THE 2007 Winter ACCOUNTING TRIBE - Ohio Accounting 1010
The Fall 2019 MBA Tribe
The Second Scrimmage
Rules: Version 4
No cheating
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Multiple Choice (5 points each)
1) Rush will sell you a new Gosche for $3,000. The deal is 10% down and the rest payable in four equal annual payments that include interest at 2%. You called the bank and they said that they would charge you 10% for a similar loan. How much are the payments if you take Rush’s deal?
A. $ 709.08
B. $ 472.72
C. $ 675.00 + interest
D. $ 787.87
E. Some other number
2) How much are you really paying for the Gosche under Rush’s deal?
A. $ 1,698.47
B. $ 2,247.70
C. $ 3,603.68
D. $ 3,000.00
E. $ 2,547.70
3) Ran Barniv wants to retire in twenty years. He plans on going back to Israel with his wife Edna
and to live out his life there. Being an accountant, he has figured out exactly how much
he will need each year to live comfortably. He figures it will cost him $188,000 per year.
Actuary tables tell him he will live for 33 years after he retires. If he invests his money at
6%, approximately how much does he need today to meet this goal?
A. $ 1,252,260
B. $ 2,675,283
C. $ 834,166
D. $ 884,216
E. none of these
(Above question is a tribute to a very close friend of mine, Ran Barniv, who passed on October 23.)
4) Dominique wants to have $100,000 in the bank in 10 years, bank pays interest at 12%
Compounded quarterly, how much does she need to put in today?
A. $ 32,197.32
B. $ 74,409.39
C. $ 30,655.68
D. $ 31,180.47
E. none of these
5) The current ratio measures
A. the ability of a company to pay its bills for the coming year.
B. how long it takes a company to turn its inventory into sales.
C. the ability of a company to turn sales into cash.
D. the percentage the company is earning for its shareholders.
E. the amount of cash a company is carrying as a percentage of total assets.
6) Angela will sell you a new thing for $2,500. The deal is that you pay interest only at 3% for
three years and then pay her the$2,500. You called the bank and they said that they
would charge 10% for a similar loan. How much are you really paying for the thing
under Angela’s deal?
A. $ 2,995.01
B. $ 2 ,064.80
C. $ 2,500.00
D. $ 3,292.47
E. $ 2,500 plus interest
7) Justin sold you a new Mishalanina for $8,000 payable in 5 equal payments of $1,648.32
which include interest at 1%. The bank said that the interest rate that would be
appropriate is 6%. You calculated that the Mishalanina really cost you $6,943.32. If you
are amortizing your purchase correctly, what would be the principal balance after the first
payment?
A. $ 6,571.16
B. $ 5,364.43
C. $ 5,989.332
D. $ 5,711.60
E. None of these
8) Which accounting assumption assumes that an enterprise will continue indefinitely,
A. Monetary unit assumption
B. Economic entity assumption
C. Time period assumption
D. Going concern assumption
E. None of these
9) The accounting equation is
A. Debits = Credits
B. Having the same number of asset accounts on the balance sheet as the prior year
C. Revenues - Cost of Goods Sold = Gross Margin
D. Recording all expenses incurred in generating the revenues of the period
E. Assets = Liabilities + Owners’ Equity
10) Treasury Stock is
A. sometimes an asset
B. a liability account
C. an owners’ equity account
D. a contra dividend
E. an expense on the date purchased
Use the Problem Sheet for the next 6 questions.
11) At December 31, 2018 the book value per share was approximately
A. $ 16.55
B. $ 71.33
C. $ 77.82
D. $ 1.00
E. some other number
12) For 2018, return on equity was approximately
A. 21.94%
B. 21.26%
C. 23.76%
D. 16.41%
E. some other number
13) For 2018, the return on assets was approximately
A. 21.94%
B. 18.64%
C. 14.44%
D. 14.68%
E. some other number
14) At December 31, 2018, the Debt to Equity Ratio was approximately
A. 22.83%
B. 37.92%
C. 61.88%
D. 47.20 %
E. None of the above
15) At December 31, 2018, the inventory turn was approximately
A. 4.44
B. 5.00
C. 5.71
D. 10.00
E. 11.25
16) For 2018, the average collection period in days was approximately,
A. 30.42
B. 12.00
C. 33.46
D. 32.16
E. 11.25
17) Alexis wants to buy a used Dakota truck. She is trying to decide between the
following deals. She called the bank and they told you they would loan her the money
at a 6% interest rate. She visited 3 different used truck lots and they made the following offers:
Deal #1 – Shemsu’s Special Trucks has offered her the truck for $7,500 with the following terms. $500 down and interest only payments of 2% per year for 4 years. At the end of the four years, you pay him the $7,000.
Deal #2 – Daemon’s Dakota Sales has offered her the same truck for $6,500 payable with no money down and the rest in three equal annual payments, which include interest at 4%.
Deal #3 – Gaza’s Great Used Trucks has offered her the truck for $6,200 cash.
Rank order the deals from best to worst.
A. Deal 2, Deal 3, Deal 1
B. Deal 1, Deal 3, Deal 2
C. Deal 3, Deal 1, Deal 2
D. Deal 1, Deal 2, Deal 3
E. Deal 3, Deal 2, Deal 1
18) The return on assets ratio measures
A) the ability of a company to pay its bills for the coming year.
B) how well a company uses its assets to create profits.
C) the ability of a company to turn sales into cash.
D) the percentage the company is earning for its shareholders.
E) none of the above
19) Which of the following changes describes the payment of $3,000 in cash for dividends
declared last month by Hughes Company?
A. Assets and owners' equity decrease by $3,000
B. Assets and liabilities decrease by $3,000
C. Liabilities increase and owners’ equity increases by $ 3,000
D. Liabilities increase and owners’ equity decreases by $ 3,000
E. No changes in total assets, liabilities, or owners' equity
Use the following information for the next five questions
Hailey’s Hankies, Inc. (HHI) issued a 10 year, $100,000 face bond with a 10% interest rate. The
bond pays the interest for 10 years and then pays the principal of $100,000 at the end of
the 10th year.
20) If the current interest rates are 10% at the time of issue, on the date of issue, HHI will receive
A. $ 100,000.00
B. $ 91,954.77
C. $ 73,734.81
D. $ 88,699.55
E. None of the above
21) If the current interest rates are 12% at the time of issue, on the date of issue, HHI will receive
A. $ 104,986.81
B. $ 113,420.16
C. $ 88,699.55
D. $ 100,000.00
E. None of the above
22) If the current interest rates are 8% at the time of issue, on the date of issue, HHI will receive
A. $ 104,986.81
B. $ 113,420.16
C. $ 77,399.11
D. $ 100,000.00
E. None of the above
23) If the HHI bonds are sold to yield 12%, they will be said to be sold at:
A. a discount
B. a premium
C. par
D. the coupon rate
E. None of the above
24) If the HHI bonds are issued to yield 12%, the face interest rate of 10% is also known as:
A. The effective rate
B. The coupon rate
C. The premium rate
D. The discount rate
E. None of the above
25) Valentina is buying all the assets and assuming all the liabilities of Koch Corporation. The following information is available for Koch’s at the date of the purchase:
Accounts Receivable 250,000 Accounts payable 150,000
Inventory 100,000 Note Payable 100,000
Land 300,000 Common Stock 100,000
Retained Earnings 300,000
The accounts receivable are worth $200,000, the inventory is worth $80,000 and the land is worth $500,000. The Accounts Payable are worth book value. Additionally, the Note Payable debt is payable interest only at 10% per year for the next 5 years and then the principal is due. The current interest rate for similar debt is 12%. Valentina will pay $660,000 for Koch. How much of the purchase price will be goodwill?
A. $ 130,000.00
B. $ 134,804.45
C. $ 127,790.45
D. $ 122,790.45
E. Some other number which is not here
26) A 7-year, $1,000,000 zero coupon bond for Schmitz Co., is priced to yield 8%. The amount Schmitz will receive when it is issued is:
A. $ 543,933.74
B. $ 1,000,000.00
C. $ 583,490.40
D. $ 547,034.24
E. None of the above
27) Assume a 10%, 5 year zero, $100,000 face was sold at the beginning of the year for $62,092.13. The interest expense for the second year would be
A. $ 12,418.42
B. $ 6,209.21
C. $ 6,830.13
D. $ 10,000.00
E. Some other number
Extra Credit
.7) e right thing... 44,000
28) The word obdurate means
A. Avoid with a passion
B. Stubborn
C. A comparison
D. Living through another
E. A bad thing
Problem Sheet for Questions 11 – 16
Carolyn’s Yacek Company, Inc.
Income Statement
For the Year Ended December 31, 2018
Sales $ 900,000
Cost of Goods Sold 400,000
Gross Margin 500,000
Operating Expenses
Wage Expense $290,000
Rent Expense 36,000
Depreciation Expense 30,000
Bad Debt Expense 8,000
Total Operating Expenses 364,000
Operating Income 136,000
Other Revenues &
Interest Expense < 6,000>
Taxable Income 130,000
Tax Expense 39,000
Net Income $ 91,000
EPS $ 1.65
Carolyn’s Yacek Company, Inc.
Balance Sheet
December 31,
2018 2017 2018 2017
Assets Liabilities
Current Assets Current Liabilities
Cash $ 130,000 $ 170,000 Accounts Payable $ 78,000 $ 139,000
Accounts Receivable 80,000 85,000 Wages payable 9,000 8,000
Less: Allowance for Interest Payable 3,000 5,000
Doubtful Accounts (10,000) (5,000) Taxes Payable 12,000 10,000
Net Accounts Receivable 70,000 80,000 Current Portion – Long-term
Inventory 90,000 70,000 Debt 10,000 10,000
Total Current Assets 290,000 320,000 Total Current Liabilities 112,000 172,000
Long-Term Debt
Property and Equipment Note Payable 90,000 100,000 Equipment 420,000 340,000 Total Liabilities 202,000 272,000 Less: Accumulated
Depreciation ( 90,000) ( 60,000) Owners’ Equity
Net Property & Equipment 330,000 280,000 Common Stock ($1 Par) 6,000 5,000
Other Assets Paid In Capital 54,000 45,000
Security Deposit 10,000 10,000 Retained Earnings 368,000 288,000
Total Owners’ Equity 428,000 338,000
Total Liabilities and
Total Assets $ 630,000 $ 610,000 Owners’ Equity $ 630,000 $ 610,000
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