Finance Answers for BUS 475 Final Exam 2017

The manager of Weiser is given a bonus based on net income before taxes.

The net income after taxes is $35,700 for FIFO and $29,400 for LIFO. The tax rate is 30%. The bonus rate is 20%. How much higher is the manager’s bonus if FIFO is adopted instead of LIFO?

$1,800

Explanation: First, find the before tax amount for each method by dividing each by (1 – 30%) or 0.7. Then get the bonus amount by multiplying by 20% or 0.2. (51000 x 0.2)  – (42000 x 0.2) =  1800

 
  • Student: Barry Tadworth
  • Textbook: Multiple Textbooks Combined
  • Course: BUS 475 (2017-18)
 

The owner of a company has recently decided to raise the salary of one employee, who was already making the highest salary, by 20%.

Which of the following is(are) expected to be affected by this raise?

Mean only

Explanation: In this case, the mean will rise because the total value of salaries will increase. Median will not change because the midpoint is the same since this employee already had the highest salary. Mode will not change because the frequency of salaries does not change.

Green, Inc. had 200,000 shares of common stock outstanding before a stock split occurred and 800,000 shares outstanding after the stock split.

The stock split was:

4-for-1

Explanation: Green Inc. shares increased by a factor of 4 times. In other words, 4 shares were given for every 1 share that was owned.

An analyst believes the probability that U.S. stock returns exceed long-term corporate bond returns over a 5-year period is based on personal assessment.

This type of probability is best characterized as a(n) ____________.

Subjective probability

Explanation: Subjective probability is based on an estimate from a person based solely on personal observation and conjecture.

If a corporation issued $8,000,000 in bonds which pay 5% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?

$280,000

Explanation: Use the following formula (8000000*0.05) * 0.7. This is a basic bond interest calculation, that is then discounted based on the tax rate that can be written off.

Which financial statement would best indicate whether the company relies on debt or stockholders’ equity to finance its assets?

Balance Sheet

Which of the following controls would best help detect the removal of a blank check by an employee from the back of a company’s checkbook for subsequent misappropriation of funds?

The use of pre-numbered checks

Explanation: Pre-numbered checks would allow the company to detect if a check had gone missing from the records. Until the employee uses the blank check, there is no other way to track that it has gone missing.

 

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