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1. STR 581 Week 4 Individual Capstone Final
Exam Part 2 NEW
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STR 581 Week 4 Individual Capstone Final
Exam Part 2 NEW
1 Intanke Inc. manufactures vacuum cleaners.
The following information is available for the
company.
Per unit cost
Sales $550

2. Variable expenses 370
The fixed expenses are $95,000. Calculate the
net operating income for 750 vacuum
cleaners.
A. $135,000
C. $35,000
D. $40,000
2 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

3. 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 __________.
A. Section 32(a) of the Securities Exchange
Act of 1934
B. Section 24 of the Securities Act of 1933
C. Section 11(a) of the Securities Act of
1933
D. Section 10(b) of the Securities Exchange
Act of 1934
3 Jonah’s Restaurant reports net income of
$20,000 during the year 2015. It distributes a

4. dividend of $6,000 to its shareholders.
Calculate the retention ratio.
A. 50%
B. 30%
C. 80%
D. 70%
4 Wilande Inc., a leading apparel store,
acquires Parewa Inc., an energy drink
manufacturer. This is an example of a
__________.
A. congeneric merger
B. horizontal merger
C. conglomerate acquisition

5. D. vertical acquisition
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?
A. An individual who is employed by a
certified public accounting firm that audits a
company can be employed as the CEO or CFO
of that company to ensure the fairness of its
financial statements.
B. If a company’s financial statements
contain misrepresentations, the CEO and CFO
run the risk of serving time in jail.

6. C. The Sarbanes-Oxley Act prohibits a
public company from granting personal loans
to any of its executive officers or directors
D. If a CEO or CFO of a company fails to
comply with the provisions of the act, he or
she is subject to a fine up to $10,000 and one
year in jail.
6 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

7. Accounts payable 14,500
Inventory 32,000
Accrued expenses 6,500
A. $23,000
B. $49,500
C. $11,000
D. $43,000
7 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 units.

8. 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?
A. Its net income will increase by $8,200.
B. Its net income will increase by $3,800.
C. Its net income will decrease by $3,800.

9. D. Its net income will increase by $4,400.
8 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?
A. Adverse opinion
B. Disclaimer of opinion
C. Unqualified opinion
D. Qualified opinion
9 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

10. 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?
A. 38.4%
B. 35.9%
C. 85.9%
D. 64.1%

11. 10 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
A. $706,200
B. $510,400
C. $812,000
D. $1,483,200
10 Calculate depreciation from the following
information.

12. 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
A. $706,200
B. $510,400
C. $812,000
D. $1,483,200
11 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

13. 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.
A. $314,452
B. $64,463
C. $(64,452)
D. $204,394
12 Which of the following scenarios illustrates
a violation of the Sarbanes-Oxley Act?
• Natalie is assigned to audit a company’s
financial records. She finds it impossible to
arrive at a conclusion and issues a disclaimer
of opinion.

14. • Ronan, the CFO of Puvane Inc., is
granted an unsecured loan by the company to
pay his son’s medical bills.
• Tina, an accountant, fails to detect a
fraud in the financial statements of the
company she audits.
• Wong is a member of the audit
committee of a public corporation. However,
he is an external member and was not
employed by the corporation.
13 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
A. 63.6%
B. 36.8%
C. 271.4%
D. 87.5%

15. 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
A. Assets turnover ratio of 0.3
B. Debt to assets ratio of 3.4
C. Assets turnover ratio of 2.3

16. D. Debt to assets ratio of 0.4
15 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

17. A. The company does not have adequate
resources to pay the interest due to creditors.
B. The company’s gross margin is 20
percent.
C. The company has sufficient resources to
pay the interest due to creditors.
D. The company’s earnings before interest
is the same as its earnings after taxes.
16 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.

18. 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%.
A. 8.4%
B. 16.5%
C. 9.96%
D. 13.65%
17 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?

19. A. Receiving $130 at the end of two years
at an interest rate of 8% compounded
annually
B. Receiving $100 at the end of two years
at an interest rate of 9% compounded
annually
C. Receiving $150 at the end of three years
at an interest rate of 7% compounded
annually
D. Receiving $90 at the end of one year at
an interest rate of 5% compounded annually
18 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

20. following statements best supports Josh’s
argument?
A. Companies that choose to go dark
typically have only limited access to capital
markets.
B. Mandatory annual audits by
independent auditors are carried out
regardless of whether or not companies
choose to go dark.
C. Executives of companies that choose to
go dark are required to certify the accuracy of
financial statements.
D. Companies that go dark are required to
file annual reports.
19 Robert is a manager of a small-scale firm.
He needs to decide whether the firm has

21. 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
A. Current ratio of 0.92
B. Current ratio of 1.04
C. Debt ratio of 0.91

22. D. Debt ratio of 1.26
20 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?
A. $11,883.15
B. $653.26
C. 5,614.94
D. $6,268.21
21 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

23. 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.
• Since the cash flows are evenly
distributed, the proposal should be accepted.
• Since the IRR is lesser than the required
rate of return, the proposal should be
rejected.
• Since the capital investment is higher
than $15,000, the proposal should be rejected.
• Since the IRR is greater than the
required rate of return, the proposal should
be accepted.
22 Calculate the total equivalent units for
materials from the information given below.

24. 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%
A. 2,070
B. 23,400
C. 22,700
D. 21,260

25. 23 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?
A. Participative behavior
B. Directive behavior
C. Supportive behavior
D. Achievement-oriented behavior
24 The following information is given for
Rafea Corporation.

26. 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

27. Which of the following can be inferred from
the data?
A. The company has a current ratio of 1.51.
B. The company has a debt-to-equity ratio
of 1.74.
C. The company has a debt-to-equity ratio
of 0.71.
D. The company has a current ratio of 1.13.
25 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
A. $15,550 unfavorable

28. B. $1,600 favorable
C. $9,100 unfavorable
D. $6,450 unfavorable