Cisco Inc. reported the following in its income statement for the year ended July 26, 2008: Basic earnings per share of $1.35 and diluted earnings per share of $1.31. 5,986 million weighted average shares were outstanding during the year. What approximate net income, did the company report for 2008? Choose one answer. a. $8,081 million b. $7,842 million c. $15,923 million d. $7,962 million e. None of the above Question 2 Marks: --/2 Intelligentsia Corp. recorded restructuring charges of $78,514 thousand during fiscal 2009 related entirely to anticipated employee separation payments. Intelligentsia had never before incurred restructuring charges. At the end of the year, the companys balance sheet included a restructuring accrual of $9,881. The cash flow effect of Intelligentsias restructuring during fiscal 2009 was: Choose one answer. a. $9,881 thousand b. $78,514 thousand c. $68,633 thousand d. $88,395 thousand e. None of the above Question 3 Marks: --/2 Mariposa Imports recorded a restructuring charge of $5.4 million during fiscal 2009 related entirely to the closing of its California based operations in San Diego and in Tijuana, Mexico. The companys financial statement footnotes indicated that expected employee separation payments amounted to $4.2 million and that fixed asset write-downs accounted for the remainder. Mariposa had never before incurred restructuring charges. At the end of the year, the companys balance sheet included a restructuring accrual of $900,000. The cash flow effect of Mariposas restructuring during fiscal 2009 is: Choose one answer. a. $0 (there was no cash flow effect in 2009) b. $900,000 c. $3,300,000 d. $4,200,000 e. $5,400,000 Question 4 Marks: --/2 Sams Club (part of the WalMart consolidated operations) collects annual non-refundable membership fees from customers. When should Sams Club recognize revenue for these membership fees? Choose one answer. a. immediately when cash is received because the fees are nonrefundable b. evenly over the membership year c. evenly over the current fiscal year d. at the end of the membership year when Sams has discharged its obligation to the customer e. pro rata over the customers actual purchasing pattern Question 5 Marks: --/2 Assume that Quinn Jewelry Co. uses the LIFO inventory costing method for both tax and financial reporting purposes. The balance sheet reports inventories at $102 million. Then, in its footnotes, the company reports that inventories would have been $133 million had the company used the FIFO method. The difference between these two numbers ($31 million) is referred to as: Choose one answer. a. LIFO reserve b. LIFO conformity rule c. LIFO holding gain d. Inventory temporary difference e. none of the above Question 6 Marks: --/2 At what amount will accounts receivable be reported on the balance sheet if the gross receivable balance is $20,000 and the allowance for uncollectible accounts is estimated at 10% of gross receivables? Choose one answer. a. $2,000 b. $18,000 c. $20,000 d. $22,000 Question 7 Marks: --/2 CarMax Inc. reports sales of $6,973,966 thousand and cost of sales of $6,005,796 thousand for the year ended February 28, 2009. The gross profit for the year is: Choose one answer. a. $968,170 b. $12,979,762 c. 13.9% d. 16.1% e. there is not enough information to determine gross profit Question 8 Marks: --/2 In times of falling prices, choosing LIFO over FIFO as an inventory cost method would affect the financial statements as follows: Choose one answer. a. Cost of goods sold will be higher and ending inventory will be lower b. Cost of goods sold will be lower and ending inventory will be lower c. Cost of goods sold will be higher and ending inventory will be higher d. Cost of goods sold will be lower and ending inventory will be higher e. none of the above Question 9 Marks: --/2 Other than raw materials and manufacturing overhead, what is the third component of inventories for manufacturing companies? Choose one answer. a. Direct labor b. Indirect labor c. Equipment cost d. Processing cost e. All of the above Question 10 Marks: --/2 The 2008 financial statements of Walgreens reported the following information (in millions). Walgreens Co. 2008 2007 Cost of sales $42,391 $38,518 Inventories, net $ 7,249 $ 6,790 LIFO reserve $ 1,067 $ 969 The 2008 average inventory days outstanding is: Choose one answer. a. 53.2 days b. 60.4 days c. 62.4 days d. 71.6 days e. none of the above Question 11 Marks: --/2 The 2008 financial statements of Willamette Valley Vineyards include the following footnote: Note 4. Property and Equipment 2008 2007 Land and improvements $2,589,560 $ 959,064 Winery building and hospitality center 4,969,758 4,848,249 Equipment 5,352,835 4,617,040 12,912,153 10,424,353 Less accumulated depreciation (6,842,745) (6,224,198) $6,069,408 $4,200,155 Depreciation expense $ 620,180 $ 576,515 The average useful life of Willamettes depreciable assets at the end of fiscal 2008 is: Choose one answer. a. 9.8 years b. 10.4 years c. 16.7 years d. 20.8 years e. None of the above Question 12 Marks: --/2 Credit analysis concerns which of the following? Choose one answer. a. The price of a companys stock b. The ability of a company to consistently pay dividends c. The probability a company will make timely payments d. An assessment of a companys credit-granting policies. e. None of the above Question 13 Marks: --/2 In general, how do credit analysts determine the risk-free rate? Choose one answer. a. The average corporate yield b. The yield on U.S. Government borrowings c. The rate defined by the largest U.S. banks d. The weighted-average corporate yield based on the preceding four quarters e. None of the above Question 14 Marks: --/2 In January 2009, Vivendi announced a 1 billion bond issuance. The bonds have a coupon rate of 7.75% payable semi-annually. According to the companys website, the bonds have been assigned credit ratings of BBB (stable outlook) by Standard and Poors, Baa2 (stable outlook) by Moodys, and BBB (stable outlook) by Fitch. Which of the following is not true? Choose one answer. a. The yield on these bonds would have been lower if Standard and Poors, Moodys, and Fitch had assigned higher credit ratings. b. The periodic interest payment will be 38.750 million. c. The coupon rate on these bonds would have been higher if Standard and Poors, Moodys, and Fitch had assigned lower credit ratings. d. The periodic interest expense will depend on the bonds yield. e. None of the above Question 15 Marks: --/2 Keskek Corp. sells $100,000 of bonds to private investors. The bonds have a 9% coupon rate and interest is paid semi-annually. The bonds were sold to yield 8%. What periodic interest payment does Keskek make? Choose one answer. a. $4,000 b. $8,000 c. $9,000 d.$4,250 *e. None of the above Question 16 Marks: --/2 Selected recent balance sheet and income statement information for American Eagle Outfitters follows: (in thousands) 2008 Year-end accounts payable $ 152,068 Average accounts payable 154,998 Sales 2,988,866 Cost of goods sold 1,814,765 Accounts payable turnover for 2008 is: Choose one answer. a. 11.93 b. 19.65 c. 11.71 d. 19.28 e. None of the above Question 17 Marks: --/2 Selected recent balance sheet and income statement information for Gap, Inc. follows: (in millions) 2008 Year-end accounts payable $ 975 Average accounts payable 990 Sales 14,526 Cost of goods sold 9,079 Accounts payable days outstanding for 2008 is: Choose one answer. a. 39.2 days b. 24.5 days c. 39.8 days d. 24.9 days e. None of the above Question 18 Marks: --/2 Which of the following does not affect the current liabilities section of the balance sheet? Choose one answer. a. Purchase of inventory on credit b. Wages owning to employees but not yet paid c. Insurance bill to be paid next month d. Sale of goods on credit e. A probable legal obligation, due within 12 months Question 19 Marks: --/2 Which of the following would not require the company to record an accrual on the balance sheet? Choose one answer. a. The company owes $20,000 in wages to its employees for the previous two weeks. b. Interest will be paid when a note payable matures in the following accounting period c. Management believes a lawsuit against the company is meritless because they have never had a single complaint about dangerous side effects of their drug in two years. d. The company knows that they will be fined for pollution as a result of their manufacturing process and can estimate the amount of the obligation. e. None of the above. Question 20 Marks: --/2 Which of the following does not represent a current liability? Choose one answer. a. Accrual of taxes payable b. Short-term loan c. Purchase of equipment on credit d. Bond issue e. None of the above Question 21 Marks: --/2 Which of the following business factors does not play a role in determining a companys credit rating? Choose one answer. a. Industry characteristics b. Capital structure c. Management d. Corporate marketing e. Profitability Question 22 Marks: --/2 Which of the following does Moodys not consider in deriving the credit rating of a company? Choose one answer. a. Profitability ratios b. Loan covenants c. Solvency ratios d. Collateral e. None of the above Question 23 Marks: --/2 Brown Inc. reported retained earnings of $74,550 on December 31, 2008. During the year, Brown recorded net income of $35,123 and paid dividends of $10,389. The company had no other transactions that affected retained earnings. What must retained earnings have been on December 31, 2007? Choose one answer. a. $39,816 b. $49,816 c. $84,939 d. $95,328 e. None of the above Question 24 Marks: --/2 Convertible preferred stock conveys what additional benefit over common stock? Choose one answer. a. Convertible preferred stock has a fixed dividend yield b. Unpaid dividends on convertible preferred stock are paid before common stock dividends c. Convertible preferred stock has a senior claimant position in bankruptcy d. Convertible stock can be converted into the companys debt security e. All of the above Question 25 Marks: --/2 In November 2004, Kraft Foods sold its confectionery business to Wrigley for $1.85 billion cash, which consisted primarily of the following key candy brands: Lifesavers, Altoids, and Crme Savers. This deal is referred to as a: Choose one answer. a. Split-off b. Sell-off c. Spin-off d. Carve-off e. None of the above Question 26 Marks: --/2 Which of the following should not be included in accumulated other comprehensive income? Choose one answer. a. Minimum pension liability b. Currency translation adjustment c. Unrealized gains and losses on available-for-sale securities d. Unrealized gains and losses on trading securities e. None of the above. Question 27 Marks: --/2 Which one of the following items is a not component of contributed capital? Choose one answer. a. Preferred stock b. Retained earnings c. Common stock d. Additional paid-in capital e. All of the above Question 28 Marks: --/2 Why might a company repurchase its own stock? Choose one answer. a. It believes that the market undervalues its shares b. To offset dilutive effects of employee stock options granted c. To recognize an economic gain when the treasury shares are later sold for a profit. d. To improve earnings per share by reducing the denominator. e. All of the above