This document discusses solutions to ACC 225 Week 1 discussion questions about accounting classifications and influences. It also includes questions from the STR 581 Week 4 Capstone Final Examination, covering topics like the four fundamental financial statements, cost classifications, capital budgeting techniques, and organizational forms.

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This document of ACC 225 Week 1 Discussion Questions
shows the solutions to the following problems: DQ 1: Talk to
a family member or friend regarding his/her work
environment. Is his/her company a sole proprietorship,
partnership, or corporation? Who is associated with the
accounting judgments and information? In what ways is your
family member or friend influenced by the accounting
information?
DQ 2: Explain one of the four fundamental fiscal statements,
and reply the following queries.
- For what is it usually used?
- What information is the most important?
- How does it complement one other fiscal statement?
General Questions - General General Questions
STR 581 STR581 Week 4 Capstone Final Examination, Part 2
Which of the following financial statements is concerned
with the company at a point in time?
income statement
statement of cash flows
retained earnings statement
balance sheet
2
A cost which remains constant per unit at various levels of
activity is a:
fixed cost
mixed cost
variable cost

2. manufacturing cost
3
MM Proposition 1: Dynamo Corp. produces annual cash
flows of $150 and is expected to exist forever. The company
is currently financed with 75 percent equity and 25 percent
debt. Your analysis tells you that the appropriate discount
rates are 10 percent for the cash flows, and 7 percent for the
debt. You currently own 10 percent of the stock.
If Dynamo wishes to change its capital structure from 75
percent equity to 60 percent equity and use the debt
proceeds to pay a special dividend to shareholders, how
much debt should they use?
$600
$375
$225
$321
4
Serox stock was selling for $20 two years ago. The stock sold
for $25 one year ago, and it is currently selling for $28. Serox
pays a $1.10 dividend per year. What was the rate of return
for owning Serox in the most recent year? (Round to the
nearest percent.)
32%
16%
12%
40%
5
The process of evaluating financial data that change under

3. alternative courses of action is called:
contribution margin analysis
cost-benefit analysis
double entry analysis
incremental analysis
6
What decision criteria should managers use in selecting
projects when there is not enough capital to invest in all
available positive NPV projects?
the discounted payback
the profitability index
the internal rate of return
the modified internal rate of return
7
The convention of consistency refers to consistent use of
accounting principles:
among firms
within industries
throughout the accounting period
among accounting periods
8
External financing needed: Jockey Company has total assets
worth $4,417,665. At year-end it will have net income of
$2,771,342 and pay out 60 percent as dividends. If the firm
wants no external financing, what is the growth rate it can
support?
27.3%
32.9%
25.1%

4. 30.3%
9
Which of the following is considered a hybrid organizational
form?
limited liability partnership
partnership
sole proprietorship
corporation
10
An activity that has a direct cause-effect relationship with the
resources consumed is a(n):
overhead rate
product activity
cost driver
cost pool
11
Next year Jenkins Traders will pay a dividend of $3.00. It
expects to increase its dividend by $0.25 in each of the
following three years. If their required rate of return if 14
percent, what is the present value of their dividends over the
next four years?
$11.63
$13.50
$9.72
$12.50
12
TuleTime Comics is considering a new show that will
generate annual cash flows of $100,000 into the infinite
future. If the initial outlay for such a production is $1,500,000
and the appropriate discount rate is 6 percent for the cash

5. flows, then what is the profitability index for the project?
1.90
0.90
0.11
1.11
13
Your firm has an equity multiplier of 2.47. What is the debt-to-
equity ratio?
0
1.74
0.60
1.47
14
If a company’s weighted average cost of capital is less than
the required return on equity, then the firm:
partnership
is perceived to be safe
is financed with more than 50% debt
has debt in its capital structure
15
When a company assigns the costs of direct materials, direct
labor, and both variable and fixed manufacturing overhead to
products, that company is using:
operations costing
variable costing
absorption costing
product costing
16
The major element in budgetary control is:

6. the comparison of actual results with planned objectives .
the valuation of inventories
the preparation of long-term plans
the approval of the budget by the stockholders
17
Horizontal analysis is a technique for evaluating a series of
financial statement data over a period of time:
to determine which items are in error.
that has been arranged from the highest number to the
lowest number.
to determine the amount and/or percentage increase or
decrease that has taken place .
that has been arranged from the lowest number to the
highest number.
18
Which of the following is an advantage of corporations
relative to partnerships and sole proprietorships?
lower taxes
most common form of organization
harder to transfer ownership
reduced legal liability for investors
19
The break-even point is where:
contribution margin equals total fixed costs .
total variable costs equal total fixed costs.
total sales equal total variable costs.
total sales equal total fixed costs.
20
Turnbull Corp. had an EBIT of $247 million in the last fiscal
year. Its depreciation and amortization expenses amounted
to $84 million. The firm has 135 million shares outstanding

7. and a share price of $12.80. A competing firm that is very
similar to Turnbull has an enterprise value/EBITDA multiple
of 5.40.
What is the enterprise value of Turnbull Corp.? Round to the
nearest million dollars.
$1,787 million
$1,344 million
$1,315 million
$453.6 million
21
Which of the following is considered a hybrid organizational
form?
partnership
limited liability partnership
corporation
sole proprietorship
22
The most important information needed to determine if
companies can pay their current obligations is the:
projected net income for next year
relationship between short-term and long-term liabilities
relationship between current assets and current liabilities
net income for this year
23
Gateway, Corp. has an inventory turnover of 5.6. What is
the firm’s days’s sales in inventory?
61.7
57.9

8. 65.2
64.3
24
Horizontal analysis is also known as:
vertical analysis
linear analysis
trend analysis
common size analysis
25
Which of the following presents a summary of changes in a
firm’s balance sheet from the beginning of an accounting
period to the end of that accounting period?
the statement of net worth
the statement of working capital
the statement of cash flows
the statement of retained earnings...
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