Assume US GAAP to answer this question.

In 2017, $2 million in wages were earned and no cash wages were paid.

In 2018, $8 million in wages were earned and $7 million in cash wages were paid.

Cash wages were used to first pay wages earned in 2017 with the remainder used to pay wages earned in 2018.

Any earned but unpaid wages will be paid during the first quarter of 2019.

Using only the information provided, which of the following statements is most accurate?

A. Liabilities increased by $1.0 million in 2018

B. Liabilities increased by $3.0 million in 2018

C. Assets decreased by $5.0 million in 2018

D. Retained earnings decreased by $10.0 million in 2018

E. Retained earnings decreased by $7.0 million in 2018

2.

A company issued its CEO 100,000 shares of restricted stock in the beginning of 2018 that are restricted for two years. The current share price is $10.

Based on the information provided, which of the following statements is true?

A. An unearned compensation liability in the amount of $1 million is created at the grant date

B. An unearned compensation asset in the amount of $1 million is created at the grant date

C. Stockholders' equity increases by $1 million at the grant date

D. An unearned compensation contra equity account in the amount of $500,000 is recognized at the grant date

E. Stockholders' equity is unchanged at the grant date

3.

A company issued its CEO 100,000 stock options in the beginning of 2018 that will vest equally over 2 years. Assume the following:

The share price at grant date is $10 per share

The option exercise price is $10 per share

The fair value of each option at grant date is $5 per share

No options are exercised until after year 2

Based only on the information provided, which of the following statements is true?

A. Stockholders' equity increases by $1,000,000 at the grant date

B. Stockholders' equity increases by $500,000 at the grant date

C. Stockholders' equity increases by $250,000 at the grant date

D. Stockholders' equity decreases by $250,000 at the end of year 1

E. Stockholders' equity does not change at the end of year 1

4.

A company recorded the following activities in 2018:

$5 million in capital expenditures were made in 2018

$4 million in depreciation expense was recognized in 2018

$3 million in affiliate income recognized on the income statement from a 25% investment in an affiliate

$1 million of insurance proceeds were received in cash due to hurricane damage on the companys corporate headquarters

Based only on the information provided, calculate the impact of the activities described above on the companys 2018 operating income and cash flows (ignore taxes).

A. Operating income decreased by $1.0 million. Cash flows decreased by $4.0 million.

B. Operating income decreased by $5.0 million. Cash flows increased by $6.0 million.

C. Operating income decreased by $4.0 million. Cash flows decreased by $4.0 million.

D. Operating income decreased by $6.0 million. Cash flows decreased by $1.0 million.

E. Operating income decreased by $6.0 million. Cash flows decreased by $3.0 million.

5.

A company reported gross profit of $20 million in 2018. In addition, it recorded the following activities:

Sales and marketing expenses were $5 million.

Interest income was $2 million.

Sold equipment for $5 million that had a net book value of $9 million.

$3 million in preferred stock issuance.

Companys tax rate is 40%.

Calculate the companys net income.

A. $5.4 million

B. $6.0 million

C. $6.8 million

D. $7.2 million

E. $7.8 million

6.

The next two questions use the following data from TGX Global, a heavy equipment manufacturer (this information will be repeated on the next question):

TGX Global sells excavators, with an average sale price of $500,000 per excavator.

TGX received new orders for 90 excavators in 2018.

TGX produced & delivered 120 excavators in 2018: 50 excavators were ordered in 2017 and the rest (70 excavators) were ordered in 2018.

TGX received payment for 110 excavators.

TGX began selling 1-year maintenance services contracts for $50,000 per excavator in 2018, which begin after the excavator is delivered. Contracts were sold on 50% of all excavator orders made in 2018 (no contracts were sold on orders placed in 2017).

Assume all excavators delivered in 2018 are delivered at year end, calculate TGXs 2018 revenue based on the transactions described above.

A. $45.0 million

B. $55.0 million

C. $60.0 million

D. $61.0 million

E. $66.0 million

7.

This question uses the same TGX Global data as the previous question, repeated below:

TGX Global sells excavators, with an average sale price of $500,000 per excavator.

TGX received new orders for 90 excavators in 2018.

TGX produced & delivered 120 excavators in 2018: 50 excavators were ordered in 2017 and the rest (70 excavators) were ordered in 2018.

TGX received payment for 110 excavators.

TGX began selling 1-year maintenance services contracts for $50,000 per excavator in 2018, which begin after the excavator is delivered. Contracts were sold on 50% of all excavator orders made in 2018 (no contracts were sold on orders placed in 2017).

Assume now that instead of the revenue recognized in the previous question, TGX recognized $50 million in revenue for 100 excavators (and assume no maintenance contract revenue was recognized). In addition, the following occurred in 2018:

TGX recognized $2 million in shipping and delivery costs for its excavators.

TGX recognized $6 million in direct labor expenses.

TGX recognized $3 million in commissions paid to its salespeople for selling the excavators.

TGX purchased $60 million in raw materials in 2018, of which $50 million was in cash.

Raw materials required to assemble each excavator cost $300,000 per excavator.

Calculate TGXs 2018 gross profit based on the transactions described above.

A. $(15.0 million)

B. $9.0 million

C. $12.0 million

D. $14.0 million

E. $18.0 million

8.

Fairview Corporation recorded the following in 2018:

After-tax net income was $20 million in 2018.

The actual share count at the beginning of the year was 10.0 million.

Fairview repurchased 2 million shares at $12/share in the middle of 2018.

Fairview issued preferred dividends of $3 million and common dividends of $2 million.

Fairview issued 4 million stock options in 2018 that begin to vest in 2019.

Calculate 2018 basic earnings per share (EPS).

A. 1.25

B. 1.67

C. 1.89

D. 2.22

E. 2.25

9.

Dynamic Resources reported the following information for year ending June 30, 2016 (values in millions):

Plant, Property & Equipment, gross	$3,000
Accumulated Depreciation	1,400
Plant, Property & Equipment, net	1,600
Salvage Value	200

The company also reported the following transactions on the first day of fiscal 2017:

Sale of asset with gross PP&E of $600 million for $500 million and useful life of 3 years and no salvage value. Recorded a gain on sale of $300 million.

Write off of asset with gross PP&E of $400 million. Asset was purchased 3 years ago with original useful life of 4 years and salvage value of $200 million.

Purchase of new equipment for $1,400 with useful life of 8 years and no salvage value.

Assuming the remaining useful life of other equipment is 10 years on a straight-line basis, what is the net PP&E as of June 30, 2017?

A. $2,125 million

B. $2,260 million

C. $2,300 million

D. $2,435 million

10.

Information about the assets of TAP Holdings is provided below:

TAP purchased land on January 1, 2013 for $250 million. As of January 1, 2018, the fair value was estimated to be $290 million.

TAP purchased a trademark on January 1, 2016 for $150 million. As of January 1, 2018, the fair value was estimated to be $80 million.

TAP acquired a company on Jun 5, 2016 and recognized $880 million in goodwill as a result. A $140 million goodwill impairment was recognized at year end 2017.

Assume a useful life of 5 years and the straight-line method for any depreciable or amortizable assets above.

What is the total value of these assets reported on TAPs balance sheet as of January 1, 2018?

A. $1,070 million

B. $890 million

C. $1,170 million

D. $1,140 million