TEST BANK for Financial and Managerial
Accounting for MBAs, 5th Edition by Peter
D. Easton
Practice Quiz Solutions| All Modules covered 1-25|
Verified Q&As for Exam Preparations| A+
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, Module 1 – Financial Accounting for MBAs
1. Which of the following organizations does not contribute to the formation of GAAP?
a. FASB (Financial Accounting Standards Board)
b. IRS (Internal Revenue Service)
c. AICPA (American Institute of Certified Public Accountants)
d. SEC (Securities and Exchange Commission) Correct Answer: b
2. Rocky Beach reports the following dollar balances in its retained earnings account.
($ millions) 2017 2016
Retained earnings… ................... 8,968.1 8,223.9
During 2017, Rocky Beach reported net income of $1,351.4 million. What amount of dividends, if any,
did Rocky Beach pay to its shareholders in 2017?
a. $607.2 million
b. No dividends paid
c. $301.2 million
d. $744.2 million Correct Answer: a
Computation of dividends
Beginning retained earnings, 2017 ............................................................................ $8,223.9
+ Net income ................................................................................................................. 1,351.4
– Cash dividends...........................................................................................................
(?)
= Ending retained earnings, 2017 .................................................................................
$8,968.1
Thus, dividends were $607.2 million for 2017.
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,3. At the beginning of a recent year, The Walt Disney Company’s liabilities equaled $26,197 million.
During the year, assets increased by $400 million and year-end assets equaled $50,388 million. Liabilities
decreased $100 million during the year.
What were beginning and ending amounts for Walt Disney’s equity?
a. $26,197 million beginning equity and $24,291 million ending equity
b. $23,791 million beginning equity and $27,042 million ending equity
c. $23,791 million beginning equity and $24,291 million ending equity
d. $27,042 million beginning equity and $25,183 million ending equity Correct Answer: c
Using the accounting equation at the beginning of the year:
Assets($50,388 - $400) = Liabilities($26,197) + Equity(?)
Thus: Beginning Equity = $23,791
Using the accounting equation at the end of the year:
Assets($50,388)= Liabilities($26,197 - $100) + Equity(?)
Thus: Ending Equity = $24,291
4. Assume that Starbucks reported net income for a recent year of $564 million. Its stockholders’ equity is
$2,229 million and $2,090 million, respectively.
Compute its return on equity.
a. 13.0%
b. 22.8%
c. 26.1%
d. 32.7%
Correct Answer: c
ROE = Net income / Average stockholders’ equity
= $564 million / [($2,229 million + $2,090 million) / 2] = 26.1%
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, 5. Nokia manufactures, markets, and sells phones and other electronics. Assume that Nokia reported net
income of €3,582 on sales of €34,191 and total stockholders’ equity of €14,576 and €14,871, respectively.
What is Nokia’s return on equity?
a. 24.3%
b. 42.3%
c. 17.7%
d. 10.5%
Correct Answer: a
Return on equity is net income divided by the average total stockholders’ equity. Nokia’s ROE: €3,582 /
[(€14,576 + €14,871) / 2] = 24.3%.
6. The total assets of Dell, Inc. equal $15,470 million and its equity is $4,873 million. What is the amount
of its liabilities, and what percentage of financing is provided by Dell’s owners?
a. $20,343 million, 24.0%
b. $10,597 million, 31.50%
c. $10,597 million, 68.5%
d. $20,343 million, 76.0%
Correct Answer: b ($ millions)
Dell receives more of its financing from nonowners ($10,597 million) versus owners ($4,873 million). Its
owner financing comprises 31.5% of its total financing ($4,873 million/ $15,470 million).
7. The total assets of Ford Motor Company equal $315,920 million and its liabilities equal $304,269
million. What is the amount of Ford’s equity and what percentage of financing is provided by its owners?
a. $ 11,651 million, 3.9%
b. $620,189 million, 49.1%
c. $620,189 million, 50.9%
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Accounting for MBAs, 5th Edition by Peter
D. Easton
Practice Quiz Solutions| All Modules covered 1-25|
Verified Q&As for Exam Preparations| A+
GUARANTEED
1|Page
, Module 1 – Financial Accounting for MBAs
1. Which of the following organizations does not contribute to the formation of GAAP?
a. FASB (Financial Accounting Standards Board)
b. IRS (Internal Revenue Service)
c. AICPA (American Institute of Certified Public Accountants)
d. SEC (Securities and Exchange Commission) Correct Answer: b
2. Rocky Beach reports the following dollar balances in its retained earnings account.
($ millions) 2017 2016
Retained earnings… ................... 8,968.1 8,223.9
During 2017, Rocky Beach reported net income of $1,351.4 million. What amount of dividends, if any,
did Rocky Beach pay to its shareholders in 2017?
a. $607.2 million
b. No dividends paid
c. $301.2 million
d. $744.2 million Correct Answer: a
Computation of dividends
Beginning retained earnings, 2017 ............................................................................ $8,223.9
+ Net income ................................................................................................................. 1,351.4
– Cash dividends...........................................................................................................
(?)
= Ending retained earnings, 2017 .................................................................................
$8,968.1
Thus, dividends were $607.2 million for 2017.
2|Page
,3. At the beginning of a recent year, The Walt Disney Company’s liabilities equaled $26,197 million.
During the year, assets increased by $400 million and year-end assets equaled $50,388 million. Liabilities
decreased $100 million during the year.
What were beginning and ending amounts for Walt Disney’s equity?
a. $26,197 million beginning equity and $24,291 million ending equity
b. $23,791 million beginning equity and $27,042 million ending equity
c. $23,791 million beginning equity and $24,291 million ending equity
d. $27,042 million beginning equity and $25,183 million ending equity Correct Answer: c
Using the accounting equation at the beginning of the year:
Assets($50,388 - $400) = Liabilities($26,197) + Equity(?)
Thus: Beginning Equity = $23,791
Using the accounting equation at the end of the year:
Assets($50,388)= Liabilities($26,197 - $100) + Equity(?)
Thus: Ending Equity = $24,291
4. Assume that Starbucks reported net income for a recent year of $564 million. Its stockholders’ equity is
$2,229 million and $2,090 million, respectively.
Compute its return on equity.
a. 13.0%
b. 22.8%
c. 26.1%
d. 32.7%
Correct Answer: c
ROE = Net income / Average stockholders’ equity
= $564 million / [($2,229 million + $2,090 million) / 2] = 26.1%
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, 5. Nokia manufactures, markets, and sells phones and other electronics. Assume that Nokia reported net
income of €3,582 on sales of €34,191 and total stockholders’ equity of €14,576 and €14,871, respectively.
What is Nokia’s return on equity?
a. 24.3%
b. 42.3%
c. 17.7%
d. 10.5%
Correct Answer: a
Return on equity is net income divided by the average total stockholders’ equity. Nokia’s ROE: €3,582 /
[(€14,576 + €14,871) / 2] = 24.3%.
6. The total assets of Dell, Inc. equal $15,470 million and its equity is $4,873 million. What is the amount
of its liabilities, and what percentage of financing is provided by Dell’s owners?
a. $20,343 million, 24.0%
b. $10,597 million, 31.50%
c. $10,597 million, 68.5%
d. $20,343 million, 76.0%
Correct Answer: b ($ millions)
Dell receives more of its financing from nonowners ($10,597 million) versus owners ($4,873 million). Its
owner financing comprises 31.5% of its total financing ($4,873 million/ $15,470 million).
7. The total assets of Ford Motor Company equal $315,920 million and its liabilities equal $304,269
million. What is the amount of Ford’s equity and what percentage of financing is provided by its owners?
a. $ 11,651 million, 3.9%
b. $620,189 million, 49.1%
c. $620,189 million, 50.9%
4|Page
