STR 581 Capstone Final Exam Part 2 – Question and Answers


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STR 581 Capstone Final Exam Part 2 (Question and Answers)

  1. 1.Rick, a certified accountant, is asked to conduct an audit of the financial statements of Schenk Ltd. However, the company refuses to cooperate with Rick and does not provide him with the necessary information. This makes it impossible for him to carry on with the audit. In this scenario, which of the following opinions is Rick most likely to express?​
  2. Wilande Inc., a leading apparel store, acquires Parewa Inc., an energy drink manufacturer. This is an example of a __________.​Top of Form
  3. Darrin Corporation is considering a proposal to purchase a new piece of equipment. The cost of the equipment is $16,611. The equipment is estimated to provide an annual cash flow of $3,000 for the next nine years. The company has a required rate of return of 15%. Calculate the internal rate of return (IRR), and interpret the results. Use the present value of an annuity table.​
  4. Rinetin Corporation has been falsifying its financial statements for the past year. The staff in the accounting department of the company have been fake employee IDs and recording payments on the company’s payroll. The funds sent to these fake employees are then redirected to the company’s bank accounts. When Rinetin Corporation is audited, the auditors fail to discover this fraud because of their negligence. Months later, a whistle-blower alerts the appropriate authorities about the company’s deceptive practices. In this scenario, the accountants who conducted the audit of the company will be held civilly liable under __________.​
  5. Gina and Samantha are discussing the Sarbanes-Oxley Act of 2002. Gina argues that although the act requires the management of a company to explicitly declare in writing that a company’s financial statements accurately and fairly represent the financial results, no steps have been taken to ensure that this rule is followed. Which of the following statements weakens Gina’s argument?​
  6. Yalken Corporation is considering the purchase of a new machine. The cost of the machine is $250,000. The cash flows for five years are given below.
  • ​ Year 1 Year 2 Year 3 Year 4 Year 5
  • Cash flows: $84,790 $102,500 $70,580 $64,760 $115,700
  • ​The company is in the 35 percent tax bracket. Assuming that the cost of capital is 12%, calculate the net present value.​
  1. The capital structure for Purnen Corporation is given below. Calculate the weighted average cost of capital (WACC).
  • Debt: 10%, 1,500 bonds, 20 years to maturity, selling for 105% of par. The bonds have a $1,000 par value each and make annual payments.
  • Common stock: 3,000,000 shares outstanding at a par value of $1, selling for $35 a share. The expected dividend is $2.8, and the growth rate is 10%.
  • Preferred stock: 5,000 shares of 6% preferred stock outstanding, selling for $103 a share and having a par value of $100. The flotation cost is $3, and the dividend is $9.
  • The corporate tax rate is 35%.
  1. Susan is a financial manager at Rvetz Corporation. She wants to evaluate the efficiency with which the company is using its resources. For this reason, she needs to calculate the operating margin from the information given below.
  • Net sales $3,500,000
  • Cost of goods sold 1,750,000
  • Office rent 54,500
  • Selling expenses 350,000
  • Interest expense 50,000
  • Other operating expenses 88,500
  • Which of the following will be the result
  1. Robert is a manager of a small-scale firm. He needs to decide whether the firm has sufficient resources to meet its short-term obligations. Calculate the ratio that Robert needs to calculate from the information given below.
  • Cash and cash equivalents $1,057,600
  • Accounts receivables 1,556,500
  • Short-term investments 770,300
  • Other current assets 420,500
  • Accounts payable 995,700
  • Long-term debt 528,000
  • Short-term debt 176,000
  • Other current liabilities 2,495,700
  1. Jonah’s Restaurant reports net income of $20,000 during the year 2015. It distributes a dividend of $6,000 to its shareholders. Calculate the retention ratio.​
  2. Ray is an entrepreneur who has recently started his own venture. Since he does not have the resources to hire a financial expert, he has to manage the company’s finance in addition to managing the company. He needs to calculate the working capital of his business. From the following information, calculate the net working capital.
  • Cash $20,000
  • Accounts receivable 12,000
  • Accounts payable 14,500
  • Inventory 32,000
  • Accrued expenses 6,500
  1. The following information is given for Rafea Corporation.
  • ​Rafea Corporation
  •   Balance Sheet
  • December 31, 2016
  • Assets Liabilities
  • Cash $ 20,300 Accounts payable $ 82,400
  • Marketable securities 33,000 Bonds payable 215,300
  • Accounts receivable 74,200 Common stock 78,900
  • Inventory 82,400 Paid-in-capital 37,600
  • Fixed assets 258,500 Retained earnings 54,200
  • ​ 468,400 ​ 468,400
  • Which of the following can be inferred from the data?​
  1. Jose, a financial expert of Cerione Ltd., analyzes the data given below. What conclusion is he likely to arrive at?
  • ​Sales $161,000
  • Cost of goods sold 110,000
  • Gross margin $ 51,000
  • Total selling and administrative expenses 39,500
  • Net operating income $ 11,500
  • Interest expenses 2,170
  • Net income before taxes $ 9,330
  • Income tax (30%) 2,799
  • Net income $ 6,531​
  1. The financial manager of a company needs to measure how efficiently the company’s total assets are being used to generate sales. From the information given below, calculate the relevant ratio he needs for this purpose.
  • ​Cash $220,000
  • Accounts receivable 1,800,000
  • Inventory 950,000
  • Plant and equipment 1,330,000
  • Sales 10,000,000
  1. Tanial Inc. has $950,000 in assets and $400,000 in debt. If it earns net income of $350,000, calculate the return on assets​
  2. Mark wants to withdraw $6,500 at the end of three years and $8,000 at the end of five years. He wants to do this in such a way that the account balance drops to zero after the last withdrawal. Assuming that the interest rate is 5%, how much money should Mark deposit today to ensure that his needs are met?​ str 581 capstone final exam
  3. Raul needs to choose one alternative from the four alternatives given below. Applying the concept of time value of money, which of the following alternatives should he select?​
  4. Calculate the total equivalent units for materials from the information given below.
  • ​ Percentage complete
  • ​ Units Materials Conversion
  • Work in process, June 1 1,100 60% 35%
  • Units started into production during June 22,500 ​ ​
  • Units completed and transferred to the next department 21,800 100% 100%
  • Work in process, June 30 1,800 50% 15%
  1. Intanke Inc. manufactures vacuum cleaners. The following information is available for the company.
  • ​ Per unit cost
  • Sales $550
  • Variable expenses 370
  • The fixed expenses are $95,000. Calculate the net operating income for 750 vacuum cleaners.
  1. Calculate depreciation from the following information.
  • ​Accounting profit break-even point 2,871 units
  • Fixed costs $4,083,200
  • Sales price $42 per unit
  • Total variable costs $2,600
  • Number of units 100
  1. Which of the following scenarios illustrates a violation of the Sarbanes-Oxley Act
  2. Josh and Mike are discussing the pros and cons of the Sarbanes-Oxley Act. While Josh argues that the act has a high compliance cost, Mike is of the opinion that companies can easily avoid these costs by choosing to go dark and delisting their shares from exchanges. Josh, in turn, states that such a choice comes with its own drawbacks. Which of the following statements best supports Josh’s argument?​ str 581 capstone final exam
  3. Blanrin Inc. currently produces all the components for the products it makes and sells. The total costs of producing a component,
  • Component Y, for one of its products are given below. The annual requirement of Component Y is 2,200 unit $19,800
  • Direct materials $19,800
  • Direct labor 11,000
  • Variable manufacturing overhead 15,400
  • Fixed manufacturing overhead 13,200
  • An external supplier offers to sell the component to Blanrin Inc. for $23 per unit. After analysis, it is found that if the company buys the component instead of producing it, all of its variable costs and $8,200 of its fixed overhead costs will be eliminated. If Blanrin Inc. decides to buy the component instead of manufacturing it, how will the decision affect the company? str 581 capstone final exam
  1. Calculate the direct labor quantity variance from the information given below.
  • ​Standard rate $13 per hour
  • Standard hours 4,300 hours
  • Actual hours 5,000 hours
  • Actual rate $11.50 per hour​
  1. Bob is a project leader in a software company. He assigns tasks to his team members, explains how to execute the tasks, and sets weekly goals for them. He convenes meetings to discuss the progress of projects at each stage of execution and does not bother about the personal issues of his team when he evaluates any dip in their performance with respect to the targets he set. In accordance with House’s path-goal theory, which of the following leadership behaviors does Bob display?​ str 581 capstone final examstr 581 capstone final exam