Questions #1-25 1. Jeremia joins as the new marketing manager in a leading multinational company. The company usually advertises its products through newspapers, television, or trade fairs. Jeremia invites different product managers within the company to discuss and find out new ways of creating consumer awareness for the company’s products. Several members of the group are inclined toward Jeremia’s idea of using social media, while others are content with the present promotional strategies. Which of the following stages of the group development process are the managers experiencing? A. B. C. D. 2. Norming Forming Performing Storming Telda is a large accounting firm. It has an office in each of the 27 states of Kavenia. The chairperson of Telda Corp.: I believe that if employees work in the same office for a long time, issues like favoritism, complacency, and misuse of authority are likely to develop. Therefore, I propose a policy that requires at least the employees in managerial positions and above to be transferred to a different office every five years. This policy will be well received by our employees and discourage them from leaving our company. Which of the following statements, if true, would most seriously weaken the chairperson’s policy? A. The employees of Telda Corp would have to be paid a relocation allowance if they are transferred to a different city. B. The cost of living in Kavenia varies from state to state. C. Employees are more likely to switch jobs within their city than to relocate to a new city for their current jobs. D. There is a high rate of attrition among Telda Corp.’s employees who are not in managerial positions. 3. LaBelle, a famous cosmetic brand, introduces a new skin cleanser. The product does extremely well and reaps huge profits for the company. After using the product for a few months, consumers complain of rashes and allergies. An external chemical agency accuses the company of using banned substances in its products. When investigated, the company’s CEO confesses that he knew about the substance but did not act because of the product’s initial success. Which of the following could be the cause for the CEO’s unethical behavior? • A. Ill-conceived goals B. Indirect blindness C. The slippery slope D. Overvaluing outcomes • • • 4. From the information given below, calculate the net cash flows from operating activities using the indirect method. Net income $170,000 Depreciation 5,750 Loss on disposal of plant asset 4,000 Increase in inventory 7,500 Increase in prepaid expenses 5,460 Decrease in accounts payable 6,750 A. B. C. D. 5. $176,460 $160,040 $173,540 $152,040 Calculate the net income of Tinekal Corporation from the following information. Depreciation expense $ 850 Rent expense 500 Salaries expense 700 Supplies expense 650 Interest expense 400 Revenue from sales 5,000 Profit from sale of assets 1,000 Dividend 700 A. $3,600 B. $1,900 C. $2,900 D. $2,600 6. Gharial LLC is a company that manufactures and leases cars. To increase its production capacity, the CEO of Gharial LLC has decided to build a new manufacturing plant. The company requires a loan from a bank, and submits its financial statements to the bank. The CEO believes that the loan will be approved because of the company’s liquidity. Which of the following, if true, weakens the CEO’s argument? A. The price of Gharial LLC’s shares has remained constant over the past year. B. The current ratio of Gharial LLC is higher than one. C. A majority of Gharial LLC’s current assets are in the form of inventory. D. Gharial LLC specializes in high-end cars. 7. Aaron has recently been recruited as the managing director of Ikara Corp., which is a leading accounting firm with a global presence. He learns that the employees of Ikara felt that the previous managing director was unapproachable and did not encourage employees to express their problems or ideas to him. Aaron does not want to be perceived the same way. To appear friendlier toward his employees, he decides to use a bit of humor in his electronic communication. This will surely enable him to build a good rapport with the employees of Ikara Corp. Which of the following, if true, most seriously undermines Aaron’s argument? A. Managers must seem approachable to their teams, especially when their teams are spread across the globe. B. Some employees of Ikara belong to cultures where humor is likely to be perceived as ridicule. C. Aaron's electronic communication is mostly directed to the senior management of the company. D. Aaron has previously worked in companies where communication between employees was informal. 8. Calculate the cost of goods sold based on the following information. Inventory at the beginning of 2016 Purchases Purchase returns Inventory at the end of 2016 A. B. C. D. $ 54,000 450,000 12,800 60,000 $443,200 $431,200 $444,000 $491,200 9 The board of directors of Yudel Corp. is looking for a new managing director for the company. They find a candidate, Linda, who is hardworking, passionate, and confident. These are the characteristics that all the past leaders of Yudel Corp. had in common. Therefore, the board concludes that hiring Linda as the new managing director will contribute positively to the company’s success. The board of directors relies on the assumption that: A. Linda has worked in companies similar to Yudel Corp. in the past. B. Linda will not have any other job offer to consider when Yudel Corp. offers her the position of managing director. C. Linda’s goals, as a leader, are compatible with the culture and vision of Yudel Corp. D. the leaders of other companies have characteristics in common with the leaders of Yudel Corp. 10 Neha is a communications manager in a reputed software company. She firmly believes that men do not prefer working with women supervisors because they think women are inferior to them. Jordon is Neha’s manager and elder to her by 10 years. Every time Neha interacts with Jordon, she downplays her dominant nature by acting naive. However, she is aggressive and dominant with younger employees. Which of the following approaches to managing diversity should be used to help Neha overcome her prejudiced attitude? A. B. Hiring more women employees to create an environment that is more diverse Isolating Neha by putting her in special projects that require minimum interaction with other employees C. Acknowledging Neha’s beliefs but not valuing or accepting them D. Educating Neha about stereotyping people of different age and sex 11 Melanie and Peter are discussing the limitations of internal control systems in organizations. Melanie believes that the human element is an insignificant factor in internal control systems. If Peter wants to refute this view, which of the following points should he put forth? A. Small companies have more efficient internal control systems as they do not need to segregate duties or provide for independent internal verification. B. The size of an organization determines the expectations from an internal control system in the organization. C. A well-built internal control system has inbuilt controls to reverse the results of employee indifference and carelessness. D. Collusion between two individuals can eliminate the protection offered by segregation of duties in an internal control system. 12 Raubac Inc. has an earnings before interest and taxes (EBIT) of $350,000. Raubac Inc.'s capital structure consists of a long-term debt of $950,000 (costing 4%) and 110,000 issued shares of common stock at a market price of $6 per share. To bring down Raubac's dependence on debt, the company is planning to reduce its debt by $200,000 by selling additional shares of common stock. Raubac's EBIT will not change with the change in capital structure and will remain in the 40 percent tax bracket. Which of the following is a result of the change in Raubac’s capital structure? A. Raubac’s earnings before taxes (EBT) will reduce by $8,000. B. Raubac’s earnings before taxes (EBT) will remain unchanged. C. Raubac’s earnings per share (EPS) will increase by $0.57. D. Raubac’s net income will increase by $4,800. 13 CoolWindows Corp. produces 2,000 air conditioners per week in three plants: Plant I, Plant II, and Plant III. Plant I produces 800 air conditioners per week, Plant II produces 500 air conditioners per week, and Plant III produces 700 air conditioners per week. The probability of an air conditioner being defective is 7% for Plant I, 5% for Plant II, and 6% for Plant III, respectively. In a random check, a defective air conditioner is found. What is the probability that the air conditioner was produced in Plant II? A. 0.20 B. 0.75 C. 0.25 D. 0.18 14 Raetal Inc. acquired 2,000 shares of its own stock of par value $1 for $20 per share. Which of the following is the correct journal entry to record this transaction? A. Cash Treasury Stock 40,000 40,000 B. Treasury Stock Common Stock 2,000 2,000 C. Treasury Stock Cash D. Treasury Stock Cash 40,000 40,000 2,000 2,000 15 Cero Inc. is an oil and gas company that operates in the nation of Lumnia. Cero has incurred unforeseen expenses this year because of an environmental lawsuit filed against the company for accidentally causing an oil spill in a marine area in Lumnia. Therefore, despite Cero’s earnings being high, the company’s net income is much lower than what the company anticipated. CFO of Cero Inc.: Our operations are compliant to the current environmental laws. Accidents such as the oil spill caused by Cero Inc. are extremely rare. Therefore, the consequences of the environmental impacts of our operations should be categorized as nonrecurring costs in our financial statements. Cero’s shareholder: Cero Inc.’s earnings steadily increase every year. Since the oil spill is a onetime incident, there is no need to worry about its impact on next year’s profits. Which of the following statements, if true, weakens the CFO’s argument? A. Cero Inc. categorizes any change in accounting principles as a nonrecurring expense. B. A change in the taxes applicable to Cero Inc. cannot be listed as a nonrecurring expense unless it is unanticipated. C. In the future, Lumnia’s environmental laws are likely to undergo frequent changes because of increasing environmental activism in Lumnia. D. Cero Inc.’s earnings come from many other operations that are based outside Lumnia. 16 The senior management of Reska Corp. realizes the importance of encouraging employees to be creative. In the previous year, the company organized quarterly town hall meetings, where employees were given the opportunity to share innovative ideas to tackle the issues faced by the company and to improve the company’s overall performance. However, this plan did not yield the desired result. The CEO of Reska Corp.: This plan failed because employees tended to be apprehensive about expressing their ideas in public as they did not know how the ideas would be received. We must change our strategy and give employees the opportunity to express their ideas to their managers in person. This will make the employees feel comfortable expressing their creativity. Which of the following is assumed by the CEO? A. Companies with a creative workforce are less resistant to change than those lacking creativity. B. Unless the employees of Reska share their creative ideas, the company’s overall performance is unlikely to improve. C. Reska’s employees want to be creative at their jobs. D. Employees feel less apprehensive about expressing their ideas to their managers than about expressing them in public. 17 As a common practice, Rova Inc. mostly collects upfront payments for goods that will be delivered to customers in the future. Unearned revenues contribute significantly to the company’s current liabilities. Commentator A: The advance cash received from customers can be used to finance the company’s operations, and the corresponding liabilities that are recorded will appear as sales in future financial statements. Therefore, this practice is beneficial to Rova Inc. and should be continued. Which of the following statements, if true, weakens commentator A’s argument? A. A majority of the orders received by Rova Inc. from its customers are for customized products. B. Rova Inc.’s ability to deliver exactly as per its commitments to its customers is frequently impacted by its unreliable suppliers. C. Rova Inc.’s long-term liabilities are not offset by its current assets. D. Rova Inc.’s cash flow statement shows that the company does not have enough cash to scale up its operations in the next year. 18 Financial analyst: Linksus Tech is a company that manufactures drill bits and screwdrivers. Over the last year, its sales have not shown a significant increase. The company has a large quantity of inventory on hand, its accounts receivable have doubled, and its accounts payable have increased threefold. Given this, the company should try to realize its current assets at the earliest to stay afloat. Which of the following, if true, would strengthen the argument? A. The company will introduce a much-awaited new product into the market in the following year. B. Linksus Tech has applied for a short-term loan to meet its working capital requirements. C. The current liabilities are expected to be due within the next three months. D. The demand for the products sold by the company is expected to increase. 19 Janet works as a senior software developer in a multinational IT firm. She prefers to work as an individual contributor and volunteers to work on challenging projects. The firm encourages Janet and other people like her by assigning them to projects that require a great deal of innovation. The firm motivates Janet by appealing to her need for __________. A. power B. achievement C. affiliation D. security 20 The HR manager of Delta Corp.: According to our rewards and recognition program, employee achievements are acknowledged and employees are given gift vouchers through emails on reaching milestones and targets. I feel this is not enough to make employees feel appreciated. In my previous company, work anniversaries and professional achievements were celebrated in organization-wide meetings, where the concerned employee would be publicly rewarded. After all, I would love it if my efforts were recognized like this! Therefore, such an idea would be a great success in our company. The HR manager’s argument is flawed because it: A, fails to recognize the effort put in by his team to implement the existing rewards and recognition program. B. fails to prove that employees of Delta Corp. feel unappreciated. C. dismisses the possibility of increasing the value of the gift vouchers that are given to the employees at present. D. fails to consider that other people might perceive appreciation differently than him. 21 The HR manager of Delta Corp.: According to our rewards and recognition program, employee achievements are acknowledged and employees are given gift vouchers through emails on reaching milestones and targets. I feel this is not enough to make employees feel appreciated. In my previous company, work anniversaries and professional achievements were celebrated in organization-wide meetings, where the concerned employee would be publicly rewarded. After all, I would love it if my efforts were recognized like this! Therefore, such an idea would be a great success in our company. Which of the following statements, if true, weakens the HR manager’s argument? The HR manager of Delta Corp.: According to our rewards and recognition program, employee achievements are acknowledged and employees are given gift vouchers through emails on reaching milestones and targets. I feel this is not enough to make employees feel appreciated. In my previous company, work anniversaries and professional achievements were celebrated in organization-wide meetings, where the concerned employee would be publicly rewarded. After all, I would love it if my efforts were recognized like this! Therefore, such an idea would be a great success in our company. A. Employees are not motivated to perform well at their jobs if their work is not appreciated and rewarded. B. Delta Corp.’s policy requires the CEO of the company to be present in every town hall. C. Delta Corp. does not have sufficient funds to organize frequent town halls. D. The HR manager’s previous company did not offer promotions to its employees easily. 22 Calculate the expected return for a stock based on the following information. Expected dividend Current price Expected growth rate A. B. C. D. $2.20 $47.82 5.67% 7.87% 10.27% 16.46% 4.6% 23 Calculate the revenue for the year ending December 31, 2016, based on the information given below. Retained earnings, January 1 Revenue for the year Expenses for the year Dividends paid 2016 $14,500 Y 44,800 3,500 2017 $ X 48,500 42,700 5,700 The ending balance of retained earnings on December 31, 2017, is $18,500. A. 52,200 B. 33,800 C. 18,400 D. 15,400 24 Telda Corp. is a large accounting firm. It has an office in each of the 27 states of Kavenia. The chairperson of Telda Corp.: I believe that if employees work in the same office for a long time, issues like favoritism, complacency, and misuse of authority are likely to develop. Therefore, I propose a policy that requires at least the employees in managerial positions and above to be transferred to a different office every five years. This policy will be well received by our employees and discourage them from leaving our company. Which of the following statements, if true, would strengthen the chairperson’s argument? A. Cultural differences may lead to different working styles in the different office locations of Telda Corp. B. The technical skills required to work vary from team to team in Telda. C. Introducing policy changes without consulting the relevant stakeholders is against the work culture of Telda Corp. D. Rotating employees among different office locations leads to greater employee cohesion in companies. 25 Cryser Inc. specializes in manufacturing wind turbines. In order to increase the efficiency of its manufacturing process, the management decides to restructure its shop floor into several workshops. Each workshop specializes in a specific function. The engineers working in the company raise concerns that their jobs will become monotonous if each employee performs only one of those functions. Which of the following is a soft tactic that the management can use to influence the engineers? A. Convincing the union leader to persuade other engineers B. Demanding the engineers to comply with the authority C. Explaining the benefits of the new structure D. Promising monetary benefits 
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