000 and the tax rate was
35%.

(TCO C) Presented below is pension information related to Amazing Goods, Inc. for the year 2013.

(TCO C) Apple Dumpling Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2013.

(TCO D) Animal, Inc. leased equipment from Zoo Enterprises under a 5-year lease requiring equal annual payments of $63,000, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 5-year useful life and no salvage value. Animal,Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Assuming that this lease is properly classified as a capital lease, what is the amount of interest expense recorded by Animal, Inc. in the first year of the asset’s life?

(TCO E) On December 31, 2013, Bob’s Trucking, Inc. appropriately changed its inventory valuation method from weighted-average cost to FIFO method for financial statement and income tax purposes. The change will result in an $800,000 increase in the beginning inventory at January 1, 2013. Assume a 40% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is

(TCO F) Amazing Glory, Inc. recognized a net income of $55,000 including $8,000 in depreciation expense.

(TCO G) Which of the following events that occurred after the balance sheet date but before issuance of the financial statements would require adjustment of the accounts before issuance of the financial statements?

(TCO G) Adventure, Inc. is a company that operates in four different divisions. The following information relating to each segment is available for 2013.

Sales revenue Operating profit (loss) Identifiable assets

(TCO A) Adam’s Adorable Creations Company provided the following financial information for its installment sales for the current year.

(TCO B) The Accent Corporation shows the following information.

On January 1, 2012, Accent purchased a donut machine for $700,000.

(a) Pretax financial income is $2,300,000 in 2012 and $2,400,000 in 2013.

(b) Taxable income is expected in future years with an expected tax rate of 35%.

© The company recognized an extraordinary gain of $150,000 in 2013 (which is fully taxable).

(d) Tax-exempt municipal bonds yielded interest of $150,000 in 2013.

(e) Straight-line basis for 7 years for financial reporting (See Appendix 11A.)

(f) Half-year convention basis depreciation for 4 years for tax purposes.

Required:

(TCO D) Absolute Leasing, Inc. agrees to lease equipment to Allen, Inc. on January 1, 2012. They agree on the following terms:
(a) The normal selling price of the equipment is $600,000 and the cost of the asset to Absolute Leasing, Inc. was $475,000.

(b) At the end of the lease, the equipment will revert to Absolute Leasing, Inc. and have an unguaranteed residual value of $60,000. Their implicit interest rate is 10%.
© The lease is noncancelable with no renewal option. The lease term is 10 years (the same as the estimated economic life).

(d) Absolute Leasing, Inc. incurred costs of $10,000 in negotiating and closing the lease. There are no uncertainties regarding additional costs yet to be incurred and the collectability of the lease payments is reasonably predictable.

(e) The lease begins on January 1, 2012 and payments will be in equal annual installments.
(f) Allen will pay all maintenance, insurance, and tax costs directly and annual payments of $65,000 on January 1 of each year.

(TCO F) Drexon Corp., which follows U.S. GAAP, uses the direct

Student Answer:

Instructor Explanation:

method to report its cash flows. The CFO is assessing the impact on cash flows of 12 events during the fiscal year. Specify which category each event falls under (under the direct method) and note whether it increases cash, decreases cash, or has no impact on cash:

(TCO G) Selected financial ratios.
The following information pertains to Allbright, Inc.

Student Answer:

Current Ratio (53000+186000+82000) / (85000 +12000) = 3.31 Inventory Turnover 760000/82000 = 9.27 C) Receivables

10 11 12

Investing Operating Financing

17 of 40

Decrease Increase

Decrease

Cash
Accounts receivable Inventory
Plant assets (net) Total assets

Accounts payable
Accrued taxes and expenses payable $12,000

Long-term debt
Common stock ($10 par) Paid-in capital in excess of par Retained earnings
Total equities

Net sales (all on credit) Cost of goods sold
General & Admin Expenses Net income

$268,000 $120,000 $6,000

$150,000 $641,000

$980,000 $760,000 $160,000 $60,000

(TCO E) Please describe the requirements for a change in accounting principle and at least four reasons why companies might implement a change in accounting principle.

ACCT 567 ACCT567 Midterm Exam Answers (Keller)

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ACCT 567 Midterm Summer 2016 (Keller)

1. (TCOs A and B) The GASB has the authority to establish and financial reporting standards for which of the following groups?

2. (TCOs A and B) Governmental fund statements are prepared using which of the following?

3. (TCOs A and B) Which of the following is most correct with regard to Management’s Discussion and Analysis?

4. (TCOs B and C) With regards to budgetary reporting by governmental entities, which of the following is not a true statement?

5. (TCOs B and C) Which of the following is a true statement regarding modified accrual accounting?

6. (TCOs B and C)) Capital assets that are used by an enterprise fund should be accounted for in the following fund?

7. (TCO E) King City receives a trust donation for the purpose of maintaining flower in city parks, but the donor does not make a specification as to how the principal must be maintained. This type of trust should be appropriately accounted for which of the following fund?

8. (TCO E) Which fund type is the interest on Long Term Debt typically not accrued; however, it is recognized as an expenditure in the year in which interest is legally due?

9. (TCO E) Debt Service funds are used to record which of the following?

10. (TCO D) Under GASB Statement №33, when would a special revenue fund be considered to have satisfied the eligibility requirement of a reimbursement type federal grant?

11. (TCO E) The City of Holland issued bonds on August 1, 2012. The interest on its bonds is paid from City of Holland Debt Service Fund on February 1 and August 1. Should the interest payable be accrued at December 31, the end of the city’s fiscal year? Why? Would you have a different answer if the interest payment dates were July 15 and January 15? Please explain.

12. (TCOs A and B) What are fiduciary funds? Please identify and explain the two main types and what is the main difference between the funds?

13. (TCO D) The City of Norton received a gift of $3,500,000 from a group of local residents on April 1, 2012 and signed an agreement that the funds would be invested on a permanent basis and the income would be used to purchase artifacts for the city museum. The following transactions took place during the fiscal year ended Dec 31, 2012.
 
a. The gift was recorded on the books on April 1.
b. On April 1, 2012, the Calvin Co. bonds were purchased in the amount of $3,000,000, at par. The bonds carry an annual interest rate of 5 percent, payable semiannually on October 1 and April 1. The city also purchased a certificate with a face value of $250,000 pays interest of 4 percent on semiannually on October 1 and April 1.
c. On October 1, the semiannual interest was received on the bonds and certificate of deposit.
d. From October 1 through December 1, payments were made totaling $85,000 to purchase artifacts for the city museum.
e. On December 31, an accrual was made for interest for the bonds and the certificate of deposit.
f. After a review of the bond market on December 31, 2012, the bonds had a market value of $2,979,000, exclusive of accrued interest.
g. The books were closed on December 31.

ACCT 567 ACCT567 Week 3 Quiz Answers

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ACCT 567 ACCT567 Week 3 Quiz Answers

1. (TCO A) Which of the following funds does not belong under the fiduciary fund category?

2. (TCO B) In addition to the government-wide statements, governmental entities are required to prepare fund financial statements for which of the following category of funds?

3. (TCO C) The County Commission of Hunter County adopted its General Fund budget for the year ending June 30, comprising of estimated revenues of $3,750,000 and appropriations of $3,150,000. Hunter County utilizes the budgetary accounts required by GASB standards. The budgeted excess of estimated revenues over appropriations will be recorded as

4. (TCO D) The journal entry to record the property tax levy for a municipality would include which of th

5. (TCO B) Which of the following is true regarding the government-wide Statement of Activities?

6. (TCO D) Which of the following is not true with respect to Special Revenue Funds?

7. (TCOs A and B) Please identify the accounting standard setting bodies for the U.S. commercial enterprises, private not-for-profit entities, public not-for-profit entities, state and local governments, and the federal government.

8. (TCO D) Prepare entries in general journal form to record the following transactions in General Fund general ledger accounts for the fiscal year 2012. Please use the modified accrual accounting approach in recording the transactions. 
a. The legal budget for the provided for $6,530,000 of estimated revenues and $5,975,000 of appropriations.
b. Assume that are $340,000 of purchase orders outstanding at the end of last fiscal year and these purchase orders will be honored in the current year. Prepare the entries to re-establish the encumbrance.
c. Property taxes were levied in the amount of $4,650,000. It is estimated that 3.5 percent of the taxes will not be collected.
d. Purchase orders were issued for equipment and supplies in the amount of $2,760,000.
Supplies that were relating to all of the prior year purchase orders ($ 340,000) were received along with invoices amounting to $336,800.
Collections of current property taxes amounted to $4,190,000. The uncollected taxes were recorded

9. (TCO D) The following information was available for the General Fund for the City of Newman for the Year Ended June 30, 2012.
 
a. Revenues for the year: Property Taxes of $6,240,000, fines and penalties of $484,000, sales taxes of $453,000, intergovernmental revenue of $272,000, and charges for services of $64,000.
b. Expenditures from current appropriations included: General Government of $3,320,000, Public Safety of $1,923,000, Public Works of $821,000, Health and Welfare of $294,000, and Miscellaneous Appropriations of $42,000.
c. A transfer was made from the General Fund to the Debt Service Fund of $700,000. A transfer of $510,000 was made to the General Fund from the Enterprise Fund. 
d. A sale of city-owned land was made to a private enterprise which is considered infrequent but not unusual was under city management control. The proceeds amounted to $330,000 and the land had a basis of $200,000 which was reported in the government-wide Statement of Net Assets the year before.
e. Beginning balances included Fund Balance in the amount of $290,000 and Reserve for Encumbrances in the amount of $20,000.
Required: Prepare a statement of Revenues, Expenditures, and Changes in Fund Balance for the General Fund for the City of Newman for the Year Ended June 30, 2012.

ACCT 567 ACCT567 Week 6 Quiz Answers

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ACCT 567 ACCT567 Week 6 Quiz Answers

1. (TCO F) Any activities that produce goods or services to be provided to other departments or other governmental units would be reported in which fund?

2. (TCO F) Which of the following is false regarding proprietary fund accounting?

3. (TCO G) A fund that is the result of an agreement between a contributor and a government that the principal and/or income of trust assets that is for the benefit of individuals, organizations, or other governments is a(n)

4. (TCO H) Public sector audits differ from those of commercial businesses in which of the following

5. (TCO J) Which of the following kinds of information would not be provided by management’s discussion and analysis (MD&A)?

6. (TCO H) Depreciation expense in a not-for-profit organization should be treated as follows.

7. (TCO H) Please list and explain the five ethical concepts that are outlined by the Yellow Book.

8. (TCO F) Internal Service Fund, Statement of Cash Flows. Prepare a statement of cash flows for the internal service fund for the city of Pearman from the following information:
 
Cash on hand at the beginning of the year $149
Interest on investments 188
Wages and salaries paid (3,230)
Purchases of supplies (1,340)
Collections (for services) from other funds 8,400
Interest paid on long-term debt (180)
Repayment of loans from other funds (730)
Purchase of capital assets (960)
Proceeds of revenue bonds 960
Purchase of investments (480)
Proceeds from sale of capital assets 32
Proceeds from sale of investments 54
Loans from other funds 560

ACCT 567 Government & Not For Profit Accounting Midterm Answers Summer 2016 (Keller)

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ACCT 567 Midterm Summer 2016 (Keller)

1. (TCOs A and B) The GASB has the authority to establish and financial reporting standards for which of the following groups?

2. (TCOs A and B) Governmental fund statements are prepared using which of the following?

3. (TCOs A and B) Which of the following is most correct with regard to Management’s Discussion and Analysis?

4. (TCOs B and C) With regards to budgetary reporting by governmental entities, which of the following is not a true statement?

5. (TCOs B and C) Which of the following is a true statement regarding modified accrual accounting?

6. (TCOs B and C)) Capital assets that are used by an enterprise fund should be accounted for in the following fund?

7. (TCO E) King City receives a trust donation for the purpose of maintaining flower in city parks, but the donor does not make a specification as to how the principal must be maintained. This type of trust should be appropriately accounted for which of the following fund?

8. (TCO E) Which fund type is the interest on Long Term Debt typically not accrued; however, it is recognized as an expenditure in the year in which interest is legally due?

9. (TCO E) Debt Service funds are used to record which of the following?

10. (TCO D) Under GASB Statement №33, when would a special revenue fund be considered to have satisfied the eligibility requirement of a reimbursement type federal grant?

11. (TCO E) The City of Holland issued bonds on August 1, 2012. The interest on its bonds is paid from City of Holland Debt Service Fund on February 1 and August 1. Should the interest payable be accrued at December 31, the end of the city’s fiscal year? Why? Would you have a different answer if the interest payment dates were July 15 and January 15? Please explain.

12. (TCOs A and B) What are fiduciary funds? Please identify and explain the two main types and what is the main difference between the funds?

13. (TCO D) The City of Norton received a gift of $3,500,000 from a group of local residents on April 1, 2012 and signed an agreement that the funds would be invested on a permanent basis and the income would be used to purchase artifacts for the city museum. The following transactions took place during the fiscal year ended Dec 31, 2012.
 
a. The gift was recorded on the books on April 1.
b. On April 1, 2012, the Calvin Co. bonds were purchased in the amount of $3,000,000, at par. The bonds carry an annual interest rate of 5 percent, payable semiannually on October 1 and April 1. The city also purchased a certificate with a face value of $250,000 pays interest of 4 percent on semiannually on October 1 and April 1.
c. On October 1, the semiannual interest was received on the bonds and certificate of deposit.
d. From October 1 through December 1, payments were made totaling $85,000 to purchase artifacts for the city museum.
e. On December 31, an accrual was made for interest for the bonds and the certificate of deposit.
f. After a review of the bond market on December 31, 2012, the bonds had a market value of $2,979,000, exclusive of accrued interest.
g. The books were closed on December 31.

ACCT 574 Forensic Accounting Final Exam with Answers

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ACCT 574 ACCT574 Final Exam Answers (Keller)

1. (TCO A) Which statement is false?

2. (TCO A) Which would not be useful in searching for hidden assets?

3. (TCO A) Which statement is false?

4. (TCO A) If an internal auditor finds fraud, what communication step should not be taken?

5. (TCO A) What is an investigative technique used by the SEC to investigate specific companies for cooking the books?

6. (TCO A) Which statement is false?

7. (TCO A) Which is not one of the six areas of litigation services?

8. (TCO B) Select the true answer. To prevent fraud, the entity may choose to:

9. (TCO B) Which type of investigative technique works best at accumulating evidence to build a legal case against a financial fraudster?

10. (TCO B) A fraud investigation should not be commenced without proper:

11. (TCO B) You are told that a company has a 30% profit margin and the discovered fraud has caused $2,400,000 more needed revenue to cover the fraud. How much was stolen?

12. (TCO B) Which statement is false?

13. (TCO B) All of the following would be found in HTTP log files except:

14. (TCO B) In order to avoid working with a money launderer, due diligence in a relationship with a new business partner means:

15. (TCO B) Which would be the least effective procedure for preventing procurement fraud?

16. (TCO B) The purpose of money laundering is to:

17. (TCO C) Which is not a situation which would cause an expert to be ejected?

18. (TCO C) Side-taking refers to:

19. (TCO C) Which item is not required in an expert’s report?

20. (TCO C) Which statement is false?

21. (TCO C) Which statement is false?

22. (TCO C) Which statement is false?

23. (TCO C) In a criminal case, the burden of proof is normally:

24. (TCO D) In analyzing cost behavior data for cases, most experts find that the most effective and defensible analysis method is:

25. (TCO D) A simple but potentially useful method of estimating cost behavior is the:

26. (TCO D) Beth Company sold assets to Karen Company with an alleged value of $2,400,000. Beth Company paid $2,100,000 for the assets. The actual value of the assets was $1,700,000. Using the “out-of-pocket” damage loss rule, the fraud damages would be:

27. (TCO D) Jones Lumber had an exclusive three-year supply agreement with Wood Construction. The contract called for lumber sales of $4,000,000 per year. After one year, Wood Construction canceled the contract without cause. The court found Wood Construction liable under the contract. Jones Lumber had average gross margins of 40% and average net income of 10% of sales. Jones Lumber’s operating expenses average 70% fixed. The damages from the loss of this contract would be:

28. (TCO D) Georgetown Company’s weekly store operating costs for a 10-week period had a high value of $300,000 and a low value of $260,000. Sales volumes for the two weeks were $4,000,000 and $3,200,000 respectively. The estimated variable cost per dollar of sales using the high-low method is:

29. (TCO D) In correlation analysis, the coefficient that describes the percentage of explained variance is:

30. (TCO D) Antitrust laws were enacted to:

31. (TCO D) When evaluating whether or not a company is engaged in predatory pricing, the forensic accountant must determine if the company:

32. (TCO E) Magnetic force microscopy is used:

33. (TCO E) Actually “deleting” data from a hard drive means:

34. (TCO E) The purpose of remailers is to:

35. (TCO E) To determine if a port on a Web server is alive and connected to the Internet, which of the following tools would be best to use?

36. (TCO E) What are the dates found on an electronic file?

37. (TCO E) When a suspect’s PC is disconnected, all the following data is lost, except:

38. (TCO E) Datagrams are:

39. (TCO F) Of the following costs, which cost is not part of the value of a tangible physical asset?

40. (TCO F) A serious problem for forensic investigators in finding cybercriminals is:

41. (TCO F) A “protected computer” under federal legislation is defined as:

42. (TCO F) Which of the following is NOT part of a loss evaluation from a cyber attack?

43. (TCO F) WishGift.com had its website shut down for two days due to a cyber attack. During that period, it is estimated that 200 customers were permanently lost. Registered customers visit once a month, on average, spend $20 on each visit, and remain registered for five years. What is the sales loss for WishGift assuming a cost of capital of 7%?

44. (TCO F) Determine the value of the option for the Snyder Company by delaying its investment for one year. Consider the value of the option is the difference between traditional present value analysis and real option analysis. The initial investment is for $7,000,000, but the investment will not be made until next year. The investment is being delayed so that Snyder’s management can better determine the market for its product. There are two alternatives for sales in the next year of $10,000,000 or $7,500,000. Each sales level has an occurrence probability of 50%. The cost of capital for Snyder is 10%. If traditional present value analysis shows that the net present value of the project is $1,000,000, what is the value of the option (the ability to wait one year before executing or abandoning the project)?

45. (TCO G) One type of agreement that can have a direct impact on the valuation of parts of a closely held business is a:

46. (TCO G) IRS Rev. Rul. 59–60:

47. (TCO G) A valuation professional who holds a CVA has the credentials of a:

48. (TCO G) Generally speaking, “book value” is considered to be:

49. (TCO G) In trying to determine how many years of data are necessary to perform a business valuation, a commonly used starting point is:

50.

(TCO G) Atlas Manufacturing produces axels for automobiles. The company’s weighted average cost of capital is 12%. The company forecasted the following free cash flows for the next 20 years.

Year Free Cash Flows
1 $ 9,000,000
2 11,000,000
3 13,000,000
4 16,000,000
5 20,000,000
6–10 20,000,000 per year
11–20 18,000,000 per year

Use the discounted cash flow approach to value Atlas Manufacturing. Note — you will need a present value table or a financial calculator to solve this problem

51. (TCO F) The legal statutes and insurance policy coverage identify a number of loss categories from a cyber attack. In the list of losses is one for “general injuries.” Identify one general injury that might be suffered during a cyber attack. How should a loss estimate be determined for the item you have identified as a general injury loss?

52. (TCO G) What are the most commonly used methods of business valuations? Are there any reasons to use business valuation methods other than the common ones? Discuss/explain.

53. (TCO D) Name and describe the two basic assumptions that underlie cost behavior patterns. Explain in full.

54. (TCO E) What provisions of the Patriot Act have been enacted to make it easier to apprehend cybercriminals?

After a lengthy job search, Judy Smith has found a place of employment

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After a lengthy job search, Judy Smith has found a place of employment; however, it is demanding and she is required to work long hours during the week and even on weekends, leaving little time for outside interests. Her decision to work at this job is an example of (Points : 4)

deflation.

financial opportunity cost.

personal opportunity cost.

time value of money.

inflation.

Question 2.2. (TCO 1) Marinda Smart is interested in purchasing new appliances for her kitchen that collectively will cost her approximately $5,000. She knows that she could obtain financing for her purchase, but recently heard rumors that there may be layoffs where she works and is concerned about her employment. What type of risk is Marinda concerned about? (Points : 4)

Inflation risk

Interest rate risk

Income risk

Personal risk

Liquidity risk

Question 3.3. (TCO 1) Which step in the financial planning process is demonstrated by a situation in which Royanne decides to stop traveling through Europe and return back to the States to seek a part-time job and take smaller, less costly trips? (Points : 4)

Developing her financial goals

Identifying alternative courses of action

Evaluating her alternatives

Implementing her financial plan

Reviewing and revising her financial plan

Question 4.4. (TCO 1) When retirement contributions made on your behalf where you work fully belong to you even if you leave the company, this is called the point of (Points : 4)

networking.

vesting.

a tax-deferred benefit.

a tax-exempt benefit.

break even.

Question 5.5. (TCO 1) Tracey has been unemployed for almost a year. However, after extensive research, she has found that the industry in which she would like to work will begin to experience job growth in California. This is an example of _____ influencing jobs in the future. (Points : 4)

technology trends

economic conditions

industry trends

geographic trends

educational trends

Question 6.6. (TCO 1) This month, Ken Grossman has cash inflows of $3,500 and cash outflows of $2,350, resulting in a (Points : 4)

balanced budget.

surplus of $1,150.

deficit of $1,150.

surplus of $3,500.

deficit of $2,350.

Question 7.7. (TCO 1) Sherry O’Neal is interested in opening a savings account and her bank offers several types. Her main concern is that she wants to have the ability to withdraw her money whenever she wants. She has an interest in opening an account that is best categorized as (Points : 4)

money management.

an opportunity cost.

a limited asset.

a liquid asset.

net worth analysis.

Question 8.8. (TCO 1) An example of _____ is a situation in which you would use a software program to help track your spending each week. (Points : 4)

money management

an opportunity cost

a balance sheet

creative accounting

electronic analysis

Question 9.9. (TCO 2) An example of _____ would involve a situation in which Judy Smith and Tom Smith each write their daughter a check for $12,500 for graduation, instead of giving her one $25,000 check, so they will not have to pay a gift tax. (Points : 4)

fraud

tax evasion

tax exclusion

tax avoidance

tax-deferred income

Question 10.10. (TCO 2) A _____ is an employer-sponsored program that allows a taxpayer to cover medical and child care costs. (Points : 4)

tax credit

tax deduction

flexible spending account

tax-deferred investment

tax-exempt investment

Question 11.11. (TCO 2) The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution. Joyce has $198,000 in an individual account and $404,000 in a joint account with her husband, Dan. How much of Joyce’s money is not covered by FDIC insurance? (Points : 4)

$198,000

$250,000

$602,000

$150,000

$0

Question 12.12. (TCO 2) The most liquid type of account would be a (Points : 4)

certificate of deposit.

checking account.

money market account.

brokerage account.

share of stock.

Question 13.13. (TCO 3) All of the following are examples of closed-end credit except a(n) (Points : 4)

home mortgage.

installment loan to purchase new furniture.

line of credit from your bank.

automobile loan.

single lump sum credit loan due in 90 days.

Question 14.14. (TCO 3) If a bank is attempting to evaluate the trade-in value of a 2006 SUV when Anna McFarland is applying for a used car loan, the bank is examining which of the five Cs? (Points : 4)

Character

Capacity

Capital

Collateral

Conditions

Question 15.15. (TCO 3) An example of a credit bureau would be (Points : 4)

Equitron.

Transexpress.

the Better Business Bureau.

Experian.

FICO.

Question 16.16. (TCO 3) A _____ would require that Jessica writes a check for $125 in order to obtain a loan for $100. (Points : 4)

credit union

payday advance company

finance company

department store

commercial bank

Question 17.17. (TCO 3) If Anthony Fontain makes a decision to accept a variable-rate loan instead of a fixed-rate loan, he is _____ with the lender and reducing the lender’s risk. (Points : 4)

sharing the interest rate risk

increasing his monthly payments

taking a larger stake in the asset he is purchasing

repaying the loan over a faster period of time

pledging collateral

Question 18.18. (TCO 3) _____ is/are the primary reason(s) why consumers default on their debts. (Points : 4)

Medical expenses

Defective goods and services

Excessive use of credit

Fraudulent use of credit

Consumer fraud

Question 19.19. (TCO 5) All of the following statements are true except which? (Points : 4)

You can obtain recommendations to buy or sell stocks and other securities by accessing Internet sites.

There is a wealth of investment information available, but most small investors cannot afford to use it.

You can obtain current price information for stocks, bonds, and mutual funds by using the Internet.

A search engine is a research tool that helps you find the investment information you want.

Both government and businesses provide individuals with investment information.

Question 20.20. (TCO 5) If Chris is considering an investment in a pool that is managed by professional managers, most likely he is interested in investing in (Points : 4)

common stock.

preferred stock.

corporate bonds.

real estate.

mutual funds.

Question 21.21. (TCO 5) All of the following statements are false except (Points : 4)

investors should put all of their eggs in one basket.

individuals can ignore their tolerance for risk when selecting specific investments.

diversification is one way to lessen systematic risk.

the amount of time a specific investment has to work is an important consideration when developing an investment portfolio.

younger investors should invest a large percentage of their portfolio in income-producing securities.

Question 22.22. (TCO 5) _____ involves the analysis of charts and historical data in order to make stock purchasing decisions. (Points : 4)

Fundamental

Technical

Efficient market

Chart

Plot

Question 23.23. (TCO 5) A(n) _____ market is one in which previously issued financial securities are traded among investors. (Points : 4)

technical

fundamental

efficient

secondary

primary

Question 24.24. (TCO 5) Last year, High-Tech Electronics earned $1.50 per share. If the current market value for a share of stock is $60, what is the firm’s P/E ratio? (Points : 4)

0.04

1.50

40.00

44.00

60.00

Question 25.25. (TCO 5) Scott Turner has a bond with 10 years to maturity, a face value of $1,000, an 8% interest rate, and a market price of $800. What is the yield to maturity on this bond? (Points : 4)

4.00%

11.11%

8.00%

10.00%

6.67%

Question 26.26. (TCO 5) An example of a junk bond is a(n) (Points : 4)

Treasury bond.

bond rated B by Standard & Poor’s.

bond rated AAA by Standard & Poor’s.

insured municipal bond.

Treasury bill.

Question 27.27. (TCO 5) What is the current yield for a $1,000 corporate bond that pays 9% and has a current market value of $825? (Points : 4)

9.0%

10.9%

10.0%

8.25%

8.0%

Question 28.28. (TCO 3) Lori Walker purchased a new car 9 months ago, and decides to take it in for servicing under the warranty. Lori is involved in which step of the purchasing process? (Points : 4)

Problem identification

Information gathering

Evaluating alternatives

Determining the purchase price

Postpurchase activities

Question 29.29. (TCO 1) If Bradley Smith gives a cashier a document at a point of purchase with the expectation of obtaining a discount, he is using a (Points : 4)

coupon.

rebate.

warranty.

receipt.

promissory note.

Question 30.30. (TCO 3) A credit purchase with 24 monthly payments of $80 and a down payment of $125 would have a total cost of (Points : 4)

$2,000.

$1,795.

$2,045.

$1,920.

$1,085.

Question 31.31. (TCO 3) The _____ is considered to be the assessed value of your home. (Points : 4)

value used to calculate property taxes

estimated current market value

price you paid to purchase the home

amount of money a buyer has offered to purchase the home

cost basis assigned to your home by your insurance company

Question 32.32. (TCO 4) Your home insurance policy has a $250 deductible. If hail causes $1,500 damage to your home, what amount of the claim would the insurance company pay? (Points : 4)

$1,750

$1,250

$1,500

$250

$0

Question 33.33. (TCO 4) John Brown owns a home in Oakland, California and because of the risk of earthquakes, he decides to purchase _____ to cover potential losses. (Points : 4)

building and other structures

additional living expenses

personal property

personal liability

specialized coverage

Question 34.34. (TCO 4) Martina has a policy that includes a $500 deductible and a coinsurance provision requiring her to pay 10% thereafter. Her medical bills total $5,500. What amount is she required to pay personally? (Points : 4)

$1,500

$500

$1,000

$5,000

$5,500

Question 35.35. (TCO 4) _____ is a healthcare institution that directly contracts with specific medical care specialists in order to provide healthcare services in exchange for a fixed, prepaid monthly premium. (Points : 4)

Blue Cross

Blue Shield

A PPO

Medicaid

An HMO

Question 36.36. (TCO 4) If Mary Lou applies for a life insurance policy and lies about her age, a _____ provision will state that her benefits will be what her premium would have bought if she had been truthful about her age. (Points : 4)

policy loan

grace period

true age

guaranteed insurability

misstatement of age

Question 37.37. (TCO 4) If Frank has a term life insurance policy that is _____, this means that he can obtain additional years of protection at the end of the initial term without the need for a medical examination. (Points : 4)

straight

renewable

convertible

decreasing

accelerated

Question 38.38. (TCO 6) The Capitalist Mutual Fund’s net asset value is $27.25. The fund has liabilities of $1.4 million and 1,600,000 shares have been issued. What is the value of the fund’s portfolio? (Points : 4)

$43.6 million

$45 million

$38.2 million

$40 million

$16 million

Question 39.39. (TCO 6) Tracey Patterson would need to purchase a(n) _____ if she desires federally tax-exempt income. (Points : 4)

junk bond fund

intermediate corporate bond fund

municipal bond fund

short-term government bond

world bond fund

Question 40.40. (TCO 6) A benefit associated with an investment in a real estate limited partnership is that the investor (Points : 4)

does not have to worry about capital gains tax.

does not have to pay federal income tax.

does not have to pay state income tax.

can invest in a shopping center or large building by investing as little as $5,000.

faces an investment that is very liquid.

Question 41.41. (TCO 6) Judith recently inherited several pieces of diamond jewelry from her aunt. This jewelry is an example of (Points : 4)

a direct investment in real estate.

an indirect investment in real estate.

an investment in precious metals.

an investment in collectibles.

an investment in gems.

Question 42.42. (TCO 6) If Jeremiah’s employer makes nontaxable contributions to a plan in his name and his salary is reduced by the same amount, Jeremiah has a (Points : 4)

money-purchase pension plan.

stock bonus plan.

profit-sharing plan.

defined benefit plan.

403(b) plan.

Question 43.43. (TCO 6) Chuck owns a home worth $140,000, a car valued at $30,000, and miscellaneous assets worth $7,500. He owes $75,000 on the home and $12,000 on the car, and has no other debts. His retirement account, in which he is fully vested, contains $17,500 in mutual funds. He is insured with a $250,000 term life insurance policy. What is his net worth? (Points : 4)

$83,000

$108,000

$195,000

$358,000

$445,000

Question 44.44. (TCO 7) The benefits of establishing a trust include the fact that (Points : 4)

it can reduce or provide payment for estate taxes.

it can allow you to avoid probate and transfer assets immediately to beneficiaries.

it can free you from managing your assets, while providing you a regular income.

it can ensure that your property serves a desired purpose after you die.

All of the above

Question 45.45. (TCO 7) If Barry has been named by Anderson to distribute his assets as outlined in his will and pay outstanding obligations, Barry will serve as a(n) (Points : 4)

executor.

trustee.

guardian.

beneficiary.

agent.

BIS 155 Data Analysis with Spreedsheet with LAB Final Exam Practical Problems Solution

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BIS 155 Final Exam Practical Problems

Questions/Problems

1. Formatting and charts (TCOs 1, 2, and 3; 30 points)

Using the Documentation sheet:

a. Enter your name and today’s date.

Using the ‘Quest 1 & 2’ worksheet:

b. Adjust the widths of the columns so all data is visible.

c. Center the title “Music on Demand — Sales by Product” across columns A-D.

d. Increase the font size to 16, and change the font color to red.

e. Bold the column headings “Product”, “Unit Price”, “Quantity”, and “Total Sales”.

f. Add formulas to the Total Sales column to calculate the total sales for each product.

g. Add a grand total at the bottom of the Total Sales and Quantity columns.

h. Format grand totals so that they are easily read.

i. Format the numbers in the Unit Price and Total Sales columns as accounting or currency format with a dollar sign and two decimal places. Format appropriately.

j. Correct spelling by using the Spell Check feature.

k. Create a 3-D pie chart on a separate sheet (Chart1) that displays the total sales for each product. (Do notinclude the grand total in the pie chart!)

l. Move the chart to a new worksheet titled “Chart 1”.

m. Make the title of the chart “Total Sales by Product”.

n. Place each product name and its percentage of sales at or inside its pie slice, with product names off to the right as well.

o. Move the Chart1 pie chart worksheet immediately after the Quest 1&2 sheet.

p. Save your work (CTRL+s).

2. Formulas, applications and statistical functions (TCOs 2, 3, 6, and 10; 30 points)

Using the ‘Quest 1 & 2’ worksheet.

a. Draw a box around the table at A22-B25, with a light shading color for the column labels.

b. In cell E18, add a formula using a lookup function that will look up the grand total in cell D18 in the table of sales and assessments in A22:B25, and display the corresponding assessment. (For example, if the grand total of $505 is displayed in cell D18, “Good” should be displayed in cell E18.)

c. In cell E19 add the label Highest Sales. In F19 add the function formula for Maximum based on the Total Sales column.

d. In cell E20 add the label Lowest Sales. In F20 add the function formula for Minimum based on the Total Sales column.

e. In cell E21 add the label Average Sales. In F21 add the function formula for Average based on the Total Sales column.

f. Place a border around the statistics data and widen columns as needed for readability.

g. Save your work (CTRL+s).

3. Lists, sorting, charts, and conditional formatting (Excel; TCOs 4 and 6; 40 points)

Using the ‘Quest 1 & 2’ Worksheet:

a. Convert the list of products, unit prices, quantities, and total sales in A3:D17 into a table on the Quest 3 — Lists & Sorting sheet starting in cell A1.

Using the ‘Quest 3 — Lists & Sorting’ worksheet:

b. Sort the table into descending order (highest to lowest) by Total Sales.

c. Apply conditional formatting to the Total Sales column so that sales greater than $1,000 are highlighted in green.

d. Create a pivot table using the table data from Quest 1 & 2 on a new sheet and name it MoD-3b. Then move it after ‘Quest 3 Lists & Sorting’. Create a pivot showing the list of products in alphabetical order, showing total sales by product with appropriate currency formatting.

e. Create, on this same sheet, a line graph using the sales data from the pivot table. Add chart title and labels as appropriate.

f. Save your work (CTRL+s).

4. Functions and Financials (TCO’s 2, 6, and 7; 30 points)

Using the Quest 4-Financials worksheet:

a. Complete the Profit and Loss Statement provided by adding formulas (referenced shaded cell locations) and using the product and Total Sales data already included in Quest 1 & 2. Note: Do not just re-key the data, but use references from the original data.

b. Format the Total Revenue, Expenses, and Net Income in bold, and choose a fill color for the Net Income.

c. Perform a one-way analysis (i.e., Week5, iLab 6) to see at what sales volume level MP3 player sales add at least $1,000 to net income. Apply conditional formatting to the options that produce at least $1,000 in net income in the above table.

d. Format all the numeric data and labels on the worksheet using consistent and business like formatting options.

e. Save your work (CTRL+s).

Continue using the ‘Quest 4 — Financials’ worksheet:

f. Music on Demand (MoD) wants to apply for a 20-year loan and they need to know how much the monthly payment will be with a $10,000 down payment or a $20,000 down payment on a loan of $160,000. The annual interest rate is 3% and payment is assumed to be made at the end of the period.

g. Complete the chart and calculate the monthly payment, using an Excel function.

h. Secure/Protect, without a password, the Quest 4-Financials worksheet tab.

i. Save your work (CTRL+s).

5. Organization, Planning and Consolidation Strategies (TCO’s 5, 7, & 8; 40 Points)

Using the ‘Quest 5 — Organizing Data’ worksheet:

a. Consolidate the information on the Quest 5-Organizing Data sheet from the three (3) worksheets (DC Branch, Houston Branch, and LA Branch), using consolidation strategies that include:

1. Group sheets and use the auto-fill to complete the list of months in Column A and add totals for rows and columns.

2. Apply formatting to column headings and merge and center a title across row 1 for each sheet.

3. Open the blank worksheet, Quest 5-Organizing Data, and on the data tab click consolidate.

4. Choose the sum function to sum the data.

5. Add each worksheet to the consolidated Summary.

6. As an alternative to steps 3–5 above, use 3-D referencing to summarize the data.

7. Add row and column summary totals on the Quest 5-Organizing Data Worksheet.

b. Summarize your results using an appropriate chart type and place it below the summarized data.

c. Spell check the worksheet.

d. Save your work (CTRL+s).

6. Analysis, Summary and Recommendation (TCO’s 8, and 9; 30 Points).

Analyze the results from Quest 5-Organizing Data worksheet and create a report/memo with the following:

a. Identify the top two selling items and the two lowest selling items.

b. Add a Chart/Table (s) to reflect your results — or use the chart created in step 5

c. Offer management a recommendation to improve the business based upon your analysis.

d. List at least two Lessons Learned from your course experience.

e. Save and close your Excel file.

BSOP 206 Operations Strategy Week 8 Final Exam Answers

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After a lengthy job search, Judy Smith has found a place of employment; however, it is demanding and she is required to work long hours during the week and even on weekends, leaving little time for outside interests. Her decision to work at this job is an example of (Points : 4)

deflation.

financial opportunity cost.

personal opportunity cost.

time value of money.

inflation.

Question 2.2. (TCO 1) Marinda Smart is interested in purchasing new appliances for her kitchen that collectively will cost her approximately $5,000. She knows that she could obtain financing for her purchase, but recently heard rumors that there may be layoffs where she works and is concerned about her employment. What type of risk is Marinda concerned about? (Points : 4)

Inflation risk

Interest rate risk

Income risk

Personal risk

Liquidity risk

Question 3.3. (TCO 1) Which step in the financial planning process is demonstrated by a situation in which Royanne decides to stop traveling through Europe and return back to the States to seek a part-time job and take smaller, less costly trips? (Points : 4)

Developing her financial goals

Identifying alternative courses of action

Evaluating her alternatives

Implementing her financial plan

Reviewing and revising her financial plan

Question 4.4. (TCO 1) When retirement contributions made on your behalf where you work fully belong to you even if you leave the company, this is called the point of (Points : 4)

networking.

vesting.

a tax-deferred benefit.

a tax-exempt benefit.

break even.

Question 5.5. (TCO 1) Tracey has been unemployed for almost a year. However, after extensive research, she has found that the industry in which she would like to work will begin to experience job growth in California. This is an example of _____ influencing jobs in the future. (Points : 4)

technology trends

economic conditions

industry trends

geographic trends

educational trends

Question 6.6. (TCO 1) This month, Ken Grossman has cash inflows of $3,500 and cash outflows of $2,350, resulting in a (Points : 4)

balanced budget.

surplus of $1,150.

deficit of $1,150.

surplus of $3,500.

deficit of $2,350.

Question 7.7. (TCO 1) Sherry O’Neal is interested in opening a savings account and her bank offers several types. Her main concern is that she wants to have the ability to withdraw her money whenever she wants. She has an interest in opening an account that is best categorized as (Points : 4)

money management.

an opportunity cost.

a limited asset.

a liquid asset.

net worth analysis.

Question 8.8. (TCO 1) An example of _____ is a situation in which you would use a software program to help track your spending each week. (Points : 4)

money management

an opportunity cost

a balance sheet

creative accounting

electronic analysis

Question 9.9. (TCO 2) An example of _____ would involve a situation in which Judy Smith and Tom Smith each write their daughter a check for $12,500 for graduation, instead of giving her one $25,000 check, so they will not have to pay a gift tax. (Points : 4)

fraud

tax evasion

tax exclusion

tax avoidance

tax-deferred income

Question 10.10. (TCO 2) A _____ is an employer-sponsored program that allows a taxpayer to cover medical and child care costs. (Points : 4)

tax credit

tax deduction

flexible spending account

tax-deferred investment

tax-exempt investment

Question 11.11. (TCO 2) The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution. Joyce has $198,000 in an individual account and $404,000 in a joint account with her husband, Dan. How much of Joyce’s money is not covered by FDIC insurance? (Points : 4)

$198,000

$250,000

$602,000

$150,000

$0

Question 12.12. (TCO 2) The most liquid type of account would be a (Points : 4)

certificate of deposit.

checking account.

money market account.

brokerage account.

share of stock.

Question 13.13. (TCO 3) All of the following are examples of closed-end credit except a(n) (Points : 4)

home mortgage.

installment loan to purchase new furniture.

line of credit from your bank.

automobile loan.

single lump sum credit loan due in 90 days.

Question 14.14. (TCO 3) If a bank is attempting to evaluate the trade-in value of a 2006 SUV when Anna McFarland is applying for a used car loan, the bank is examining which of the five Cs? (Points : 4)

Character

Capacity

Capital

Collateral

Conditions

Question 15.15. (TCO 3) An example of a credit bureau would be (Points : 4)

Equitron.

Transexpress.

the Better Business Bureau.

Experian.

FICO.

Question 16.16. (TCO 3) A _____ would require that Jessica writes a check for $125 in order to obtain a loan for $100. (Points : 4)

credit union

payday advance company

finance company

department store

commercial bank

Question 17.17. (TCO 3) If Anthony Fontain makes a decision to accept a variable-rate loan instead of a fixed-rate loan, he is _____ with the lender and reducing the lender’s risk. (Points : 4)

sharing the interest rate risk

increasing his monthly payments

taking a larger stake in the asset he is purchasing

repaying the loan over a faster period of time

pledging collateral

Question 18.18. (TCO 3) _____ is/are the primary reason(s) why consumers default on their debts. (Points : 4)

Medical expenses

Defective goods and services

Excessive use of credit

Fraudulent use of credit

Consumer fraud

Question 19.19. (TCO 5) All of the following statements are true except which? (Points : 4)

You can obtain recommendations to buy or sell stocks and other securities by accessing Internet sites.

There is a wealth of investment information available, but most small investors cannot afford to use it.

You can obtain current price information for stocks, bonds, and mutual funds by using the Internet.

A search engine is a research tool that helps you find the investment information you want.

Both government and businesses provide individuals with investment information.

Question 20.20. (TCO 5) If Chris is considering an investment in a pool that is managed by professional managers, most likely he is interested in investing in (Points : 4)

common stock.

preferred stock.

corporate bonds.

real estate.

mutual funds.

Question 21.21. (TCO 5) All of the following statements are false except (Points : 4)

investors should put all of their eggs in one basket.

individuals can ignore their tolerance for risk when selecting specific investments.

diversification is one way to lessen systematic risk.

the amount of time a specific investment has to work is an important consideration when developing an investment portfolio.

younger investors should invest a large percentage of their portfolio in income-producing securities.

Question 22.22. (TCO 5) _____ involves the analysis of charts and historical data in order to make stock purchasing decisions. (Points : 4)

Fundamental

Technical

Efficient market

Chart

Plot

Question 23.23. (TCO 5) A(n) _____ market is one in which previously issued financial securities are traded among investors. (Points : 4)

technical

fundamental

efficient

secondary

primary

Question 24.24. (TCO 5) Last year, High-Tech Electronics earned $1.50 per share. If the current market value for a share of stock is $60, what is the firm’s P/E ratio? (Points : 4)

0.04

1.50

40.00

44.00

60.00

Question 25.25. (TCO 5) Scott Turner has a bond with 10 years to maturity, a face value of $1,000, an 8% interest rate, and a market price of $800. What is the yield to maturity on this bond? (Points : 4)

4.00%

11.11%

8.00%

10.00%

6.67%

Question 26.26. (TCO 5) An example of a junk bond is a(n) (Points : 4)

Treasury bond.

bond rated B by Standard & Poor’s.

bond rated AAA by Standard & Poor’s.

insured municipal bond.

Treasury bill.

Question 27.27. (TCO 5) What is the current yield for a $1,000 corporate bond that pays 9% and has a current market value of $825? (Points : 4)

9.0%

10.9%

10.0%

8.25%

8.0%

Question 28.28. (TCO 3) Lori Walker purchased a new car 9 months ago, and decides to take it in for servicing under the warranty. Lori is involved in which step of the purchasing process? (Points : 4)

Problem identification

Information gathering

Evaluating alternatives

Determining the purchase price

Postpurchase activities

Question 29.29. (TCO 1) If Bradley Smith gives a cashier a document at a point of purchase with the expectation of obtaining a discount, he is using a (Points : 4)

coupon.

rebate.

warranty.

receipt.

promissory note.

Question 30.30. (TCO 3) A credit purchase with 24 monthly payments of $80 and a down payment of $125 would have a total cost of (Points : 4)

$2,000.

$1,795.

$2,045.

$1,920.

$1,085.

Question 31.31. (TCO 3) The _____ is considered to be the assessed value of your home. (Points : 4)

value used to calculate property taxes

estimated current market value

price you paid to purchase the home

amount of money a buyer has offered to purchase the home

cost basis assigned to your home by your insurance company

Question 32.32. (TCO 4) Your home insurance policy has a $250 deductible. If hail causes $1,500 damage to your home, what amount of the claim would the insurance company pay? (Points : 4)

$1,750

$1,250

$1,500

$250

$0

Question 33.33. (TCO 4) John Brown owns a home in Oakland, California and because of the risk of earthquakes, he decides to purchase _____ to cover potential losses. (Points : 4)

building and other structures

additional living expenses

personal property

personal liability

specialized coverage

Question 34.34. (TCO 4) Martina has a policy that includes a $500 deductible and a coinsurance provision requiring her to pay 10% thereafter. Her medical bills total $5,500. What amount is she required to pay personally? (Points : 4)

$1,500

$500

$1,000

$5,000

$5,500

Question 35.35. (TCO 4) _____ is a healthcare institution that directly contracts with specific medical care specialists in order to provide healthcare services in exchange for a fixed, prepaid monthly premium. (Points : 4)

Blue Cross

Blue Shield

A PPO

Medicaid

An HMO

Question 36.36. (TCO 4) If Mary Lou applies for a life insurance policy and lies about her age, a _____ provision will state that her benefits will be what her premium would have bought if she had been truthful about her age. (Points : 4)

policy loan

grace period

true age

guaranteed insurability

misstatement of age

Question 37.37. (TCO 4) If Frank has a term life insurance policy that is _____, this means that he can obtain additional years of protection at the end of the initial term without the need for a medical examination. (Points : 4)

straight

renewable

convertible

decreasing

accelerated

Question 38.38. (TCO 6) The Capitalist Mutual Fund’s net asset value is $27.25. The fund has liabilities of $1.4 million and 1,600,000 shares have been issued. What is the value of the fund’s portfolio? (Points : 4)

$43.6 million

$45 million

$38.2 million

$40 million

$16 million

Question 39.39. (TCO 6) Tracey Patterson would need to purchase a(n) _____ if she desires federally tax-exempt income. (Points : 4)

junk bond fund

intermediate corporate bond fund

municipal bond fund

short-term government bond

world bond fund

Question 40.40. (TCO 6) A benefit associated with an investment in a real estate limited partnership is that the investor (Points : 4)

does not have to worry about capital gains tax.

does not have to pay federal income tax.

does not have to pay state income tax.

can invest in a shopping center or large building by investing as little as $5,000.

faces an investment that is very liquid.

Question 41.41. (TCO 6) Judith recently inherited several pieces of diamond jewelry from her aunt. This jewelry is an example of (Points : 4)

a direct investment in real estate.

an indirect investment in real estate.

an investment in precious metals.

an investment in collectibles.

an investment in gems.

Question 42.42. (TCO 6) If Jeremiah’s employer makes nontaxable contributions to a plan in his name and his salary is reduced by the same amount, Jeremiah has a (Points : 4)

money-purchase pension plan.

stock bonus plan.

profit-sharing plan.

defined benefit plan.

403(b) plan.

Question 43.43. (TCO 6) Chuck owns a home worth $140,000, a car valued at $30,000, and miscellaneous assets worth $7,500. He owes $75,000 on the home and $12,000 on the car, and has no other debts. His retirement account, in which he is fully vested, contains $17,500 in mutual funds. He is insured with a $250,000 term life insurance policy. What is his net worth? (Points : 4)

$83,000

$108,000

$195,000

$358,000

$445,000

Question 44.44. (TCO 7) The benefits of establishing a trust include the fact that (Points : 4)

it can reduce or provide payment for estate taxes.

it can allow you to avoid probate and transfer assets immediately to beneficiaries.

it can free you from managing your assets, while providing you a regular income.

it can ensure that your property serves a desired purpose after you die.

All of the above

Question 45.45. (TCO 7) If Barry has been named by Anderson to distribute his assets as outlined in his will and pay outstanding obligations, Barry will serve as a(n) (Points : 4)

executor.

trustee.

guardian.

beneficiary.

agent.

Case 16.1 & 18.7

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Facts

Among other assets, Turner Broadcasting System, Inc. (Turner) owned the Atlanta Hawks professional basketball team, the Atlanta Thrashers professional hockey team, and the Philips Arena located in Atlanta, Georgia (collectively “assets”). Turner publicly announced its intent to sell the assets to reduce its mounting debt. David McDavid expressed an interest in purchasing the assets and entered into negotiations with Turner.

On April 30, the parties entered into a “Letter of Intent” outlining the proposed sale terms. The parties held meetings and engaged in telephone conference calls to resolve any outstanding issues, particularly a tax issue raised by Turner. During a conference call on July 30, McDavid agreed to Turner’s resolution of the tax issue, after which Turner’s Chief Executive Officer (CEO) Phil Kent, agreed and announced “we have a deal.” On August 1, Turner drafted an internal memo to its employees and planned a press conference to publicly announce the deal with McDavid. During August, Turner consulted with McDavid and his advisors on team management decisions, including hiring a general manager and head coach for the Hawks, assistant coaches, a trainer and scouts.

On or about August 16, as the drafting process of a final written agreement continued, Turner’s executive and principal negotiator, James McCaffrey, told McDavid that the “deal was done” and that “they were ready to close the deal.” On August 19, the directors of Time Warner, Inc., Turner’s parent company, approved the sale of the assets to McDavid based on the agreed-upon terms. However, Ted Turner, a member of Time Warner’s board of directors, opposed the deal. Ted Turner’s son-in-law, Rutherford Seydel, the son of a member of the Hawks board of directors, approached Turner about purchasing the assets on behalf their company, Atlanta Spirit, LLC.

While Turner continued to prepare the written agreement with McDavid, Turner began negotiations with Atlanta Spirit. On or about September 12, during a conference call, Turner and McDavid verbally reached a final agreement for the written agreement and Turner’s principal negotiator announced “the deal is done. Let’s get documents we can sign and we’ll meet in Atlanta for a press conference and a closing early next week.” But later the same day, Turner’s principal negotiator signed an agreement to sell the assets to Atlanta Spirit on substantially the same terms agreed upon by Turner and McDavid. On September 15, as McDavid was preparing to travel to Atlanta for the closing and a press conference to announce the sale, he was notified that Turner was selling the assets to Atlanta Spirit.

McDavid sued Turner for breach of contract. Turner denied the existence of any binding contract with McDavid, arguing that the parties had not executed a final written agreement. Following an eight-week trial, the jury returned a verdict in favor of McDavid, finding that Turner had breached their contract, and awarded $281 million in damages to McDavid. Turner appealed.

Issue

Is there an enforceable contract between McDavid and Turner?

Language of the Court

In determining whether there was a mutual assent, courts apply an objective theory of intent whereby one party’s intention is deemed to be that meaning a reasonable man in the position of the other contracting party would ascribe to the first party’s manifestations of assent.

The parties’ objective manifestations of their mutual assent and intent to be bound to the McDavid acquisition deal included testimony that Turner’s CEO formally announced, “we have a deal” during the parties’ July 30th conference call. On or about August 16, Turner’s principal negotiator further confirmed the existence of an agreement during discussions pertaining to the deal by stating that the “deal was done,” and that “they were ready to close on the deal.” And yet again, on or about September 12, during the course of another conference call to confirm the parties’ final agreement on the terms to be incorporated into the written agreements, Turner’s principle negotiator announced, “the deal is done. Let’s get documents we can sign and we’ll meet in Atlanta for a press conference and a closing early next week.”

Furthermore, in August, Turner consulted with McDavid and his advisor on team management decisions, including the hiring of a general manager and head coach for the Hawks. It is undisputed that the parties intended to sign written documents that memorialized the terms of their oral agreement. McDavid and his advisors testified that in accordance with the customary deal-making process, the parties first had to reach an oral agreement upon the material terms, and then the lawyers were expected to prepare the written documents that memorialized the parties’ agreed upon terms. There was evidence from which the jury could conclude that the parties entered into a binding oral agreement with the intent to sign written documents that memorialized the terms, but failed to do so as a result of Turner’s breach.

Decision

The court of appeals affirmed the trial court’s judgment that found that Turner had breached an oral agreement with McDavid and that awarded $281 million in damages against Turner.

Case Questions

Critical Legal Thinking

What is the objective theory of contracts? Do you think Turner manifested its intent to enter into a contract with McDavid?

Ethics

Did Turner act ethically in this case? Why did Turner back out of its deal with McDavid and enter into a deal with Atlanta Spirit?

Contemporary Business

Should oral agreements be enforced regarding business deals of this magnitude and complexity? Should business people be bound to their word?

(Cheeseman 267–269)

Cheeseman, Henry R. Business Law, VitalSource for DeVry University, 8th Edition. Pearson Learning Solutions, 02/2013. VitalBook file.

The citation provided is a guideline. Please check each citation for accuracy before use.

Case 18.7

18.7 Good or Service Frances Hector entered Cedars-Sinai Medical Center (Cedars-Sinai), Los Angeles, California, for a surgical operation on her heart. During the operation, a pacemaker was installed in Hector. The pacemaker, which was manufactured by American Technology, Inc., was installed at Cedars-Sinai Medical Center by Hector’s physician, Dr. Eugene Kompaniez. The pacemaker was defective, causing injury to Hector. Hector sued Cedars-Sinai Medical Center under Article 2 (Sales) of the UCC to recover damages for breach of warranty of the pacemaker. Hector alleged that the surgical operation was primarily a sale of a good and therefore covered by the UCC. Cedars-Sinai Medical Center argued that the surgical operation was primarily a service and therefore the UCC did not apply. Who wins? Hector v. Cedars-Sinai Medical Center, 180 Cal.App.3d 493, 225 Cal.Rptr. 595, Web 1986 Cal. App. Lexis 1523 (Court of Appeal of California) What is the public policy that supports the mixed sale doctrine?

(Cheeseman 313)

Cheeseman, Henry R. Business Law, VitalSource for DeVry University, 8th Edition. Pearson Learning Solutions, 02/2013. VitalBook file.

The citation provided is a guideline. Please check each citation for accuracy before use.

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