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## Latest Homework Solution

### XYZ Corp Statement of Cash Flows

Prepare a statement of cash flows for XYZ corp using the following

1. Beginning cash- 8,800,000
2. Ending cash - 8,850,000
3. Issuance of stock to purchase building - 200,000
4. Depreciation expense - 25,000
5. Net income - 80,000
6. Issuance of bonds for equipment - 250,000
7. Payment of Dividends - 80,000
8. Amortization expense - 45,000
9. Issuance of XYZ bonds - 500,000
10. Purchase back our own XYZ stock as treasure stock - 120,000
11. Acquire plant assets - 460,000
12. Depletion expense of natural resources -60,000
13. Loan to another company - 70,000
14. Sale of Pepsi-Cola bonds - 100,000
15. Proceeds of sale of plant assets - 150,000
16. Issuance of XYZ stock - 600,000
17. Investment in Coca-Cola Stock - 780,000

### 19 MCQ Orbitz.com combines several major airlines into a one-stop online reservation site

Orbitz.com combines several major airlines into a one-stop online reservation site. This is an example of a(n):

strategic alliance.
strategic network.
intranet.
extranet.

Keeping the Internet free from tax policies applied to off-line transactions:
is a better option for buyers.
gives online retailers a competitive advantage.
means less sales and use tax revenue for the states.
All of the above

Strategies for competing in the Internet product market are based upon:
specialization and generalization.
ecology and competitiveness.
communication and interactivity.
market segmentation and competition.

Which of the following Internet resources can specifically add value through leveraging? ( Not 100% Sure)
Loyalty and improvement
Content, channel, and communication

A Web site link that points to a particular page is called a:

Your company purchased 250,000 online advertising impressions and made an average net profit per sale of its product of \$5. With statistical averages of 3% for click-through and 4% for company turnover, the expected return on your investment is:
\$6,000.
\$3,500.
\$1,500.
\$60.

A market that emphasizes products and services necessary to the manufacturing and sales of products in a specific industry are known as: ( Not 100% Sure)
procurement markets.
vertical markets.
horizontal markets.
B2C markets.

__________ intermediaries connect buyers and sellers when fragmentation is high on both sides of the market.

Aggregator
Auctioneer
Exchange
Market-making

Which of the following is NOT a key shift in business activity with regard to ongoing relational exchange?
From products to people
From competition to cooperation
From stand-alone to networked
From transactions to collaboration

The appropriability of technology deals with:
technology that has been illegally appropriated by a foreign government.
how appropriate the technology is for generating long-term profit.

how easily the technology can be learned and used by the host nation employees.

the ability of the firm to profit from its technology by protecting it from its competitors.

Which of the following is NOT a cultural variable?

Kinship
Career choice
Education
Religion

In contrast to Russians, Arabs are more likely to make concessions because of their interest in:
long-term relationships.
compromise.
accommodating the needs of others.
financial negotiating variables.

The process by which a firm’s managers evaluate the future prospects of the firm and decide on appropriate strategies to achieve long-term objectives is called:

internal resource analysis.
environmental scanning.
strategic planning.
product marketing.

The critical criterion in the use of a franchising strategy is:

financial reserves.
choice of management.
quality control.
whether or not the local market has sophisticated consumers.

Which of the following is an example of the competitive aspect of strategic alliances?
Economies of scale in tangible assets
Upstream-downstream division of labor
Creating a critical mass to develop new technologies
Encircling existing competitors with alliance partners

The creation of a(n) __________ facilitates the beginning of a global strategy.
local division
international division
transnational division
matrix division

__________ are usually preferable where a high level of technical capability is required.

Parent-country nationals
Host-country nationals
Third-country nationals
Cross-cultural nationals

__________ suggests the need for job security, whereas people with __________ would probably be motivated by more risky opportunities for variety and fast-track advancement.

High uncertainty avoidance; low uncertainty avoidance
Low uncertainty avoidance; high uncertainty avoidance
Large power distance; small power distance
Small power distance; large power distance

The degree of general importance that working has in the life of an individual is called:

intrinsic motivation.

extrinsic motivation.
work centrality.

### A product sells for \$200 per unit, and its variable costs per unit are \$130

1. A product sells for \$200 per unit, and its variable costs per unit are \$130. The fixed costs are \$420,000. If the firm wants to earn \$35,000 pretax income, how many units must be sold? (Points : 5)
6,500
500
5,000
200

Units required to earn target pre-tax income of \$35,000 = (\$35,000 + \$420,000)/\$70 = 6,500 units

2. For January, sales revenue is \$700,000; sales commission are 5% of sales; the sales manager's salary is \$96,000; advertising expenses are \$90,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are \$2,100 plus 1/2 of 1% sales. Total selling expenses for the month of January are: (Points : 5)

\$157,100

\$240,600

\$183,750

\$182,100

3. A company's product sells at \$12 per unit and has a \$5 per unit variable cost. The company's total fixed costs are \$98,000.The break-even point in units is: (Points : 5)
14,000
7,000
5,187
2,123

\$98,000/\$7 = 14,000 units

4. The contribution margin per unit is equal to the sales price per unit minus the variable costs per unit. (Points : 5)
True
False

5. Total variable costs change proportionately with changes in output activity. (Points : 5)
True
False

6. Variable costs per unit increase proportionately with increases in output activity. (Points : 5)
True
False

7.
If fixed costs are \$500,000 and variable costs are 60% of break-even sales, profit is zero when sales revenue is \$930,000.
(Points : 5)
True
False

8. Which of the following is a mixed cost? (Points : 5)

Salary of a factory supervisor

Electricity costs of \$2 per kilowatt-hour

Rental costs of \$5,000 per month plus \$.30 per machine hour of use

Straight-line depreciation on factory equipment

9. Variable costs are costs that remain constant in total dollar amount as the level of activity changes (Points : 5)
True
False

10. Variable costs as a percentage of sales for Lemon Inc. are 80%, current sales are \$600,000, and fixed costs are \$130,000. How much will operating income change if sales increase by \$40,000? (Points : 5)

\$8,000 increase

\$8,000 decrease

\$30,000 decrease

\$30,000 increase

11. A break-even point can be calculated either in units or in dollars. (Points : 5)
True
False

12.
How does contribution margin differ from gross margin? Give a specific example as part of your explanation.
(Points : 10)
The Contribution Margin is calculated by subtracting Variable Costs from Sales. This is used in Variable Costing where costs are categorized based on the cost behavior; while Gross Margin is calculated by subtracting Cost of Goods Sold from Sales which is used in Absorption Costing where costs are categorized based on function.

13. A product sells for \$30 per unit and has variable costs of \$18 per unit. The fixed costs are \$720,000. If the variable costs per unit were to decrease to \$15 per unit and fixed costs increase to \$900,000, and the selling price does not change, break-even point in units would:

a. current breakeven
b. new breakeven

Show all work to receive full credit (Points : 10)

a)
Contribution Margin = \$30 - \$18
= \$12
BEP = \$720,000 / \$12
= 60,000 units

b)
Contribution Margin = \$30 - \$15
= \$15
BEP = \$900,000 / \$15
= 60,000 units

14. State the difference in cost of goods manufactured between absorption costing and variable costing. As part of your explanation give an example of the statement format difference. (Points : 10)

The main difference between those methods is in the treatment of Fixed Manufacturing Costs; where under Variable Costing, Fixed Manufacturing Costs are not included in Product Costs and are treated as a Period Cost while Under Absorption Costing Fixed Manufacturing Overhead are treated as Product Costs. Hence, under Variable Costing Product Costs consist solely of Variable Production Costs.

The following Income Statements show the difference:

Company A
Income Statement (Variable Costing)
Month Ended April 30, 20xx
Sales revenue (10,000 × \$27) \$270,000
Variable manufacturing costs \$80,000
Variable selling and administrative costs \$20,000 \$100,000
Contribution margin \$170,000
Fixed manufacturing costs \$35,000
Fixed selling and administrative costs \$10,000 \$45,000
Operating income \$125,000

Company A
Income Statement (Absorption Costing)
Month Ended April 30, 20xx
Sales revenue (10,000 × \$27) \$270,000
Cost of goods manufactured \$131,000
Less: Ending inventory (\$22,000)
Cost of Goods Sold \$109,000
Gross Profit \$161,000
Operating expenses:
Variable Selling and administrative cost \$20,000
\$10,000 \$30,000
Operating income \$131,000

Income statements

15. The more activities tracked by activity-base...The more activities tracked by activity-based costing, the more accurately overhead costs are assigned. (Points : 5)
True
False

16. Which of the following would not be considered a product cost? (Points : 5)
Cost accountant's salary
Factory line worker's salary.
Direct labor costs

17. A retail store has three departments, 1, 2, and 3, and does general advertising that benefits all departments. Advertising expense totaled \$41,000 for the year, and departmental sales were as follows. Which department would be allocated the highest amount of the advertising expense if the activity base is sales?

Sales: Department 1 \$101,000
Department 2 \$212,750
Department 3 \$157,750

(Points : 5)
Department 1
Department 2
Department 3
Each department would have and equal amount since advertising benefits all departments

### Carlton executed and delivered to Raymond a \$1,000

1. Carlton executed and delivered to Raymond a \$1,000 negotiable note payable to Raymond or bearer. Raymond then negotiated it to Fred and endorsed it on the back by merely signing his name. Which of the following is a true statement?

a. The instrument is bearer paper, and Fred can convert it to order paper by writing “pay to the order of Fred” above Raymond’s signature.

b. Raymond’s endorsement was a special endorsement.

c. The instrument was initially bearer paper and cannot be converted to order paper.

d. Raymond’s endorsement was necessary to Fred’s qualification as a holder.

2. Under the Secured Transactions Article of the UCC, which of the following remedies is available to a secured creditor when a debtor fails to make a payment when due?

Proceed Obtain a General

against the Judgment against

Collateral__ the Debtor_

a. Yes Yes

b. Yes No

c. No No

d. No Yes

3. On July 27, 2011 Summerson sent Fallson a letter offering to sell Fallson a vacation home for \$150,000. On August 2, 2011 Fallson replied by mail agreeing to buy the home for \$145,000. Summerson did not reply to Fallson. Do Summerson and Fallson have a binding contract?

a. Yes, because Summerson’s silence is an implied acceptance of Fallson’s letter.

b. No, because Fallson failed to sign the letter that was sent by Fallson.

c. No, because Fallson’s letter was a counteroffer.

d. Yes, because Summerson’s offer was validly accepted.

4. Cindy, Odsen Corp.’s agent, needs a written agency agreement to

a. Hire an attorney to collect a business debt owed Odsen.

b. Purchased an interest in undeveloped land for Odsen.

c. Retain an independent general contractor to renovate Odsen’s office building.

d. Enter into a series of sales contracts on Odsen’s behalf.

5. A party who filed a financing statement covering inventory on April 1, 2010 would have a superior interest to which of the following parties?

a. A holder of a mechanic’s lien whose lien was filed on March 15, 2010.

b. A judgment lien creditor who filed its judgment on April 15, 2010.

c. A holder of a purchase money security interest in after-acquired inventory filed on March 20, 2010.

d. A purchaser in the ordinary course of business who purchased on April 10, 2010.

6. In determining whether the consideration requirement to form a contract has been satisfied, the consideration exchanged by the parties to the contract must be

a. Fair and reasonable under the circumstances.

b. Legally sufficient.

c. Exchanged simultaneously by the parties.

d. Of approximately equal value.

7. Pavers Roadway, Inc., contracts with Best Building Corporation to repave Best Building Corporation's parking lot. The elements of a contract do not include

a. consideration.

b. contractual capacity.

c. legality.

d. practicality.

____ 8. Holly writes a check on her account at Investment Bank to Jerry to pay a debt. Jerry negotiates the check by indorsement to Kelly, who negotiates the check by indorsement to Lisa, who presents it for payment to Interstate Bank. Holly is

a.

not liable for payment under any circumstances.

b.

primarily liable.

c.

secondarily liable.

d.

simultaneously liable.

____ 9. Under the facts of question 8, if Investment Bank dishonors the check, Lisa can obtain payment from Jerry

a.

if Lisa timely notifies Jerry.

b.

only if Holly refuses to pay the check.

c.

only if Holly and Kelly refuse to pay the check.

d.

under no circumstances.

10. Nora enters into a contract with Owen's Transport Company for the delivery of a shipment of fresh produce. If ambiguities appear in the contract, they will be construed against

a. the party who drafted the contract.

b. the party with the greater bargaining power.

c. the promisor.

d. the promisee.

11. On November 1, 2011, Ted sent a telegram to Zena offering to sell a rare vase. The offer required that Zena’s acceptance telegram be sent on or before 5:00 p.m. on November 2, 2011. On November 2, 201 at 3:00 p.m., Zena sent an acceptance by overnight mail. It did not reach Ted until November 5, 2011. Ted refused to complete the sale to Zena. Is there an enforceable contract?

a. No, because Zena did not accept by telegram.

b. No, because the offer required receipt of the acceptance within the time specified.

c. Yes, because the acceptance was effective when sent.

d. Yes, because the acceptance was made within the time specified.

12. Mary promises to pay her assistant Ned \$10,000 in consideration of the services he provided over the years. Mary never pays Ned. Mary is

a. liable for payment of the \$10,000.

b. liable only if Ned still works for Mary.

c. not liable, because the consideration is in the past.

d. not liable, because the consideration was unintentional.

13 Collection of EZ Sales Company's debt to First Storage Corporation is barred by a statute of limitations. A new promise by EZ to pay the debt

a. may become enforceable if payments are made.

b. must be in writing.

c. requires consideration.

d. will not revive the obligation.

14. Auto Body Repair Shop (ABRS) promises to pay Ben \$1,000 a week to work for ABRS. Ben accepts and quits his job with Car Care Service. ABRS fails to provide a job for Ben. Ben has a cause of action based on

a. an illusory promise.

b. a release.

c. past consideration.

d. promissory estoppel.

15. Pat, a world famous musician and composer, agrees to give ten piano lessons to Quinn in exchange for \$1,000. Pat's attempt to delegate his contract to Ruth, an inexperienced pianist, will probably be

a. permitted because contracts may be freely delegated.

b. permitted because the contract is concerned with music lessons.

c. prohibited because contracts may not be freely delegated.

d. prohibited because Pat and Ruth have very different skill levels.

16. Jill and Karl contract for the sale of Jill's horse for \$1,000. Unknown to either party, the horse has died. Karl is

a. entitled to another horse of equivalent value.

b. not required to pay due to the mutual mistake.

c. not required to pay due to the unilateral mistake.

d. required to pay because he assumed the risk the horse might die.

17. Alpha Company offers to sell Beta, Inc., 1,000 computers for a \$1 million, states that the offer will be open for six days, and asks for a response by fax. On the fourth day, Beta sends an acceptance to Alpha via the mail, which is received on the sixth day. In this deal

a. a contract is formed.

b. no contract is formed, because Alpha asked for a response by fax.

c. no contract is formed, because Alpha received the acceptance late.

d. no contract is formed, because Beta sent the acceptance late.

18. Under the facts of question 8, if Investment Bank dishonors the check, Lisa can obtain payment from Kelly.

a.

if Lisa timely notifies Kelly.

b.

only if Holly refuses to pay the check.

c.

only if Holly and Jerry refuse to pay the check.

d.

under no circumstances.

19. Furnishings, Inc., agrees to lease a desk to Better Resources, Inc. (BRI), which requests that the desk be left outside City Warehouse for BRI to pick up. Before BRI retrieves the desk, it is stolen. The loss is suffered by

a. A-1 Furnishings and BRI, but not City Warehouse.

b. A-1 Furnishings, BRI, and City Warehouse.

c. A-1 Furnishings only.

d. BRI only.

20. John, the secured party, perfects its security interest by filing a financing statement. What is the effect of perfection of John’s security interest?
a. The secured party has priority in the collateral over most creditors who acquire a security interest in the same collateral after the filing.
b. The security interest becomes enforceable against the debtor.
c. The debtor is protected against all other parties who acquire an interest in the collateral after the filing.
d. The assets subject to the security interest do not become part of the bankruptcy estate in the event the creditor files an involuntary petition against the debtor.

21. Ample Country Stables contracts to buy 1,000 horseshoes from Blacksmith, Inc., for \$1 per shoe. When the market price decreases to 50 cents per shoe, Ample refuses to go through with the deal. Blacksmith can recover

a. \$1,500.

b. \$1,000.

c. \$500.

d. 0.

22. Farm Equipment, Inc., makes farming machinery. Gail discovers that her Farm Equipment tractor is defective and sues the maker for product liability based on negligence. To win, Gail must show that

a. Farm Equipment sold the tractor to Gail.

b. Gail knew and appreciated the risk caused by the defect.

c. Gail suffered an injury caused by the defect.

d. the "defect" was a commonly known danger.

23. Ida signs a check payable to Jane and gives it to her. Jane indorses the back, and transfers the check to Kyle. To negotiate the check to Leo, Kyle must

a. indorse "Kyle" on the back and deliver the check to Leo.

b. indorse "pay to the order of Leo [signed] Kyle" on the back and deliver the check to Leo.

c. only deliver the check to Leo.

d. transfer the check through the drawee bank.

24. Local Appliance Store, the secured party, sells a refrigerator to John, a consumer, for the use of John’s family. John signs a sales agreement, a loan note, and a security agreement. Local Appliance Store fails to file either the security agreement or a financing statement with the secretary of state. Which of the following statements is accurate?

a. The secured party has priority in the collateral over most creditors who subsequently acquire a security interest in the same collateral.
b. The security interest is not enforceable against the debtor.
c. The security interest is not enforceable against subsequent creditors.
d. The assets subject to the security interest cannot become part of the bankruptcy estate in the event the creditor files an involuntary petition against the debtor.

25. Ruth, a minor, charges groceries at Sam's Mini-Mart. Two days later, Ruth disaffirms the purchase. Ruth owes Sam's Mini Mart

a.

the reasonable value of the groceries.

b.

the retail value of the groceries.

c.

the wholesale value of the groceries.

d.

nothing.

Fact Pattern A
General Leasing Company (GLC) buys equipment for use as inventory, borrowing \$1 million from Helpful Finance Corporation (Helpful) for a security interest in the equipment. The next day, GLC borrows \$500,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on both loans.

26. Refer to Fact Pattern A. Suppose that two weeks after GLC takes possession of the equipment, Helpful and Interstate file financing statements, with Interstate filing first. In that circumstance, the party with priority to the equipment is

a. GLC.
d. Interstate Bank only.

____ 27. Beth is convicted of arson for burning down her warehouse.. On an application for insurance from Cover-All Insurance Company on a new building, in answer to a question about prior convictions, Beth does not disclose her conviction. This makes the contract

a.
binding because the omission is immaterial to Cover-All's decision to issue coverage.

b.

binding due to Cover-All's failure to discover Beth's conviction.

c.

voidable by Beth because the omission is immaterial to Cover-All's decision to issue coverage.

d.

voidable by Cover-All because the omission is material to its decision to issue coverage.

Fact Pattern B

Fred enters into a contract under Gene's threats. Later, Fred refuses to perform, claiming that he acted under duress.

____ 28. Refer to Fact Pattern B. Gene sues to enforce the contract. In order for Fred to establish duress, Gene must have threatened

a. a civil suit.

b. a lost opportunity.

c. a social snubbing.

d. a wrongful act.

e. none of the above.

____ 29. Century Properties. Inc., and Dandy Capital Corporation enter into a contract for a sale of land. To be enforceable, the contract must be in writing if the land is valued at

a.

\$50.

b.

\$500.

c.

\$5,000.

d.

\$50, \$500, or \$5,000.

____ 30. Timber Trees, Inc., and Land Corporation enter into an oral contract for Timber Trees, Inc. to sell its lumber mill to Land Corporation . Before Land Corporation takes possession, this contract is enforceable by

a.

either party.

b.

neither party.

c.

Timber Trees only.

d.

Land Corporation only because only the buyer can get specific performance.

____ 31. Lola agrees to pay Mira's debt to New Sales Corporation if Mira does not pay it. Lola does not get any personal benefit for or from the agreement. To be enforceable against Lola, the promise must be in writing if the debt is

a.

paid by Mira.

b.

for \$50.

c.

for \$500.

d.

\$50, \$500, or \$5,000.

Fact Pattern C

Macro Marketing, Inc. (Macro), and National Food Corporation (NFC) discuss the terms of a contract under which NFC is to provide personal services to Macro. The next day, Macro faxes NFC a memo on Macro's letterhead that summarizes the items on which they agreed, including a two-year term. NFC immediately begins to perform, but Macro refuses to pay. NFC promptly institutes a law suit seeking damages.

____ 32. Refer to Fact Pattern C. The contract between Macro and NFC is

b.

subject to the Statute of Frauds’ services rule, and is probably enforceable.

c.

barred by the statute of limitations, and is therefore probably unenforceable.

d.

subject to the Statute of Frauds’ one-year rule, and is probably unenforceable.

Fact Pattern D

Jeff and Kris sign a written contract for the sale of Jeff's Koffee Kiosk to Kris. The parties intend their written contract to be a final statement of the terms of their agreement.

____ 33. Refer to Fact Pattern D. Kris later disputes some of the provisions of the deal with Jeff. The dispute results in litigation, and the court finds the terms of the agreement are ambiguous. The court will most likely

a.

exclude evidence that buttresses the written terms.

b.

exclude evidence that contradicts the written terms.

c.

allow evidence that explains the terms.

d.

dismiss the action because there was a lack of mutual asset and no contract was formed.

34. Kettlecorn Investments, Inc., and Lone Bank are secured parties with security interests in property owned by Metal Fabrication Corporation. Priority between these security interests is generally determined by
a. the amount of the claim.
b. the custom in the trade.
c. the time of perfection or attachment.
d. the "float" of the liens.

35. Manny, as buyer, wants to transfer his rights under a written real estate contract with Nila, as seller, to Opie. To ensure that the transfer of rights is valid, Manny must

a.

have this right expressly stated in the contract.

b.

file a notice of assignment in the public records.

c.

have the contract recorded in the public records.

d.

none of the choices.

36. Rural Development Corporation (RDC) and Sid enter into a contract for the clear-cutting of RDC's fifty-acre tract for which RDC agrees to pay Sid. Sid is the owner of Timber Logging Company. Sid transfers his duty to log the tract under the contract to Timber Logging Company. Timber Logging Company is

a.

a delegatee and is subject to the terms of the agreement between RDC and Sid.

b.

a delagetee and is not entitled to collect under the contract from RDC for services provided by Timber.

c.

an obligee and is not required to perform under the contract.

d.

a prohibitee.

37. Mke, a physician, renders aid to Nancy, who is injured and unconscious after an avalanche. Mike can recover the cost of the aid from Nancy

a.

even if Nancy was not aware of the aid when it was given.

b.

only if Nancy recovers because of the aid.

c.

only if Noel was aware of the aid at the time it was given.

d.

under no circumstances.

38. Pat, a world famous musician, agrees to give ten piano lessons to Quinn in exchange for \$1,000. Pat's attempt to transfer his contract duties to Ruth, an inexperienced pianist, will probably be

a.

permitted because contracts may be freely delegated.

b.

prohibited in this case unless the contract expressly permits delegation.

c.

permitted if the contract is silent on the issue.

d.

prohibited in any case.

39. Chaz and Dolly enter into a five year contract under which Chaz agrees to provide maintenance services for Dolly's Ski Resort. Chaz transfers his rights and obligations under the contract to Mark. Mark

performs

under the contract, and Dolly is aware of the Mark’s performance of the contract. However, Dolly refuses to pay Mark. Assuming Mark’s services are properly performed and Mark sues Dolly, Mark

a. will be successful in enforcing the contract if performance depends on the personal skills or talents of the obligor.

b. will probably not be able to recover under the express terms of the contract.

.

c. may be able to recover the value of his services.

d. may not recover.

40. On August 1, 2010 Delia and Edwin entered into an agreement for Edwin to lease Delia’s country home for two months during the following summer for \$1000 per month. Delia promised to vacate the property for Edwin by July 1, 2011 with the lease to begin on July 1, 2011. If these promises are not in writing, they are most likely

a.

enforceable.

b.

unenforceable.

c.

voidable.

d.

none of the above.

41. To avoid liability for intentional injuries, Power Corporation includes in its contracts an exculpatory clause. This is

a.

enforceable if the other parties are protected from liability.

b.

enforceable if the other parties sign the contract.

c.

enforceable if the other parties have equal bargaining power.

d.

not enforceable.

42. MicroCorp hires Nick to work for one month at a weekly salary of \$400. A MicroCorp representative orally agrees two weeks later to double Nick's salary. This agreement is

a.

enforceable because an employment contract is an adhesion contract.

b.

enforceable because the parties have executed an accord and satisfaction.

c.

unenforceable because Nick has incurred no additional detriment in exchange for MicroCorp's promise.

d.

unenforceable because Nick's performance is uncertain.

43. Karen writes on a piece of paper, "I owe you \$600," signs it, and gives it to Lou. This instrument is

a.

negotiable.

b.

nonnegotiable, because it does not recite any consideration.

c.

nonnegotiable, because it does not state any conditions to payment.

d. none of the above.

____ 44. Pam signs an instrument payable to the order of Quick Credit, Inc., that allows a holder to demand payment of the entire amount due, with interest, if Pam fails to make a payment. This instrument is

a.

negotiable.

b.

nonnegotiable, because a holder can move up the payment date.

c.

nonnegotiable, because moving up the payment date is conditional.

d.

nonnegotiable, because the exact payment date cannot be determined from the face of the instrument.

____ 45. Wyatt inherits a promissory note from Xena, his aunt. Wyatt has no notice that the note has been dishonored or is overdue. Wyatt has the rights of

a.

a holder and an HDC.

b.

a holder only.

c.

an HDC only.

d.

neither a holder nor an HDC.

### 10 MCQ Which of the following is/are the mechanism(s) for code reuse?

1. (TCO 3) Which of the following is/are the mechanism(s) for code reuse? (Points : 2)
Inheritance
Composition
Inheritance and composition
None of the above

2. (TCO 4) Which of the following is true about inheritance? (Points : 2)
Child classes are more generalized than their associated parent classes.
Inheritance demonstrates the generalization/specialization relationship.
Parent classes are more specialized than their associated child classes.
Parent classes contains more functionality than child classes.

3. (TCO 4) Select the parent class. (Points : 2)
Automobile
Convertible
MiniVan
Sedan

4. (TCO 4) Which of the following is not a good example of a hierarchy that could be modeled by inheritance? (Points : 2)
Airplanes
Geometric shapes
Prime numbers
Employee

5. (TCO 4) Which of the following examples represent(s) the “is-a” relationship in the parent/child format? (Points : 2)
dog/cat
rectangle/circle
checking account/saving account
None of the above

6. (TCO 3) What is/are the reason(s) to use inheritance? (Points : 2)
Labor division
Introducing modularity into program
Reusing design
All of the above

7. (TCO 3) Inheritance always involves a _____ relationship. (Points : 2)
general to general
specific to specific
specific to general
general to specific

8. (TCO 4) The _____ accessibility establishes that an attribute can only be accessed from methods of the class itself. (Points : 2)
private
protected
public
secured

9. (TCO 4) Inheritance is only possible in _____ languages. (Points : 2)
procedural
object-oriented
GUI based
non-structured

10. (TCO 6) _____ is the ability to combine data and operations on that data into a single unit. (Points : 2)
Inheritance
Encapsulation
Polymorphism
Composition

### Parent Inc

Parent Inc. is contemplating a tender offer to acquire 80% of Subsidiary Corporation's common stock. Subsidiary's shares are currently quoted on the New York Stock Exchange at \$85 per share. In order to have a reasonable chance of the tender offer attracting 80% of Subsidiary's stock, Parent believes it will have to offer at least \$105 per share. If the tender offer is made and is successful, the purchase will be consummated on January 1, 2013.

A typical part of the planning of a proposed business combination is the preparation of projected or pro forma consolidated financial statements. As a member of Parent's accounting group, you have been asked to prepare the pro forma 2013 consolidated financial statements for Parent and Subsidiary assuming that 80% of Subsidiary's stock is acquired at a price of \$105 per share. To support your computations, Martha Franklin, the chairperson of Parent's acquisitions committee, has provided you with the projected 2013 financial statements for Subsidiary. (The projected financial statements for Subsidiary and several other companies were prepared earlier for the acquisition committee's use in targeting a company for acquisition.) The projected financial statements for Subsidiary for 2013 and Parent's actual 2012 financial statements are presented in Table 1.

Assumptions
1.Sales will increase by 10% in 2013.
2.All sales will be on account.
3.Accounts receivable will be 5% lower on December 31, 2013, than on December 31, 2012.
4.Cost of goods sold will increase by 9% in 2013.
5.All purchases of merchandise will be on account.
6.Accounts payable are expected to be \$50,500 on December 31, 2013.
7.Inventory will be 3% higher on December 31, 2013, than on December 31, 2012.
8.Straight-line depreciation is used for all fixed assets.
9.No fixed assets will be disposed of during 2013. The annual depreciation on existing assets is \$40,000 per year.
10.Equipment will be purchased on January 1, 2013, for \$48,000 cash. The equipment will have an estimated life of 10 years, with no salvage value.
11.Operating expenses, other than depreciation, will increase by 14% in 2013.
12.All operating expenses, other than depreciation, will be paid in cash.
13.Parent's income tax rate is 40%, and taxes are paid in cash in four equal payments. Payments will be made on the 15th of April, June, September, and December. For simplicity, assume taxable income equals financial reporting income before taxes.
14.Parent will continue the \$2.50 per share annual cash dividend on its common stock.
15.If the tender offer is successful, Parent will finance the acquisition by issuing \$170,000 of 6% nonconvertible bonds at par on January 1, 2013. The bonds would first pay interest on July 1, 2013, and would pay interest semiannually thereafter each January 1 and July 1 until maturity on January 1, 2023.
16.The acquisition will be accounted for as a purchase and Parent will account for the investment using the equity method. Although most of the legal work related to the acquisition will be handled by Parent's staff attorney, direct costs to prepare and process the tender offer will total \$2,000 and will be paid in cash by Parent in 2013.
As of January 1, 2013, all of Subsidiary's assets and liabilities are fairly valued except for machinery with a book value of \$8,000, an estimated fair value of \$9,500, and a 5-year remaining useful life. Assume that straight-line depreciation is used to amortize any revaluation increment.

No transactions between these companies occurred prior to 2013. Regardless of whether they combine, Parent plans to buy \$50,000 of merchandise from Subsidiary in 2013 and will have \$3,600 of these purchases remaining in inventory on December 31, 2013. In addition, Subsidiary is expected to buy \$2,400 of merchandise from Parent in 2013 and to have \$495 of these purchases in inventory on December 31, 2013. Parent and Subsidiary price their products to yield a 65% and 80% markup on cost, respectively.

Parent intends to use three financial yardsticks to determine the financial attractiveness of the combination. First, Parent wishes to acquire Subsidiary Corporation only if 2013 consolidated earnings per share will be at least as high as the earnings per share Parent would report if no combination takes place. Second, Parent will consider the proposed combination unattractive if it will cause the consolidated current ratio to fall below two to one. Third, return on average stockholders' equity must remain above 20% for the combined entity.

If the financial yardsticks described above and the nonfinancial aspects of the combination are appealing, then the tender offer will be made. On the other hand, if these objectives are not met, the acquisition will either be restructured or abandoned.

Subsidiary Corporation Projected Financial Statements for 2013

Parent 2012 Actual Subsidiary 2013 Projected
Sales \$800,000 \$100,000
Cost of goods sold (485,000) (55,000)
Operating expenses (219,000) (10,000)
Income before taxes 96,000 35,000
Income tax expense (38,400) (14,000)
Net income 57,600 21,000

Retained earnings, January 1 23,000 14,500
Less: dividends (38,000) (7,000)
Retained earnings, December 31 42,600 28,500

Cash 36,200 19,500
Accounts receivable 39,000 13,000
Inventory 26,000 12,000
Property, plant, and equipment 673,000 213,000
Accumulated depreciation (490,000) (28,000)
Total assets 284,200 229,500

Parent 2012 Actual Subsidiary 2013 Projected
Accounts payable 44,600 21,000
Common stock * 190,000 150,000
Paid-in capital in excess of par 7,000 30,000
Retained earnings 42,600 28,500
Total liabilities and stockholders' equity 284,200 229,500

* Parent: \$12.50 par; Subsidiary: \$75 par

1.Forecast the separate financial statements of Parent Inc. Using Ms. Franklin's assumptions and Parent's 2012 financial statements, prepare pro forma 2013 financial statements for Parent Inc., assuming that the acquisition is not attempted. Support your statements with appropriate work papers and journal entries. Pro forma financial statements include a statement of operation, a statement of retained earnings, a balance sheet, and a cash flow statement.NOTE: There is a Template for Milestones 1 and 2 available for your download that is also located in Doc Sharing.
2.Adjust the separate financial statements of Parent Inc. to reflect the proposed acquisition. Adjust Parent's pro forma 2013 financial statements prepared in Milestone 1 to reflect the proposed acquisition (i.e., adjust Parent's forecasted financial statements for bond issuance, stock purchase, income from subsidiary, etc.). Support your statements with appropriate work papers and journal entries. Pro forma financial statements include a statement of operation, a statement of retained earnings, a balance sheet, and a cash flow statement.
3.Prepare a pro forma consolidated worksheet. Prepare a pro forma consolidation worksheet for Parent Inc. and its proposed subsidiary as of December 31, 2013. To ensure you are starting with the right numbers, use the solution provided to Milestone 1 for the adjusted pro forma 2013 financial statements of Parent Inc., and the projected 2013 financial statements of Subsidiary Corporation in Table 1. Show all consolidation adjusting entries, including minority interest entries.

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