1)The following information is available regarding John Smith's capital account in Technology Consulting Group, a general partnership, for a recent year:

Beginning of the year balance: $22000
His share of partnership income: $8500
Withdrawls made during the year: $6000
What is Smith's partner return on equity during the year in question?
A. 36.6%
B. 34.7%
C. 10.8%
D. 11.4%
E. 55.7%


2)Trump and Hawthorne have decided to form a partnership. Trump is going to contribute a depreciable asset to the partnership as his equity contribution to the partnership. The following information regarding the asset to be contributed by Trump is available:

Historical cost of the asset: $76000
Accumulated depreciation on the asset: $40000
note payable secured by the asset: $18000
Agreed upon the market value of the asset: $45000


*will be assumed by the partnership
Based on this information, Trump's beginning equity balance in the partnership will be:
A. $76,000
B. $36,000
C. $18,000
D. $27,000
E. $45,000

3)Preferred stock is often issued:
A. To initiate or increase financial leverage.
B. To prevent dilution of common stock.
C. To appeal to investors who believe that common stock is too risky.
D. To boost the return earned by common shareholders.
E. All of these.

4)A liquidating dividend is:
A. Only declared when a corporation closes down.
B. A return of a part of the original investment back to the stockholders.
C. Not allowed under federal law.
D. Only paid in assets other than cash.
E. Only paid in shares of stock.

5)A company borrowed $300,000 cash from the bank by signing a 5-year, 8% installment note. The present value of an annuity at 8% for 5 years is 3.9927. Each annuity payment equals $75,137. The present value of the note is:
A. $ 75,137.
B. $ 94,013.
C. $ 300,000.
D. $ 375,685.
E. $1,197,810.

6) Pitt Corporation's most recent balance sheet reports total assets of $35,000,000 and total liabilities of $17,500,000. Management is considering issuing $5,000,000 of par value bonds (at par) with a maturity date of ten years and a contract rate of 7%. What effect, if any, would issuing the bonds have on the company's debt-to-equity ratio?
A. Issuing the bonds would cause the firm's debt-to-equity ratio to improve from 1.0 to 1.3.
B. Issuing the bonds would cause the firm's debt-to-equity ratio to worsen from 1.0 to 1.3.
C. Issuing the bonds would cause the firm's debt-to-equity ratio to remain unchanged.
D. Issuing the bonds would cause the firm's debt-to-equity ratio to improve from .5 to .8.
E. Issuing the bonds would cause the firm's debt-to-equity ratio to worsen from .5 to .8.

Answer rating: 100% (QA)

Answer 1 A return on equity net incomeaverage equity 850022000... View the full answer