Question

14.   Excerpts from Peg Co.'s December 31, 2016 and 2015, financial statements and key ratios are presented below (all numbers are in millions):

               2016      2015

Accounts receivable (net)             $20        $16

Net sales             $115      100

Cost of goods sold           $60        55

Net income         $20        17

Inventory turnover          5.22      

Return on assets              10.3%   

Equity Multiple 2.36      

Peg Co.'s return on equity for 2018 is (rounded)

   A. 24.3%.

   B. 17.4%.

   C. 9%.

   D. 22%

15. In 2015, Solid Construction Co. (SCC) began work on a two-year fixed-price contract project. SCC uses the percentage-of-completion method to account for such projects and provides you with the following information (dollars in millions):

Accounts receivable (from construction progress billings)               $37.5

Actual construction costs incurred in 2015            $135

Cash collected on project during 2015     $105

Construction in progress, 12/31/15          $207

Estimated percentage of completion during 2015              60%

What are SCC's estimated remaining construction costs on the project at the end of 2015?

A. $135 million             C. $225 million

   B. $90 million              D. $0

16.   On July 15, 2016, Ortiz & Co. signed a contract to provide EverFresh Bakery with an ingredient-weighing system for a price of $90,000. The system included finely tuned scales that fit into EverFresh's automated assembly line, Ortiz's proprietary software modified to allow the weighing system to function in EverFresh's automated system, and a one-year contract to calibrate the equipment and software on an as-needed basis. (Ortiz competes with other vendors who offer ongoing calibration contracts for Ortiz's systems.) If Ortiz was to provide these goods or services separately, it would charge $60,000 for the scales, $10,000 for the software, and $30,000 for the calibration contract. Ortiz delivered and installed the equipment and software on August 1, 2016, and the calibration service commenced on that date. Assume that the scales, software, and calibration service are viewed as one performance obligation. How much revenue will Ortiz recognize in 2016 for this contract?

A. $37,500

   B. $90,000

   C. $0

   D. $63,000

17.   On July 15, 2016, Ortiz & Co. signed a contract to provide EverFresh Bakery with an ingredient-weighing system for a price of $90,000. The system included finely tuned scales that fit into EverFresh's automated assembly line, Ortiz's proprietary software modified to allow the weighing system to function in EverFresh's automated system, and a one-year contract to calibrate the equipment and software on an as-needed basis. (Ortiz competes with other vendors who offer ongoing calibration contracts for Ortiz's systems.) If Ortiz was to provide these goods or services separately, it would charge $60,000 for the scales, $10,000 for the software, and $30,000 for the calibration contract. Ortiz delivered and installed the equipment and software on August 1, 2016, and the calibration service commenced on that date. How many performance obligations exist in this contract?

   

   A. 0

   B. 3

   C. 2

   D. 1

18.   Nevada Boot Co. reported net income of $216,000 for its year ended December 31, 2018. Purchases totaled $152,000. Accounts payable balances at the beginning and end of the year were $36,000 and $33,000, respectively. Beginning and ending inventory balances were $44,000 and $46,000, respectively. Assuming that all relevant information has been presented, Nevada Boot would report operating cash flows of

   

   A. $211,000.

   B. $155,000.

   C. $221,000.

   D. $151,000.

19.   During its 2016 fiscal year, Imogen Co. reported before-tax income of $620,000. This amount does not include the following two items, both of which are considered to be material in amount:

Unusual Gain      $200,000

Loss on discontinued operations               (300,000)

The company's income tax rate is 40%.

Imogen Co. prepares its financial statements applying US GAAP. In its 2016 income statement, Imogen Co. would report income from continuing operations of

   

   A. $492,000.

   B. $620,000.

   C. $372,000.

   D. $312,000.

20.   Present and future value tables of $1 at 9% are presented below.

               PV of $1               FV of $1               PVA of $1            FVAD of $1          FVA $1

1             0.91743               1.09000               0.91743               1.09000               1.0000

2             0.84168               1.8810   1.75911               2.2781   2.0900

3             0.77218               1.29503               2.53129               3.5731   3.2781

4             0.70843               1.41158               3.23972               4.9847   4.5731

5             0.64993               1.53862               3.88965               6.5233   5.9847

6             0.59627               1.67710               4.45892               8.2004   7.5233

REI Inc. purchased a five-year certificate of deposit for its building fund in the amount of $220,000. How much should the certificate of deposit be worth at the end of five years if interest is compounded at an annual rate of 9%?

   

   A. $338,496.

   B. $142,985

   C. $855,723

   D. $319,000

Answer 1

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