FINANCIAL & MANAGERIAL ACCOUNTING FOR MBAS, 6TH EDITION BY EASTON,
HALSEY, MCANALLY, HARTGRAVES & MORSE LATEST UPDATE
, FINANCIAL & MANAGERIAL ACCOUNTING FOR MBAS,
6TH EDITIONBY EASTON, HALSEY, MCANALLY,
HARTGRAVES & MORSE
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)
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, IFANY, 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
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.
,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
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%
ANSWER: C
ROE = NET INCOME / AVERAGE STOCKHOLDERS’ EQUITY
= $564 MILLION / [($2,229 MILLION + $2,090 MILLION) / 2] = 26.1%
5. NOKIA MANUFACTURES, MARKETS, AND SELLS PHONES AND OTHER ELECTRONICS.
ASSUME THAT NOKIA REPORTEDNET 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%
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 THEAMOUNT 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. $20,343 MILLION, 76.0%
ANSWER:
B ($
Assets = Liabilities + Equity
MILLIONS
$15,470 $10,597 $4,873
)
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 $304,269MILLION. 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%
D. $ 11,651 MILLION, 3.7%
ANSWER:
D ($
Assets = Liabilities + Equity
MILLIONS
$315,920 $304,269 $11,651
)
FORD RECEIVES MORE OF ITS FINANCING FROM NONOWNERS ($304,269 MILLION)
VERSUS OWNERS ($11,651 MILLION). ITS OWNER FINANCING COMPRISES 3.7% OF ITS
TOTAL FINANCING ($11,651 MILLION/ $315,920 MILLION). THE RELATIVELY LOW LEVEL OF
EQUITY CAPITAL IS PRIMARILY THE RESULT OF THE FACT THAT FORD IS ACTUALLY A
BLEND OF TWO COMPANIES: THE AUTOMOTIVE MANUFACTURING COMPANY AND THE
FINANCIAL SUBSIDIARY. THE FINANCIALSUBSIDIARY HAS A BALANCE SHEET SIMILAR TO
THAT OF A BANK, THAT IS, RELATIVELY LITTLE EQUITY CAPITAL. THE BLEND OF THESE
TWO OPERATING ENTITIES RESULTS IN A BALANCE SHEET THAT IS MORE DEPENDENT
ON BORROWEDFUNDS THAN WOULD BE THE CASE IF FORD CONSISTED SOLELY OF THE
MANUFACTURING COMPANY.
