Category: Quizzes
Answers LEGAL ETHICS BAR EXAM
2008 LEGAL ETHICS BAR EXAM
I
Christine was appointed counsel de oficio for Zuma, who was accused of raping his own daughter. Zuma pleaded not guilty but thereafter privately admitted to Christine that he did commit the crime charged.
- In light of Zuma’s admission, what should Christine do? Explain. (3%)
Christine should suggest to Zuma that he should plead guilty to the crime as charged.
Canon 19, Rule 19.02 of the CPR states that “a lawyer who has received information that his client has, in the course of the representation, perpetrated a fraud upon a person or tribunal, shall promptly call upon the client to rectify the same, and failing which he shall terminate the relationship with such client in accordance with the Rules of Court.”
- Can Christine disclose the admission of Zuma to the court? Why or why not? (2%)
No, Christine cannot disclose Zuma’s admission to the court.
Canon 21, Rule 21.02 of the CPR provides that “a lawyer shall not, to the disadvantage of his client, use information acquired in the course of employment, nor shall he use the same to his own advantage or that of a third person, unless the client with full knowledge of the circumstances consents thereto.”
Christine cannot disclose the admission without violating the abovementioned canon. The information disclosed is in the nature of a privileged communication, hence, she cannot disclose it to the court without Zuma’s consent.
- Can Christine withdraw as counsel of Zuma should he insist in going to trial? Explain. (3%)
Christine cannot withdraw as counsel of Zuma.
Canon 14, Rule 14.01 of CPR states that “a lawyer shall not decline to represent a person solely on account of the latter’s race, sex. creed or status of life, or because of his own opinion regarding the guilt of said person.”
Despite the admission of Zuma, Christine cannot withdraw as Zuma’s counsel because Zuma is still considered innocent until proven guilty. Further, there may be mitigating circumstances that Christine may raise as a defense that is favorable to Zuma.
II
In 1998, Acaramba, a telecommunications company, signed a retainer agreement with Bianca & Sophia Law Office (B & S) for the latter’s legal services for a fee of P2,000 a month. From 1998 to 2001, the only service actually performed by B & S for Acaramba was the review of a lease agreement and representation of Acaramba as a complainant in a bouncing checks case. Acaramba stopped paying retainer fees in 2002 and terminated its retainer agreement with B & S in 2005. In 2007, Temavous, another telecommunications company, requested B & S to act as its counsel in the following transactions: (a) the acquisition of Acaramba; and (b) the acquisition of Super-6, a company engaged in the power business.
In which transactions, if any, can Bianca & Sophia Law Office represent Temavous? Explain fully. (7%)
Bianca & Sophia Law Office cannot represent Temavous in the acquisition of Acaramba because the Canons of Professional Ethics (Canon 6) and the Code of Professional Responsibility (Canon 15) provide that a lawyer shall not represent parties with adverse interests to one another. Even though their relationship had already been terminated the Code further provides (Canon 21) that a lawyer should safeguard the confidences of his former client. In the case of acquisitions, B&S would definitely have an undue advantage (Rule 21.02-.03), or to appear to have such, in assisting Temavous’ acquisition of its former client due to its prior relationship. In contrast, as to the case of Super-6, B&S may represent Temavous because such a transaction is in no way connected to its prior relationship with Acaramba.
III
Dumbledore, a noted professor of commercial law, wrote an article on the subject of letters of credit which was published in the IBP Journal.
- Assume he devoted a significant portion of the article to a commentary on how the Supreme Court should decide a pending case involving the application of the law on letters of credit. May he be sanctioned by the Supreme Court? Explain. (4%)
Yes, he may me sanctioned by the court.
Canon 13, Rule 13.02 provides that “a lawyer shall not make public statements in the media regarding a pending case tending to arouse public opinion for or against a party.”
As a lawyer, Dumbledore should not have made such statements regarding a pending case so as not to influence the court in deciding the case or giving the public the impression that the court was influenced by his commentaries, should the court arrive at a decision similar to that of Dumbledore’s comments.
- Assume Dumbledore did not include any commentary on the case. Assume further after the Supreme Court decision on the case had attained finality, he wrote another IBP Journalarticle, dissecting the decision and explaining why the Supreme Court erred in all its conclusions. May he be sanctioned by the Supreme Court? Explain. (3%)
No, he may not be sanctioned by the court.
Dumbledore’s commentary in the IBP journal is not unethical. What the CPR prohibits is the making of public statements regarding pending cases before the courts. Dumbledore’s article in the IBP Journal is about a decided case already. Once a case has been decided, it is already open for public consumption hence anyone can criticize or make known their opinions regarding the conclusion of the case.
IV
Chester asked Laarni to handle his claim to a sizeable parcel of land in Quezon City against a well-known property developer on a contingent fee basis. Laarni asked for 15% of the land that may be recovered or 15% of whatever monetary settlement that may be received from the property developer as her only fee contingent upon securing a favorable final judgment or compromise settlement. Chester signed the contingent fee agreement.
- Assume the property developer settled the case after the case was decided by the Regional Trial Court in favor of Chester for P1 Billion. Chester refused to pay Laarni P150 Million on the ground that it is excessive. Is the refusal justified? Explain. (4%)
Yes, the refusal is justified.
Canon 20 of the CPR states that “a lawyer shall charge only fair and reasonable fees.”
Although under a contingent fee agreement lawyers are entitled to greater remuneration because of the possibility of receiving nothing at all, the fee charged must still be fair, reasonable and conscionable. In this case, the 150 million fee is excessive and unconscionable.
- Assume there was no settlement and the case eventually reached the Supreme Court which promulgated a decision in favor of Chester. This time Chester refused to convey to Laarni 15% of the litigated land as stipulated on the ground that the agreement violates Article 1491 of the Civil Code which prohibits lawyers from acquiring by purchase properties and rights which are the object of litigation in which they take part by reason of their profession. Is the refusal justified? Explain. (4%)
The refusal is not justified.
The transfer of the land to Laarni would not violate Article 1491 of the Civil Code because said article does not cover contingent fee agreements. This is because in a contingent fee agreement a transfer would only occur in case a favorable judgment is obtained. Further, the case reached the Supreme Court which means that Laarni spent so much time on the case and much of her skills were demanded hence the 150 million is a fair and reasonable fee.
V
The vendor filed a case against the vendee for the annulment of the sale of a piece of land.
- Assume the vendee obtained a summary judgment against the vendor. Would the counsel for the defendant vendee be entitled to enforce a charging lien? Explain. (4%)
No, vendee’s counsel would not be entitled to enforce a charging lien.
A charging lien to be enforceable there must be a judgment for money. In the case at bar, there was no mention of a judgment for money in favor of the vendee thus vendee’s counsel cannot enforce a charging lien.
However, if there would be a judgment for money vendee’s counsel would be entitled to enforce the charging lien.
- Assume, through the excellent work of the vendee’s counsel at the pre-trial conference and his wise use of modes of discovery, the vendor was compelled to move for the dismissal of the complaint. In its order the court simply granted the motion. Would your answer be the same as in question (a)? Explain. (3%)
Vendee’s counsel would still not be entitled to enforce a charging lien.
A dismissal on motion of the plaintiff would certainly not include a judgment for money. Therfore, the counsel cannot enforce a charging lien.
VI
Atty. Abigail filed administrative cases before the Supreme Court against Judge Luis. Thereafter, Atty. Abigail filed a Motion for Inhibition praying that Judge Luis inhibit himself from trying, hearing or in any manner acting on all cases, civil and criminal, in which Atty. Abigail is involved and handling.
Should Judge Luis inhibit himself as prayed for by Atty. Abigail? Explain fully. (6%)
No. Being the subject of an administrative case is not one of the grounds for disqualification of a judge from handling case provided by the Code of Judicial Responsibility in Canon 3 Rule 12.
VII
In need of legal services, Niko secured an appointment to meet with Atty. Henry of Henry & Meyer Law Offices. During the meeting, Niko divulged highly private information to Atty. Henry, believing that the lawyer would keep the confidentiality of the information. Subsequently, Niko was shocked when he learned that Atty. Henry had shared the confidential information with his law partner, Atty. Meyer, and their common friend, private practitioner Atty. Canonigo. When confronted, Atty. Henry replied that Niko never signed any confidentiality agreement, and that he shared the information with the two lawyers to secure affirmance of his legal opinion on Niko’s problem. Did Atty. Henry violate any rule of ethics? Explain fully. (7%)
Canon 21 provides that an attorney shall preserve the confidence of his client and further articulates this point in Rule 21.03-.04 by clarifying that he may not disclose such information to outside agencies without the consent of his client and that he may disclose such information to firm partners unless prohibited by his client. In the case of Atty. Meyer, he was a firm partner and as such is covered by Rule 21.04 and not being explicitly prohibited by Niko Henry committed no wrong in giving information to him. However in the case of Atty. Canonigo who was not in any way connected to the firm Henry committed a gross violation of Rule 21.03. In either case the mere entry into the attorney-client relationship obviates the need for a confidentiality agreement.
VIII
State, with a brief explanation, whether the lawyer concerned may be sanctioned for the conduct stated below.
- Filing a complaint that fails to state a cause of action, thereby resulting in the defendant succeeding in his motion to dismiss. (3%)
Yes. Canon 18, Rule 18.02 states that “A lawyer shall not handle any legal matter without adequate preparation.” A lawyer should have exercised diligence and made adequate preparations to ascertain that the complaint stated a cause of action to prevent the dismissal of the complaint.
- A suspended lawyer working as an independent legal assistant to gather information and secure documents for other lawyers during the period of his suspension. (3%)
Yes. Under the law, only lawyers in good standing can perform or engage in the practice of law. In the case of Cayetano vs. Monsod, the Court held that the practice of law involves rendering serice to the genral public that calls for the professional judgment of a lawyer, the essence of which is his educated ability to relate the general body and philosophy of law to a specified legal problem. Clearly, the act of working as a legal assistant in gathering information and securing documents for other lawyers is within the scope of practicing law. A suspended lawyer is temporarily prohibited to practice the legal profession therefor he cannot engage in the mentioned acts.
- A suspended lawyer allowing his non-lawyer staff to actively operate his law office and conduct business on behalf of clients during the period of suspension. (3%)
Yes. Canon 9, Rule 9.01 states that “a lawyer shall not delegate to any unqualified person the performance of any task which by law may only be performed by a member of the bar in good standing.”
- Keeping money he collected as rental from his client’s tenant and remitting it to the client when asked to do so. (3%)
Yes. Canon 16, Rule 16.01 provides that “a lawyer shall account for all money or property collected or received for or from the client.” A lawyer should account for all money he collected immediately. He should not wait that the client would ask or demand for the money.
- Refusing to return certain documents to the client pending payment of his attorney’s fees. (3%)
No. Rule 138, Section 37 of the Rules of Court states that “an attorney shall have a lien upon the funds, documents and papers of his client which have lawfully come into his possession and may retain the same until his lawful fees and disbursements have been paid, and may apply such funds to the satisfaction thereof.” Hence, he may keep the documents pending payment of his attorney’s fees.
- An unwed female lawyer carrying on a clandestine affair with her unwed male hairdresser. (3%)
No. Both parties are of age and qualified to marry each other hence the affair is not one which is grossly immoral. It is not so corrupt nor so unprincipled to warrant sanction from the court.
- Not paying the annual IBP dues. (3%)
Yes. Default in payment of IBP dues for 6 months shall warrant suspension of membership to the IBP and default in payment for one year shall warrant for the removal of the member in the Roll of Attorneys.
IX
State, with a brief explanation, whether the judge concerned may be sanctioned for the conduct stated below.
- Refusing to inhibit himself although one of the lawyers in the case is his second cousin. (3%)
No. Under Canon 3, Rule 3.12 a judge should take no part in a proceeding where the judge’s impartiality might reasonably be questioned. One of the cases would be where the judge is related by consanguinity or affinity to counsel within the fourth degree. A second cousin is a relative within the 6th degree, hence it is not covered by the prohibition.
- Deciding a case in accordance with a Supreme Court ruling but adding that he does not agree with the ruling. (3%)
No. There is no law or rule prohibiting such conduct. Regardless of his opinion, the judge still followed the Supreme Court’s ruling thus there is really nothing wrong with such act. Further, his opinion will not have any bearing as it is not part of the decision.
- Dictating his decision in open court immediately after trial. (3%)
Yes. A judge should uphold the integrity and independence of the judiciary. He must not hastily issue decisions.
LA CONSOLACION COLLEGE TAX EXAMS AND ANSWERS
| LA CONSOLACION COLLEGE | ||||||
| Bacolod City | Date: | |||||
| FINAL Exams TAX 2 | ||||||
| Name/course/year: | Score: | Rating: | ||||
- TRUE OR FALSE. ANALYZE the following statements and write TRUE if the statement is correct and write FALSE if it is wrong. AVOID ERASURES.
- A small business enterprise with gross receipts of not exceeding P1.5 million may be taxed at 12% (VAT) or 3% (Non-VAT) at the option of the taxpayer.
- Clubs and caterers are subject to Amusement tax.
- A radio station with an annual gross receipts of P2,000,000 but voluntarily subjects itself to VAT can never cancel its registration and revert back to Franchise Tax even it later on decides to abandon VAT.
- Taxpayers which are subject to Other Percentage Taxes are generally required to file its tax return within 20 days after the end of each month.
- The sale of listed and traded shares of stocks after the initial public offering is exempt from business tax.
- The gross sales of a bar inside a passenger ship is subject to Amusement Tax of 18%
- Service charge which nightclubs collect from their customers, and represented as charges in lieu of cash tip to the employees are included in the term “gross receipts” which are subject to Amusement Tax
- If there are vending machines installed by Coca-cola inside the premises of race tracks, the sales effected in the vending machines shall be subject to Amusement Tax of 30%.
- The gross receipts of a bank which operates a canteen where foods are served at subsidized prices exclusively to its employees is subject to Tax on Banks notwithstanding the fact that the canteen is operated on a non-profit basis.
- A private carrier which undertakes to deliver goods at a particular place without being bound in law to undertake such transportation and does not bind himself out to the public is subject to 3% Common Carrier’s Tax.
- The filing of quarterly income tax returns and payment of quarterly income tax by corporations are mere instalments and therefore, not the basis in computing the 2 year prescriptive period for refund.
- If the tax has been withheld from source (withholding on wages), the prescriptive period for refund is counted from the date it falls due at the end of the taxable year.
- The power of the Commissioner of Internal Revenue to inquire into the bank deposits of the taxpayer is in conflict with the Secrecy of Bank Deposits Law.
- The Commissioner of Internal Revenue may authorize an examiner to inquire into the bank deposits of a taxpayer who is suspected to have committed fraud in declaring his income.
- The decision of one division of the Court of Tax Appeals may be reviewed on appeal by the court en banc.
- The Court of Tax Appeals is inferior to the Court of Appeals but it is in the same level with the Supreme Court.
- When the justices of the Court of Tax Appeals sit in two (2) divisions, each division shall be composed if three (3) justices; the presence of two (2) will constitute a quorum and the vote of the two are required to render a decision.
- When the justices of the Court of Tax Appeals sit en banc, the presence of four (4) constitute a quorum and the vote of four (4) justices are required to render a decision.
- Ambassadors of foreign countries are required to pay the community tax
- If a person loses the benefit of exemption on June 20 of the current year, he shall be liable for the community tax on that same day.
- Resident aliens are exempt from the payment of community tax
- The provisions of law governing the imposition of community tax is found in the National Internal Revenue Code (NIRC)
- For purposes of community tax, a general professional partnership is taxable as a corporation
- Aliens who have stayed in the Philippines most of the time during the taxable year are required to pay community tax in the Philippines.
- Barangay treasurers can be deputized to collect the community tax in their respective jurisdictions.
MULTIPLE CHOICE. EVALUATE each statement and the choices, then, APPLY your knowledge by selecting the best answer and write the letter only on the space provided before each number. AVOID ERASURES.
- One of the following is subject to 3% percentage tax.
| A. Establishments whose annual gross sales or receipts exceed P1,500,000 and who are VAT registered
B. Businesses whose annual gross receipts or sales exceed P1,500,000 and who are not VAT registered C. VAT registered establishments whose annual gross receipts do not exceed P1,500,000 D. Establishments whose annual gross sales do not exceed P1,500,000 and who are not VAT registered |
- Rustic owns a small eatery near a trimobile parking area. Its annual gross receipts range from P400,000 to P450,000. In January, the gross receipts amounted to P27,500 while purchases of goods subject to VAT is P6,000 and not subject to VAT, P13,000. If Rustico is not a VAT registered taxpayer, his percentage tax due for the month is –
| A. 12,000
B. 1,900 |
C. 825
D. 2,500 |
- Using the data in No. 2, assume that Rustico is a VAT registered taxpayer and the amounts indicated are exclusive of VAT, the value added tax due is
| A. 12,000
B. 1,900 |
C. 2,580
D. 2,500 |
- Malakas Wesley owns two passenger buses. Each bus has a seating capacity of 45 passengers. The buses only ply route Naga City to Legaspi City, and vice versa. During the month, he decided to stop the operation of one unit to undergo two weeks engine overhaul. Thus, his total gross receipts during the month amounted to P110,000 only. Malakas Wesley is –
| A. Subject to income tax but exempt from percentage tax
B. Subject to value added tax if the gross annual receipts exceed P1,500,000 C. A marginal income earner and therefore, exempt from common carrier’s tax and value added tax D. Subject to common carrier’s tax of P3,300. |
- The franchise tax on grantees of radio and television broadcasting companies whose annual gross receipts in any year do not exceed P10,000,000 shall be
| A. 1% of gross receipts
B. 2% of gross receipts |
C. 3% of gross receipts
D. 4% of gross receipts |
- Junjun M. operates the Peacock Nightclub along Avenida Avenue, Manila. His gross receipts in February 2016 amounted to P126,700. The foods and drinks being served inside the night club are being delivered by Tiberio, a non-VAT taxpayer. During the month, Tiberio sold P32,400 worth of goods and drinks to Junjun M. The amusement tax payable is –
| A. 19,005
B. 22,806 |
C. 28,638
D. 5,832 |
- Which of the following is not considered as a percentage tax?
| A. ½ of 1% stock transaction tax on shares traded through the local stock exchange
B. 10%-20% tax on shares not traded through the local stock exchange C. 10% stock overseas communications tax D. 3% tax on keepers of garage |
- Bayani’s ticket (daily double) won P42,000, gross of withholding tax and cost of ticket, in a horse race in San Lazaro Hippodrome. His ticket had cost him P250. How much tax was withheld on winnings in horse races by Bayani?
| A. 1,680
B. 4,200 |
C. 1,670
D. 4,175 |
- The income tax returns must be filed in
| A. Duplicate
B. Quadruplicate |
C. Triplicate
D. Quintuplicate |
- A notice to the effect that the amount therein stated is due from a taxpayer as a tax with a demand for payment of the same within the stated period of time
| A. Assessment
B. Forfeiture |
C. Audit engagement letter
D. Institution of criminal action |
- A pre-assessment notice is required –
| A. Before a final notice of assessment is sent to the taxpayer
B. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent C. When an article locally purchased or imported by an exempt person has been sold, traded or transferred to non-exempt persons D. When the deficiency tax is the result of mathematical errors in the computations appearing on the face of the return. |
- Before a formal notice of Assessment is issued, the taxpayer is required to respond to the Preliminary Assessment Notice within a period of –
| A. 30days
B. 15 days |
C. 45 days
D. 6 months |
- Where a return was filed, as a general rule, the prescriptive period for assessment after the date the return was due or was filed, whichever is later, is within
| A. Three years
B. Ten years |
C. Five years
D. Answer not given |
- Bernadette filed her 2005 Income Tax Return and paid the tax due thereon on April 1,2006. The last day for the Bureau of Internal Revenue to send an assessment is
| A. April 1, 2009
B. April 15, 2011 |
C. April 15, 2009
D. April 15, 2016 |
- Lacson filed an income tax return for the calendar year 2005 on March 10, 2006. The BIR assessed a deficiency income tax on April 10, 2008. When is the last day for the BIR to make an assessment?
| A. April 15, 2009
B. April 10, 2008 |
C. April 15, 2008
D. March 10, 2009 |
- Cosa filed a fraudulent income tax return for the year 2005 on April 11, 2006. The Bureau of Internal Revenue (BIR) discovered the fraud on February 20, 2007. The last day for the BIR to collect or send an assessment notice is
| A. April 11,2009
B. April 15, 2009 |
C. April 15,2016
D. February 20,2017 |
- Which of the following is not an extrajudicial remedy of the government against the taxpayer?
| A. Distraint of personal property
B. Levy of real property |
C. Garnishment of bank accounts
D. Filing of criminal case in court |
- The seizure by the government of real property and interest on rights to property of the taxpayer to enforce the payment of taxes followed by its public sale
| A. Confiscation
B. Distraint |
C. Forfeiture
D. Levy |
- The summary of remedies of distraint of personal property shall be exercised by the Commissioner of Internal Revenue of the amount involved is in excess of –
| A. 10,000
B. 100,000 |
C. 1,000,000
D. 10,000,000 |
- Cruzada filed an income tax return for the calendar year 2004 on March 10, 2005.the BIR issued a deficiency income tax on April 10, 2007 which has become final. When is the last day for the BIR to collect?
| A. April 10, 2012
B. April 15, 2008 |
C. April 15, 2010
D. March 10, 2008 |
- Date when assessment was received 10/01/2007
Petition for reconsideration was filed with BIR 10/09/2007
Decision of denial was received 07/02/2008
2nd request for reconsideration was filed with BIR 07/15/2008
Date of BIR revised final assessment was received 07/05/2009
Last day to appeal to the Court of Tax Appeals
| A. July 15, 2009
B. August 4, 2009 |
C. August 5, 2009
D. September 5, 2009 |
- For filing a false and fraudulent return, a surcharge is imposed. Which of the following is correct?
| A. 50% as administrative penalty
B. 50% as criminal penalty |
C. 25% plus 50%
D. 25% as criminal penalty |
- A contract whereby the taxpayer and the government by reciprocal concessions avoid litigation or put an end to one already commenced –
| A. Confiscation
B. Compromise |
C. Distraint
D. Suspension of action |
- The Chief Officials of the Bureau of Internal Revenue
| A. A commissioner and 3 Deputy Commissioners
B. A commissioner and 5 Deputy Commissioners C. A commissioner and 4 Deputy Commissioners D. A commissioner and 2 Deputy Commissioners |
- The Chief Officials of the Bureau of Internal Revenue
| A. To interpret ax laws and to decide tax cases
B. To summon, examine and take testimony of persons C. To make assessment and prescribe additional requirements to tax administration and enforcement D. To review on tax cases decided by the Court of Tax Appeals |
- This is not within the power of the Commissioner of the Internal Revenue to make an assessment –
| A. Examination of returns and determination of tax due
B. Conduct inventory-taking and surveillance C. Compromise tax cases D. Inquire into bank deposit accounts |
- The power to interpret the provisions of the National Internal Revenue Code shall be under the exclusive and original jurisdiction of the –
| A. Commissioner of Internal Revenue
B. Secretary of Justice |
C. Secretary of Finance
D. Court of Tax Appeals |
- An exception to the non-delegation of the legislative power of Congress –
| A. Revenue Memorandum Order (RAMO)
B. Revenue Special Order (RSO) |
C. Revenue Regulations (RR)
D. Revenue Travel Assignment Order (RTAO) |
- The Commissioner of Internal Revenue or his authorized representative may order suspension or closure of a business establishment for a period of not less than 5 days for any of the following violations, except:
| A. Failure to claim presumptive input taxes
B. Failure to issue receipts and invoices C. Failure to file a quarterly VAT return D. Understatement of taxable sales by 30% or more of his correct taxable sales for the quarter. |
- Which of the following cases cannot be the subject of a compromise?
| A. Those pending before the Commissioner of Internal Revenue
B. Those filed in the Regional Trial Court C. Cases filed in the Office of the City Prosecutor D. Cases under investigation by a Revenue Examiner |
- Non-payment of the following is not a ground for imprisonment
| A. Income tax
B. Value-added tax |
C. Community tax
D. Donor’s tax |
- An exempt individual may secure community tax certificate by paying –
| A. P5.00
B. P1.00 |
C. P10.00
D. None |
- Salariosa, a resident of Cubao, Quezon City, single owns a restaurant in CM Recto Ave., Manila and in Cubao, Quezon City. In 2015, it had the following data:
| Gross Receipts | Expenses | |
| Manila | 4,055,015.20 | 3,296,423.10 |
| Quezon City | 3,624,980.60 | 3,025,114.80 |
For 2016, the total basic and additional community tax payable by Salariosa is –
| A. 7,074
B. 7,679 |
C. 1,363
D. 5,005 |
- Using the information in No.33, the community tax for 2016 is payable on or before
| A. April 15, 2015
B. December 31, 2016 |
C. February 28, 2016
D. January 31, 2016 |
- Using information from No. 33, if the tax is paid on April 30, 2016, the amount payable is
| A. 5,205.20
B. 6,206.20 |
C. 5,405.40
D. Cannot be determined |
Good Luck!!
Nikki G. Estores, CPA, MBA
Key Answers:
- True
- False
- True
- True
- False
- False
- False
- False
- False
- False
- True
- True
- False
- False
- True
- False
- True
- True
- False
- True
- False
- False
- False
- True
- True
True or false:
1-10 other percentage tax
11 to 12 remedies
13 to 18 BIR and CTA
19 to 25 Community Tax
MC
1-8 other percentage taxes
9-23 remedies
24-30 BIR and CTA
31-35 community tax
Botany Multiple Choice Questions With Answers
Botany Multiple Choice Questions With Answers
Solved objective questions botany
multiple choice questions answers for botany for pre medical Exams
1. Syconus fruit develops from:
(a) catkin
(b) verticillaster
(c) hypanthodium
(d) cyathium
Ans. (c)
2. The minimum time interval required between application of stimulus and production of
response is
(a) presentation time
(b) relaxation time
(c) conversion time
(d) reaction time
Ans. (d)
3. Father of Indian green revolution is:
(a) B.P. Pal
(b) Norman Borlaug
(c) M.S. Swaminathan
(d) K.C. Mehta
Ans. (c)
4. Chromosome end is called
(a) telomere
(b) centromere
(c) satellite
(d) maramere
Ans. (a)
5. A medicinal plant is:
(a) Cryptostegia grandiflora
(b) Coffea arabica
(c) Rauwolffia serpentina
(d) Brassica oleracea
Ans. (c)
6. Polyribosomes are aggregates of:
(a) ribosomes and r-RNA
(b) only r-RNA
(c) peroxisomes
(d) several ribosomes held together by string of m-RNA
Ans. (d)
7. Number of ATP molecules produced by each NADPH is:
(a) 3
(b) 2
(c) 1
(d) 5
Ans. (a)
8. The term protoplasm was coined by:
(a) Robert Hooke
(b) Dujardin
(c) Robert Brown
(d) Purkinje
Ans. (d)
9. Final electron acceptor in respiration is
(a) hydrogen
(b) oxygen
(c) cytochrome
(d) dehydrogenase
Ans. (b)
10. An algae rich in proteins is:
(a) Chlorella
(b) Oscillatoria
(C) Ulothrix
(d) Spirogyra
Ans. (a)
11. The loading of phloem during translocation means:
(a) elongation of phloem cells
(b) separation of phloem parenchyma
(c) strengthening of phloem fibers
(d) pouring of sugars into phloem
Ans. (d)
12. Both heterospory and circinate ptyxis occur in:
(a) Dryopteris
(b) Pinus
(c) Cycas
(d) Funaria
Ans. (c)
13. In C3 plants first stable product photosynthesis during dark reaction is:
(a) PGA
(b) Pyruvic acid
(c) RuBP
(d) Oxalo acetic acid
Ans. (a)
14. Plant hormone causing abscission of leaves, senescence, bud dormancy and inhibition of cell
division is
(a) IAA
(b) ethylene
(c) cytokinins
(d) ABA
Ans. (d)
15. Chlorosis in plants occurs due to:
(a) high sunlight intensity
(b) low sunlight intensity
(c) absorption of yellow pigment from the soil
(d) deficiency of Mg and Fe in the soil
Ans. (d)
16. Vascular cryptogams are:
(a) Bryophytes
(b) Spermatophytes
(c) Pteridophyte
(d) None of these
Ans. (c)
17. Gasohol is:
(a) 20 % ethanol + 80 % petrol
(b) 20 % ethanol + 70% petrol + 10% kerosene
(c) 10% ethanol + 80% petrol+ 10% kerosene
(d) 10 % ethanol + 90 % petrol
Ans. (a)
18. Phytochrome is involved in:
(a) phototropism
(b) photorespiration
(c) photoperiodism
(d) geotropism
Ans. (c)
19. Which one of the following essential elements can land plants normally obtain directly from
air?
(a) Hydrogen
(c) Nitrogen
(b) Carbon
(d) Phosphorus
Ans. (b)
20. Main function of lenticel is:
(a) transpiration
(b) guttation
(c) bleeding
(d) gaseous exchange
Ans. (d)
21. In a-helix secondary structure, hydrogen bonds lie between amide group of one amino acid
and carbonyl group of:
(a) 2nd amino acid
(b) 3rd amino acid
(c) fourth amino acid
(d) fifth amino acid
Ans. (c)
22. Pomato is somatic hybrid between:
(a) poppy and potato
(b) potato and tomato
(c) poppy and tamarind
(d) poppy and tomato
Ans. (b)
23. Which of the following is used to determine the rate of transpiration in plants?
(a) Porometer/hygrometer
(b) Potometers
(c) Auxanometer
(d) Tensiometer/barometer
Ans. (b)
24. The protein part of enzyme is:
(a) prosthatic group
(b) apoenzyme
(c) holoenzyme
(d) zymogen
Ans. (b)
25. Pesticides comprise
(a) herbicides and insecticides
(b) insecticides
(c) insecticides, nematecides and rodenticides
(d) fungicides, herbicides, insecticides, nematecides and rodenticides
Ans. (d)
MEDICAL SURGICAL Nursing Examination Correct answers
- As a registered nurse, Dervid knew that the first thing that he will do at the scene is [3]A. Stay with the person, Encourage her to remain still and Immobilize the leg while
While waiting for the ambulance.
B. Leave the person for a few moments to call for help.
C. Reduce the fracture manually.
D. Move the person to a safer place.* The old woman is in the middle of a train railway. It is very unsafe to immobilize here legs and remain still at the middle of a railway considering that a train might come anytime while waiting for an ambulance. Safety is the utmost importance at this point. If letter D is not among the choices and the situation is a little less dangerous, the answer will be A. Remember that in all cases of emergencies, removing the victim from the scene to a much safer place is a priority.2. Dervid suspects a hip fracture when he noticed that the old woman’s leg is [4]
A. Lengthened, Abducted and Internally Rotated.
B. Shortened, Abducted and Externally Rotated.
C. Shortened, Adducted and Internally Rotated.
D. Shortened, Adducted and Externally Rotated.* SADDER should be your keyword. A hip fracture will produce a SHORTENED, ADDUCTED AND EXTERNALLY ROTATED extremity. Treatment will evolve in casting the leg and putting it in a EXTENSION, NEUTRALLY POSITIONED and SLIGHT INTERNAL ROTATION. In Hip prosthesis, The nurse should maintain the client’s leg in FLEXION, EXTERNAL ROTATION and ABDUCTION to prevent the dislocation of the prosthesis from the acetabulum. Take note of the difference because I mistakenly answered the LATTER in casting a hip fracture thinking that it is similar to a the leg positioning in hip dislocation. Just imagine a patient with a cast that has his leg in ABDUCTION, EXTERNAL ROTATION AND FLEXION. It will cause flexion contractures.
3. The old woman complains of pain. John noticed that the knee is reddened, warm to touch and swollen. John interprets that this signs and symptoms are likely related to [2]
A. Infection
C. Thrombophlebitis
B. Inflammation
D. Degenerative disease* After a trauma, Inflammation will start almost instantly. Infection occurse 24-48 hours after bone fracture and not immediately. Thrombophlebitis occurs within 4 to 7 days of hospitalization after prolonged immobilization. There is no evidence that the client has a degenerative disease and degenerative diseases will manifest in variety of ways and not after a trauma.
4. The old woman told John that she has osteoporosis; Dervid knew that all of the following factors would contribute to osteoporosis except [4]
A. Hypothyroidism
B. End stage renal disease
C. Cushing’s Disease
D. Taking Furosemide and Phenytoin.* B,C,D all contributes to bone deminiralization except HYPOTHYROIDISM. Hyperthyroidism will contribute to bone deminiralization as well as Hyperparathyroidism due to the increase in PTH, It will cause the movement of calcium from the bone to the blood causing HYPERCALCEMIA. ESRD will cause increase in PHOPHSATE due to its poor excretion. The amount of phosphate is inversely proportional to the amount of calcium. Cushing disease promotes bone demineralization as well as medications like diuretics and anti convulsants.
5. Martha, The old woman was now Immobilized and brought to the emergency room. The X-ray shows a fractured femur and pelvis. The ER Nurse would carefully monitor Martha for which of the following sign and symptoms? [3]
A. Tachycardia and Hypotension
B. Fever and Bradycardia
C. Bradycardia and Hypertension
D. Fever and Hypertension* hemorrhage results in severing of the vascular supply of the bone of the femur and the pelvis due to the fracture leading to bleeding causing the s/s of tachycardia and hypotension.
SITUATION: Mr. D. Rojas, An obese 35 year old MS Professor of OLFU Lagro is admitted due to pain in his weight bearing joint. The diagnosis was Osteoarthritis.
6. As a nurse, you instructed Mr. Rojas how to use a cane. Mr. Rojas has a weakness on his right leg due to self immobilization and guarding. You plan to teach Mr. Rojas to hold the cane [4]
A. On his left hand, because his right side is weak.
B. On his left hand, because of reciprocal motion.
C. On his right hand, to support the right leg.
D. On his right hand, because only his right leg is weak.* Reciprocal motion is a very important aspect of rehabilitation. Mr. Rojas has a weakness on his right leg. If a human moves his right leg, the left arm will accompany the movement of the right leg. That is what you call RECIPROCAL MOTION which is innate, natural and required to maintain balance. Mr. Rojas has weakness in his RIGHT LEG. If we put the cane on his right arm, The client will then be left UNSUPPORTED when he use his stronger leg [LEFT LEG] and stand with his weaker leg [RIGHT LEG] due to the fact that the opposite arm must accompany the movement of the opposite leg [RIGHT ARM]. In a more easier term, Always put the cane on the opposite of the weaker side. A is not correct because the client is NOT hemiplegic and will never be correct to reason out why the cane must always be at the opposite of the weaker side, it will always be due to reciprocal motion.
7. You also told Mr. Rojas to hold the cane [4]
A. 1 Inches in front of the foot.
B. 3 Inches at the lateral side of the foot.
c. 6 Inches at the lateral side of the foot.
D. 12 Inches at the lateral side of the foot.* Remove option A, the client will kick off the cane if it was in the front of the foot. Remove option D because that is too far and will cause the cane to poorly support the client because the side, not the tip, is touching the ground. At 3 inches, imagine how short it is and will cause a very poor supporting base. The correct answer is anywhere from 6 to 10 inches for both crutches and cane.
8. Mr. Rojas was discharged and 6 months later, he came back to the emergency room of the hospital because he suffered a mild stroke. The right side of the brain was affected. At the rehabilitative phase of your nursing care, you observe Mr. Rojas use a cane and you intervene if you see him [4]
A. Moves the cane when the right leg is moved.
B. Leans on the cane when the right leg swings through.
C. keeps the cane 6 Inches out to the side of the right foot.
D. Holds the cane on the right side.* If the right side of the brain is affected, weakness will always be CONTRALATERAL and therefore, Mr. Rojas will have weakness on his left side. Earlier I told you that cane is held on the opposite side of the weaker side, which in this situation, will be on the RIGHT. Imagine if the client moves his RIGHT LEG together witht the RIGHT CANE, it already violated the LAW OF RECIPROCAL MOTION. Moving the right leg will require Mr. Rojas to move his left arm and not the cane, which is on his right.
SITUATION: Alfred, a 40 year old construction worker developed cough, night sweats and fever. He was brought to the nursing unit for diagnostic studies. He told the nurse he did not receive a BCG vaccine during childhood
9. The nurse performs a Mantoux Test. The nurse knows that Mantoux Test is also known as [1]
A. PPD
B. PDP
C. PDD
D. DPP* PPD stands for purified protein derivative. It is used to check for TB exposure. All clients who had BCG need not perform this test because they will always be + .
10. The nurse would inject the solution in what route? [1]
A. IM
B. IV
C. ID
D. SC* A Wheal is created intradermally and then it is marked and timed. reading will be done within 2 to 3 days.
11. The nurse notes that a positive result for Alfred is [2]
A. 5 mm wheal
B. 5 mm Induration
C. 10 mm Wheal
D. 10 mm Induration* 10 mm Induration [ redness ] is considered positive for individuals with competitive immune response. Wheals are not measured, they will not anymore enlarge. A 5 mm induration is considered positive for patients with AIDS or immunocompromised.
12. The nurse told Alfred to come back after [2]
A. a week
B. 48 hours
C. 1 day
D. 4 days* Clients are asked to comeback within 2 to 3 days for the reading.
13. Mang Alfred returns after the Mantoux Test. The test result read POSITIVE. What should be the nurse’s next action? [3]
A. Call the Physician
B. Notify the radiology dept. for CXR evaluation
C. Isolate the patient
D. Order for a sputum exam* The nurse has no authority order the radiology department for a chest x ray evaluation nor order for a sputum exam. The client need not be isolated because Mantoux test do not determine the activeness of the disease.
14. Why is Mantoux test not routinely done in the Philippines? [2]
A. It requires a highly skilled nurse to perform a Mantoux test
B. The sputum culture is the gold standard of PTB Diagnosis and it will definitively determine the extent of the cavitary lesions
C. Chest X Ray Can diagnose the specific microorganism responsible for the lesions
D. Almost all Filipinos will test positive for Mantoux Test* almost all filipinos tests positive for mantoux test due to the fact that BCG are required and TB exposure in the country is fullminant. All individuals vaccinated with BCG will test POSITIVE for mantoux test all their lives.
15. Mang Alfred is now a new TB patient with an active disease. What is his category according to the DOH? [1]
A. I
B. II
C. III
D. IV* Category I patients are those with a newly diagnosed TB whose sputum culture are positive. II are for those who have relapses while III are those with negative sputum culture but positive chest x ray, or PTB Minimal.
16. How long is the duration of the maintenance phase of his treatment? [2]
A. 2 months
B. 3 months
C. 4 months
D. 5 months* Clients in category I will have 2 months INTENSIVE and 4 months maintenance treatment.
17. Which of the following drugs is UNLIKELY given to Mang Alfred during the maintenance phase? [3]
A. Rifampicin
B. Isoniazid
C. Ethambutol
D. Pyridoxine* Drugs given in the maintenance phase includes Rifampicin and Isoniazid. Ethambutol is given on the intensive phase along with rifampicin and isoniazid. Pyridoxine is given during Isoniazid treatment to prevent peripheral neuritis in contrast in treatment of parkinson’s with levodopa, Pyridoxine or VB6 is restricted.
18. According to the DOH, the most hazardous period for development of clinical disease is during the first [4]
A. 6-12 months after
B. 3-6 months after
C. 1-2 months after
D. 2-4 weeks after* According to the department of health, the most hazardous period for development of clinical disease is during the first 6 to 12 months.
19. This is the name of the program of the DOH to control TB in the country [2]
A. DOTS
B. National Tuberculosis Control Program
C. Short Coursed Chemotherapy
D. Expanded Program for Immunization* National tuberculosis control program is the name of the program of the DOH to control and eradicate TB in the country. DOTS refers to the STRATEGY used by the department in treating TB patients. EPI is not a program for TB control although BCG is one of the vaccine given in this program.
20. Susceptibility for the disease [ TB ] is increased markedly in those with the following condition except [3]
A. 23 Year old athlete with diabetes insipidus
B. 23 Year old athlete taking long term Decadron therapy and anabolic steroids
C. 23 Year old athlete taking illegal drugs and abusing substances
D. Undernourished and Underweight individual who undergone gastrectomy* Nutrition, Long term immunosupression and drug abuse are all factors that affects the resistance of an individual in acquiring communicable diseases. Other factors includes extremes of ages, poor environmental sanitation, poverty and poor living conditions. Diabetes insipidus does not, in anyway alter a persons immune response.
21. Direct sputum examination and Chest X ray of TB symptomatic is in what level of prevention? [1]
A. Primary
B. Secondary
C. Tertiary
D. Quarterly* National board exam loves asking about level of prevention. Mastery with the primary, secondary and tertiary levels of prevention is a must. All diagnostic, case finding and treatment belongs to the secondary level of prevention.
SITUATION: Michiel, A male patient diagnosed with colon cancer was newly put in colostomy.
22. Michiel shows the BEST adaptation with the new colostomy if he shows which of the following? [2]
A. Look at the ostomy site
B. Participate with the nurse in his daily ostomy care
C. Ask for leaflets and contact numbers of ostomy support groups
D. Talk about his ostomy openly to the nurse and friends* Actual participation conveys positive acceptance and adjustment to the altered body image. Although looking at the ostomy site also conveys acceptance and adjustment, Participating with the nurse to his daily ostomy care is the BEST adaptation a client can make during the first few days after colostomy creation.
23. The nurse plans to teach Michiel about colostomy irrigation. As the nurse prepares the materials needed, which of the following item indicates that the nurse needs further instruction? [3]
A. Plain NSS / Normal Saline
B. K-Y Jelly
C. Tap water
D. Irrigation sleeve* The colon is not sterile, nor the stomach. Tap water is used in enema irrigation and not NSS. Although some clients would prefer a distilled, mineral or filtered water, NSS is not always necessary. KY Jelly is used as the lubricant for the irrigation tube and is inserted 3-4 inches into the colostomy pointing towards the RIGHT. Irrigation sleeve is use to direct the flow of the irrigated solution out of the stomach and into the bedpan or toilet.
24. The nurse should insert the colostomy tube for irrigation at approximately [3]
A. 1-2 inches
B. 3-4 inches
C. 6-8 inches
D. 12-18 inches* Remember 3-4 inches. They are both used in the rectal tube and colostomy irrigation tube insertion. 1 to 2 inches is too short and may spill out the irrigant out of the stoma. Starting from 6 inches, it would be too long already and may perforate the bowel.
25. The maximum height of irrigation solution for colostomy is [3]
A. 5 inches
B. 12 inches
C. 18 inches
D. 24 inches* If you will answer in the CGFNS and NCLEX, C will be the correct answer. According to BRUNNER AND SUDDARTHS and Saunders, The height of the colostomy irrigation bag should be hanging above the clients shoulder at around 18 inches. According to MOSBY, 12 inches should be the maximum height. According to Lippinncots, 18 inches is the maximum height. According the the board of examiners, 12 inches should be the maximum height and an 18 inches irrigant height would cause rapid flow of the irrigant towards the colostomy. Therefore, answer in the local board should only be at 12 inches.
26. Which of the following behavior of the client indicates the best initial step in learning to care for his colostomy? [1]
A. Ask to defer colostomy care to another individual
B. Promises he will begin to listen the next day
C. Agrees to look at the colostomy
D. States that colostomy care is the function of the nurse while he is in the hospital* The client made the best initial step in learning to care for his colostomy once he looks at the site. This is the start of the client’s acceptance on his altered body image. A,B and D delays learning and shows the client’s disintrest regarding colostomy care.
27. While irrigating the client’s colostomy, Michiel suddenly complains of severe cramping. Initially, the nurse would [1]
A. Stop the irrigation by clamping the tube
B. Slow down the irrigation
C. Tell the client that cramping will subside and is normal
D. Notify the physician* Stopping the irrigation will also stop the cramping and pain. During the first few days of irrigation, The client will feel pain and cramping as soon as the irirgant touches the bowel. This will start to lessen once the client got accustomed to colostomy irrigation. Slowing down the irrigation will not stop the pain. Telling the client that it is normal and will subside eventually is not acceptable when a client experiences pain. Pain is all encompasing and always a priority over anything else in most situations. Notifying the physician will not be helpful and unecessary.
28. The next day, the nurse will assess Michiel’s stoma. The nurse noticed that a prolapsed stoma is evident if she sees which of the following? [1]
A. A sunken and hidden stoma
B. A dusky and bluish stoma
C. A narrow and flattened stoma
D. Protruding stoma with swollen appearance* A refers to a retracted stoma, B refers to a stoma that is getting a very poor blood supply. C is a description of stenosis of the stoma.
29. Michiel asked the nurse, what foods will help lessen the odor of his colostomy. The nurse best response would be [4]
A. Eat eggs
B. Eat cucumbers
C. Eat beet greens and parsley
D. Eat broccoli and spinach* Kinchay and Pechay helps lessen the odor of the colostomy. Spinach, broccoli, Cabbage, Cucumbers, Patola or bottle gourd also help lessen the odor BUT are gas formers. Eggs are not recommended because they are known to cause unpleasant odors in patients with colostomy.
30. The nurse will start to teach Michiel about the techniques for colostomy irrigation. Which of the following should be included in the nurse’s teaching plan? [4]
A. Use 500 ml to 1,000 ml NSS
B. Suspend the irrigant 45 cm above the stoma
C. Insert the cone 4 cm in the stoma
D. If cramping occurs, slow the irrigation* 1 inches is equal to 2.54 cm. Convert the cm if you are not familiar. 45 cm is around 17 inches which is ideal for colostomy irrigation. Any value from 12 to 18 is accepted as the colostomy irrigant height. Tap water is used as an irrigant and is infused at room temperature. 4 cm is a little bit short for the ideal 3-4 inches. If cramping occurs STOP the irrigation and continue when is subsides.
31. The nurse knew that the normal color of Michiel’s stoma should be [1]
A. Brick Red
B. Gray
C. Blue
D. Pale Pink* The stoma should be RED in color. Pale pink are common with anemic or dehydrated patients who lost a lot of blood after an operation. Blue stoma indicated cyanosis or alteration in perfusion. Stomas are not expected to be Gray.
SITUATION: James, A 27 basketball player sustained inhalation burn that required him to have tracheostomy due to massive upper airway edema.
32. Wilma, His sister and a nurse is suctioning the tracheostomy tube of James. Which of the following, if made by Wilma indicates that she is committing an error? [2]
A. Hyperventilating James with 100% oxygen before and after suctioning
B. Instilling 3 to 5 ml normal saline to loosen up secretion
C. Applying suction during catheter withdrawal
D. Suction the client every hour* This is unecessary. Suctioning is done on PRN basis and not every hour. A,B and C are all correct processes of suctioning a tracheostomy.
33. What size of suction catheter would Wilma use for James, who is 6 feet 5 inches in height and weighing approximately 145 lbs? [2]
A. Fr. 5
B. Fr. 10
C. Fr. 12
D. Fr. 18* The height is given and it looks like james is a very tall individual. The maximum height of suction tube is used. fr 12-18 are used for adults while 6-8 are used in children.
34. Wilma is using a portable suction unit at home, What is the amount of suction required by James using this unit? [4]
A. 2-5 mmHg
B. 5-10 mmHg
C. 10-15 mmHg
D. 20-25 mmHg* A is used in pediatric clients. B is for children and C is for adults. 20-25 mmHg is too much for a portable suction unit and is not recommended.
35. If a Wall unit is used, What should be the suctioning pressure required by James? [4]
A. 50-95 mmHg
B. 95-110 mmHg
C. 100-120 mmHg
D. 155-175 mmHg* A is used in pediatric clients. B is for children and C is for adults. 155-175 mmHg is too much for a wall suction unit and is not recommended.
36. Wilma was shocked to see that the Tracheostomy was dislodged. Both the inner and outer cannulas was removed and left hanging on James’ neck. What are the 2 equipment’s at james’ bedside that could help Wilma deal with this situation? [3]
A. New set of tracheostomy tubes and Oxygen tank
B. Theophylline and Epinephrine
C. Obturator and Kelly clamp
D. Sterile saline dressing* In an emergency like this, The first thing the nurse should do is maintaining the airway patency. With the cannunlas dislodged, The stoma will stenosed and narrows giving james an obstructed airway. The nurse would insert the kelly clamp to open the stoma and lock the clamp in place to maintain it open while she uses an obturator as to prevent further stenosis of the stoma. An obturator is a part of the NGT package included by most manufacturers to guide the physician or nurses in inserting the outer cannula.
37. Which of the following method if used by Wilma will best assure that the tracheostomy ties are not too tightly placed? [2]
A. Wilma places 2 fingers between the tie and neck
B. The tracheotomy can be pulled slightly away from the neck
C. James’ neck veins are not engorged
D. Wilma measures the tie from the nose to the tip of the earlobe and to the xiphoid process.* Wilma should place 2 fingers underneath the tie to ensure that it is not too tight nor too loose. Letter D is the measurement for NGT insertion and is unrelated to tracheostomy.
38. Wilma knew that James have an adequate respiratory condition if she notices that [1]
A. James’ respiratory rate is 18
B. James’ Oxygen saturation is 91%
C. There are frank blood suction from the tube
D. There are moderate amount of tracheobronchial secretions* an RR of 18 means that James is not tachypneic and has an adequate air exchange. Oxygen saturation should be more than 95%. Frank blood is not expected in the suction tube. A slight tinged of blood in the tube is acceptable and expected. Amount of secretion are not in anyway related in assessing the respiratory condition of a person and so is the amount of blood in the tube.
39. Wilma knew that the maximum time when suctioning James is [1]
A. 10 seconds
B. 20 seconds
C. 30 seconds
D. 45 seconds* According to our reviewers and lecturers, 10 to 15 seconds is the maximum suction time. But according to almost all foreign books I read, it should only be 10 seconds at max. I prefer following Saunders,Mosby and Lippinncots when they are all united.
SITUATION : Juan Miguel Lopez Zobel Ayala de Batumbakal was diagnosed with Acute Close Angle Glaucoma. He is being seen by Nurse Jet.
40. What specific manifestation would nurse Jet see in Acute close angle glaucoma that she would not see in an open angle glaucoma? [3]
A. Loss of peripheral vision
B. Irreversible vision loss
C. There is an increase in IOP
D. Pain* There is NO PAIN in open angle glaucoma. A,B,C are all present in both glaucomas including the low pressure glaucoma. Pain is absent because the increase in intra ocular pressure is not initiated abruptly. It is gradual and progressive and will lead to unoticed loss of peripheral vision. Pain is present in acute close angle glaucoma because there is a sudden closure or narrowing of the canal of schlemm. Therefore if you will be ask what s/s is common in both, answer IRREVERSIBLE LOSS OF PERIPHERAL VISION.
41. Nurse jet knew that Acute close angle glaucoma is caused by [3]
A. Sudden blockage of the anterior angle by the base of the iris
B. Obstruction in trabecular meshwork
C. Gradual increase of IOP
D. An abrupt rise in IOP from 8 to 15 mmHg* Sudden blockage of the angle will cause s/s of acute angle closure glaucoma. B and C are all related to open angle glaucoma. D is insignificant, If the client bends or cough, IOP can increase from 8 to as much as 30 mmHg but then return again to normal.
42. Nurse jet performed a TONOMETRY test to Mr. Batumbakal. What does this test measures [1]
A. It measures the peripheral vision remaining on the client
B. Measures the Intra Ocular Pressure
C. Measures the Client’s Visual Acuity
D. Determines the Tone of the eye in response to the sudden increase in IOP.* Tonometry measures the IOP. Normal range is 8 to 21 mmHg.
43. The Nurse notices that Mr. Batumbakal cannot anymore determine RED from BLUE. The nurse knew that which part of the eye is affected by this change? [3]
A. IRIS
B. PUPIL
c. RODS [RETINA] D. CONES [RETINA]* CONES Are responsible for COLOR VISION and DAY VISION, they are very sensitive to RED LIGHT that is why red lights are use to guide the elderly towards the bathroom when they wake up to urinate. Rods are responsible for night vision. They are sensitive to blue and green lights.
44. Nurse Jet knows that Aqueous Humor is produce where? [4]
A. In the sub arachnoid space of the meninges
B. In the Lateral ventricles
C. In the Choroids
D. In the Ciliary Body* AH is produced in the CILIARY BODY. It is filtered by the trabecular meshwork into the canal of schlemm.
45. Nurse Jet knows that the normal IOP is [2]
A. 8-21 mmHg
B. 2-7 mmHg
c. 31-35 mmHg
D. 15-30 mmHg46. Nurse Jet wants to measure Mr. Batumbakal’s CN II Function. What test would Nurse Jet implement to measure CN II’s Acuity? [1]
A. Slit lamp
B. Snellen’s Chart
C. Wood’s light
D. Gonioscopy* CN II is the optic nerve. To assess its acuity, Snellen’s chart is used. Slit lamp is the one you see in the usual Eye glasses shop where in, you need to look into its binocular-like holes and the optometrist is on the other side to magnify the structures of the eye to assess gross damage and structure. Woods light is a BLUE LIGHT used in dermatology. It is use to mark lesions usually caused skin infection. Gonioscopy is the angle measurement of the eye.
47. The Doctor orders pilocarpine. Nurse jet knows that the action of this drug is to [4]
A. Contract the Ciliary muscle
B. Relax the Ciliary muscle
C. Dilate the pupils
D. Decrease production of Aqueous Humor* When the ciliary muscles contract, pupils constrict and the angle widens causing an increase AH outflow and decrease IOP. Relaxing the ciliary muscle will cause mydriasis or dilation, it is used as a pre op meds for cataract surgery and eye examination to better visualize the structures behind the iris. A and C are the same. Other drugs like betaxolol, Azetazolamide and epinephrine are the drugs used to decrease AH production.
48. The doctor orders timolol [timoptic]. Nurse jet knows that the action of this drug is [4]
A. Reduce production of CSF
B. Reduce production of Aqueous Humor
C. Constrict the pupil
D. Relaxes the Ciliary muscle* All the eye drops the ends in OLOL decreases AH production. They are BETA BLOCKERS. Watch out for the S/S of congestive heart failure, bradycardia, hypotension and arrythmias.
49. When caring for Mr. Batumbakal, Jet teaches the client to avoid [1]
A. Watching large screen TVs
B. Bending at the waist
C. Reading books
D. Going out in the sun* Bending at the waist increase IOP and should be avoided by patients with glaucoma. Treatment for glaucoma is usually for life. Patients are given laxatives to avoid stratining at the stool. They should avoid all activities that will lead to sudden IOP increase like bending at the waist. Clients should bend at the knees.
50. Mr. Batumbakal has undergone eye angiography using an Intravenous dye and fluoroscopy. What activity is contraindicated immediately after procedure? [4]
A. Reading newsprint
B. Lying down
C. Watching TV
D. Listening to the music* The client had an eye angiography. Eye angiography requires the use MYDRIATICS pre-procedure. It is done by injecting an Intravenous dye and visualizes the flow of the dye throught the fluoroscopy along the vessels of the eye. This is to assess macular degeneration or neovascularizations [ proliferation of new vessels to compensate for continuous rupture and aneurysms of the existing vessels ] Mydratics usually takes 6 hours to a day to wear off. If client uses a mydratic, his pupil wil dilate making it UNABLE to focus on closer objects. Only A necessitates the constriction of the pupil to focus on a near object, which Mr.Batumbakals eye cannot perform at this time.
51. If Mr. Batumbakal is receiving pilocarpine, what drug should always be available in any case systemic toxicity occurs? [2]
A. Atropine Sulfate
B. Pindolol [Visken] C. Naloxone Hydrochloride [Narcan] D. Mesoridazine Besylate [Serentil]* Atropine sulfate is use to reverse the effects of systemic toxicity of pilocarpine. Narcan is the antidote for respiratory depression caused by narcotics like morphine and demerol. Serentil is an antipsychotic.
SITUATION : Wide knowledge about the human ear, it’s parts and it’s functions will help a nurse assess and analyze changes in the adult client’s health.
52. Nurse Budek is doing a caloric testing to his patient, Aida, a 55 year old university professor who recently went into coma after being mauled by her disgruntled 3rd year nursing students whom she gave a failing mark. After instilling a warm water in the ear, Budek noticed a rotary nystagmus towards the irrigated ear. What does this means? [2]
A. Indicates a CN VIII Dysfunction
B. Abnormal
C. Normal
D. Inconclusive* Rotary nystagmus towards the ear [ if warm ] or away from it [ if cool ] is a normal response. It indicates that the CN VIII Vestibular branch is still intact.
53. Ear drops are prescribed to an infant, The most appropriate method to administer the ear drops is [2]
A. Pull the pinna up and back and direct the solution towards the eardrum
B. Pull the pinna down and back and direct the solution onto the wall of the canal
C. Pull the pinna down and back and direct the solution towards the eardrum
D. Pull the pinna up and back and direct the solution onto the wall of the canal* Instillation for children under age 3 is CHILD : DOWN AND BACK. Directing the solution towards the eardrum might perforate or damage the infants fragile tympanic membrane.
54. Nurse Budek is developing a plan of care for a patient with Menieres disease. What is the priority nursing intervention in the plan of care for this particular patient? [1]
A. Air, Breathing, Circulation
B. Love and Belongingness
C. Food, Diet and Nutrition
D. Safety* Although A is priority according to maslow, it is not specific in clients with menieres disease. The client has an attack of incapacitating vertigo and client is high risk for injury due to falls. The client will perceive the environment moving due to disruption of the vestibular system of the ear’s normal function.
55. After mastoidectomy, Nurse Budek should be aware that the cranial nerve that is usually damage after this procedure is [3]
A. CN I
B. CN II
C. CN VII
D. CN VI* The facial nerve branches from the back of the ear and spread towards the mouth, cheeks, eyelids and almost all over the face. In mastoidectomy, Incision is made at the back of the ears to clear the mastoid air cells of the mastoid bone that is infected. Clients are at very high risk for CN VII injury because of this. Observation during the post op after mastoidectomy should revolve around assessing the client’s CN VII integrity.
56. The physician orders the following for the client with Menieres disease. Which of the following should the nurse question? [1]
A. Dipenhydramine [Benadryl] B. Atropine sulfate
C. Out of bed activities and ambulation
D. Diazepam [Valium]* Clients with acute attack of Menieres are required to have bed rest with side rails up to prevent injury. During periods of incapacitating vertigo, patient’s eyes will have rotary nystagmus because of the perception that the environment is moving. Patients are also observed to hold the side rails so hard because they thought they are going to fall. Benadryl is used in menieres due to its anti histamine effects. B and D are used to allay clients anxiety and apprehension.
57. Nurse Budek is giving dietary instruction to a client with Menieres disease. Which statement if made by the client indicates that the teaching has been successful? [1]
A. I will try to eat foods that are low in sodium and limit my fluid intake
B. I must drink atleast 3,000 ml of fluids per day
C. I will try to follow a 50% carbohydrate, 30% fat and 20% protein diet
D. I will not eat turnips, red meat and raddish* Clients are advised to limite fluid and sodium intake as not to further cause accumulation of fluids in the endolymph. C is the diabetic diet. D are the foods not eaten when clients are about to have a guaiac test.
58. Peachy was rushed by his father, Steven into the hospital admission. Peachy is complaining of something buzzing into her ears. Nurse Budek assessed peachy and found out It was an insect. What should be the first thing that Nurse Budek should try to remove the insect out from peachy’s ear? [3] A. Use a flashlight to coax the insect out of peachy’s ear
B. Instill an antibiotic ear drops
C. Irrigate the ear
D. Pick out the insect using a sterile clean forceps* Lights can coax the insect out of the child’s ear. This is the first measure employed in removing a live insect from the childs ear. Insects are not removed ALIVE, therfore, C and D are both wrong. Antibiotics has no effects since the child do not have any infection. If the insect did not come out after coaxing it with light, 2nd measure employs instillation of diluted alcohol or a mineral oil to kill the insect which is then removed using letter D.
59. Following an ear surgery, which statement if heard by Nurse Budek from the patient indicates a correct understanding of the post operative instructions? [2]
A. Activities are resumed within 5 days
B. I will make sure that I will clean my hair and face to prevent infection
C. I will use straw for drinking
D. I should avoid air travel for a while* After ear surgery, Air travel is halted for a while. There is no need to restrict activities. The client is not allowed to shower for 7 days, Patient can clean himself using a sponge bath but avoids to shampoo or wet the face and hair. Straws are not used after ear surgery because sips increases pressure in the ear.
60. Nurse Budek will do a caloric testing to a client who sustained a blunt injury in the head. He instilled a cold water in the client’s right ear and he noticed that nystagmus occurred towards the left ear. What does this finding indicates? [2]
A. Indicating a Cranial Nerve VIII Dysfunction
B. The test should be repeated again because the result is vague
C. This is Grossly abnormal and should be reported to the neurosurgeon
D. This indicates an intact and working vestibular branch of CN VIII* Refer to #52
61. A client with Cataract is about to undergo surgery. Nurse Budek is preparing plan of care. Which of the following nursing diagnosis is most appropriate to address the long term need of this type of patient? [1]
A. Anxiety R/T to the operation and its outcome
B. Sensory perceptual alteration R/T Lens extraction and replacement
C. Knowledge deficit R/T the pre operative and post operative self care
D. Body Image disturbance R/T the eye packing after surgery* Patient do not have signs of anxiety, knowledge deficit or body image disturbance. The safest answer is B because before cataract surgery, client has a blurry vision that alters his sensory perception. After surgery client will be APHAKIC and again, will have an alteration in perception until the aphakic glass is available.
62. Nurse Budek is performing a WEBERS TEST. He placed the tuning fork in the patients forehead after tapping it onto his knee. The client states that the fork is louder in the LEFT EAR. Which of the following is a correct conclusion for nurse Budek to make? [4]
A. He might have a sensory hearing loss in the left ear
B. Conductive hearing loss is possible in the right ear
C. He might have a sensory hearing loss in the right hear, and/or a conductive hearing loss in the left ear.
D. He might have a conductive hearing loss in the right ear, and/or a sensory hearing loss in the left ear.* Webers test assesses both air and bone conduction but is not decisive enough to judge which is which. When the tuning fork is tapped on the examiners knee, it is placed in the forehead or above the clients top lip. If the sound lateralizes towards the left ear, its either, the client has conductive hearing loss towards the left OR a sensory hearing loss in the right ear.
Why does conductive hearing produces a louder sound ?
Conductive hearing loss is a type of hearing loss where in, the ossicles hypertrophies, as in OTOSCLEROSIS. The stape is permanently attached to the oval window and it would not bulge causing a permanent LOUD conduction of sound using the bone because the stapes is already attached permanently into the inner ear. In a normal stape, It will not touch the oval window unless a sound is transmitted. [ refer to the ear anatomy and physiology ]
63. Aling myrna has Menieres disease. What typical dietary prescription would nurse Budek expect the doctor to prescribe? [2]
A. A low sodium , high fluid intake
B. A high calorie, high protein dietary intake
C. low fat, low sodium and high calorie intake
D. low sodium and restricted fluid intake* Refer to # 57
SITUATION : [ From DEC 1991 NLE ] A 45 year old male construction worker was admitted to a tertiary hospital for incessant vomiting. Assessment disclosed: weak rapid pulse, acute weight loss of .5kg, furrows in his tongue, slow flattening of the skin was noted when the nurse released her pinch.
Temperature: 35.8 C , BUN Creatinine ratio : 10 : 1, He also complains for postural hypotension. There was no infection.
64. Which of the following is the appropriate nursing diagnosis? [1]
A. Fluid volume deficit R/T furrow tongue
B. Fluid volume deficit R/T uncontrolled vomiting
C. Dehydration R/T subnormal body temperature
D. Dehydration R/T incessant vomiting65. Approximately how much fluid is lost in acute weight loss of .5kg? [1]
A. 50 ml
B. 750 ml
C. 500 ml
D. 75 ml* 1L = 1kg
66. Postural Hypotension is [1]
A. A drop in systolic pressure less than 10 mmHg when patient changes position from lying to sitting.
B. A drop in systolic pressure greater than 10 mmHg when patient changes position from lying to sitting
C. A drop in diastolic pressure less than 10 mmHg when patient changes position from lying to sitting
D. A drop in diastolic pressure greater than 10 mmHg when patient changes position from lying to sitting* Postural hypotension is exhibited by a drop of systolic BP when client changes position from lying to sitting or standing.
67. Which of the following measures will not help correct the patient’s condition [1]
A. Offer large amount of oral fluid intake to replace fluid lost
B. Give enteral or parenteral fluid
C. Frequent oral care
D. Give small volumes of fluid at frequent interval* The patient will not tolerate large amount of oral fluid due to incessant vomiting.
68. After nursing intervention, you will expect the patient to have [1]
1. Maintain body temperature at 36.5 C
2. Exhibit return of BP and Pulse to normal
3. Manifest normal skin turgor of skin and tongue
4. Drinks fluids as prescribedA. 1,3
B. 2,4
C. 1,3,4
D. 2,3,4* Client need not maintain a temperature of 36.5 C. As long as the client will exhibit absence of fever or hypothermia, Nursing interventions are successfully carried out.
SITUATION: [ From JUN 2005 NLE ] A 65 year old woman was admitted for Parkinson’s Disease. The charge nurse is going to make an initial assessment.
69. Which of the following is a characteristic of a patient with advanced Parkinson’s disease? [1]
A. Disturbed vision
B. Forgetfulness
C. Mask like facial expression
D. Muscle atrophy* Parkinson’s disease does not affect the cognitive ability of a person. It is a disorder due to the depletion of the neurotransmitter dopamine which is needed for inhibitory control of muscular contractions. Client will exhibit mask like facial expression, Cog wheel rigidity, Bradykinesia, Shuffling gait etc. Muscle atrophy does not occur in parkinson’s disease nor visual disturbances.
70. The onset of Parkinson’s disease is between 50-60 years old. This disorder is caused by [1]
A. Injurious chemical substances
B. Hereditary factors
C. Death of brain cells due to old age
D. Impairment of dopamine producing cells in the brain* Dopamine producing cells in the basal ganglia mysteriously deteriorates due to unknown cause.
71. The patient was prescribed with levodopa. What is the action of this drug? [1]
A. Increase dopamine availability
B. Activates dopaminergic receptors in the basal ganglia
C. Decrease acetylcholine availability
D. Release dopamine and other catecholamine from neurological storage sites* Levodopa is an altered form of dopamine. It is metabolized by the body and then converted into dopamine for brain’s use thus increasing dopamine availability. Dopamine is not given directly because of its inability to cross the BBB.
72. You are discussing with the dietician what food to avoid with patients taking levodopa? [3]
A. Vitamin C rich food
B. Vitamin E rich food
C. Thiamine rich food
D. Vitamin B6 rich food* Vitamin b6 or pyridoxine is avoided in patients taking levodopa because levodopa increases vitamin b6 availability leading to toxicity.
73. One day, the patient complained of difficulty in walking. Your response would be [2]
A. You will need a cane for support
B. Walk erect with eyes on horizon
C. I’ll get you a wheelchair
D. Don’t force yourself to walk* Telling the client to walk erect neglects the clients complain of difficulty walking. Wheelchair is as much as possible not used to still enhance the client’s motor function using a cane. Telling the client not to force himself walk is non therapeutic. The client wants to talk and we should help her walk using devices such as cane to provide support and prevent injuries.
SITUATION: [ From JUN 2005 NLE ] Mr. Dela Isla, a client with early Dementia exhibits thought process disturbances.
74. The nurse will assess a loss of ability in which of the following areas? [2]
A. Balance
B. Judgment
C. Speech
D. Endurance* Perhaps this question from the JUN 2005 NLE is finding what should the nurse NOT assess because A,B and C are all affected by dementia except ENDURANCE, which is normally lost as a person ages. There will be alteration in balance because coordination and spatial ability gradually deteriorates. Judgement is also impaired as the client exhibits poor memory and concentration. Speech is severely altered. Client develops aphasia, agnosia and in at end, will lose all the ability to speak without any manifestation of motor problem.
75. Mr. Dela Isla said he cannot comprehend what the nurse was saying. He suffers from: [1]
A. Insomnia
B. Aphraxia
C. Agnosia
D. Aphasia* This question was RECYCLED during the last 2006 NLE. Aphasia is the INABILITY to speak or understand. Aphraxia is the inability to carry out purposeful tasks. Agnosia is the inability to recognize familiar objects. Insomnia is the inability to fall asleep.
76. The nurse is aware that in communicating with an elderly client, the nurse will [1]
A. Lean and shout at the ear of the client
B. Open mouth wide while talking to the client
C. Use a low-pitched voice
D. Use a medium-pitched voice* Talk as normally as possible. The client has dementia and is not deaf, although hearing might be impaired progressively as the client ages, the nurse should not alter his voice, shout or over enunciate the words. Client will preceive this things as belittling and direspectful.
77. As the nurse talks to the daughter of Mr. Dela Isla, which of the following statement of the daughter will require the nurse to give further teaching? [1]
A. I know the hallucinations are parts of the disease
B. I told her she is wrong and I explained to her what is right
C. I help her do some tasks he cannot do for himself
D. Ill turn off the TV when we go to another room* Hallucinations and delusions are part of DEMENTIA and is termed as ORGANIC PSYCHOSES. The daughter needs further teaching when she try to bargain, explain, dissprove or advice a client with dementia. the client has an impaired judgement, concentration, thinking, reasoning and memory and has inability to learn that is why institutional care for clients with dementia is always required. The disease is progressive and is not preventable.
78. Which of the following is most important discharge teaching for Mr. Dela Isla [2]
A. Emergency Numbers
B. Drug Compliance
C. Relaxation technique
D. Dietary prescription* Drug compliance is the most important teaching for Mr. Dela Isla to prevent the symptoms of psychoses and to control behavioral symptoms.
SITUATION : Knowledge of the drug PROPANTHELINE BROMIDE [Probanthine] Is necessary in treatment of various disorders.
79. What is the action of this drug? [4]
A. Increases glandular secretion for clients affected with cystic fibrosis
B. Dissolve blockage of the urinary tract due to obstruction of cystine stones
C. Reduces secretion of the glandular organ of the body
D. Stimulate peristalsis for treatment of constipation and obstruction* Probanthine reduces glandular secretion of the different organs of the body. It is an anti-cholinergic / anti spasmodic drug and still, not approved by the FDA for treatment with various disorders. Probanthine exerts benifits for treatment of severe diaphoresis, Ulcers due to over secretion of HCl, Spasms, PANCREATITS [ Please take note ] and other conditions of over secretion.
80. What should the nurse caution the client when using this medication [4]
A. Avoid hazardous activities like driving, operating machineries etc.
B. Take the drug on empty stomach
C. Take with a full glass of water in treatment of Ulcerative colitis
D. I must take double dose if I missed the previous dose* Like other anti cholinergics/ anti spasmodics, Probanthine causes dizziness, blurred vision and drowsiness. Patients are advised not to drive, operate heavy machineries etc. Probanthine should be taken with a full glass of water but is contraindicated with inflammatory bowel diseases like ulcerative colitis and chrons disease. Drug is taken with meals to prevent irritation of the gastric mucosa and client is advised not to take double dose in case the previous dose is missed.
81. Which of the following drugs are not compatible when taking Probanthine? [4]
A. Caffeine
B. NSAID
C. Acetaminophen
D. Alcohol* Probanthine on its own already cause severe dizziness and drowsiness. Addition of alcohol will further depress the CNS and might lead to potentiation of the side effects of probanthine. A,B,C are not contraindicated when taking probanthine EXCEPT when the disease entity itself do not permit intake of such drugs like in Pancreatitis, NSAID is not use. Pain is controlled using probanthine and meperidine [ demerol ] in cases of acute pancreatitis.
82. What should the nurse tell clients when taking Probanthine? [4]
A. Avoid hot weathers to prevent heat strokes
B. Never swim on a chlorinated pool
C. Make sure you limit your fluid intake to 1L a day
D. Avoid cold weathers to prevent hypothermia* Probanthine alters the ability of the body to secrete sweat. Telling the client to avoid hot weathers to prevent heat stroke is appropriate. Chlorinated pool is discouraged for patients undergoing skin radiation for skin cancer to prevent breakdown. Limiting fluid intake and avoiding cold weather are unecessary teachings.
83. Which of the following disease would Probanthine exert the much needed action for control or treatment of the disorder? [4]
A. Urinary retention
B. Peptic Ulcer Disease
C. Ulcerative Colitis
D. Glaucoma* Probanthine is use in PUD to decrease gastric acid secretion. It is also used in Pancreatitis to rest the pancreas from over secretion of pancreatic enzyme and to prevent pain and spasm. Probanthine is contraindicated in clients with UC, Glaucoma. Since this is an anti spasmodic drug, Urinary retention will be a side effect.
SITUATION : [ From DEC 2000 NLE ] Mr. Franco, 70 years old, suddenly could not lift his spoons nor speak at breakfast. He was rushed to the hospital unconscious. His diagnosis was CVA.
84. Which of the following is the most important assessment during the acute stage of an unconscious patient like Mr. Franco? [1]
A. Level of awareness and response to pain
B. Papillary reflexes and response to sensory stimuli
C. Coherence and sense of hearing
D. Patency of airway and adequacy of respiration* Airway is always a priority in an unconscious client. Refer to maslows hierarchy of needs for prioritization. Although this is not absolute, knowledge with pathophysiology will best lead you to the correct option.
85. Considering Mr. Franco’s conditions, which of the following is most important to include in preparing Franco’s bedside equipment? [1]
A. Hand bell and extra bed linen
B. Sandbag and trochanter rolls
C. Footboard and splint
D. Suction machine and gloves* CVA patients has impaired swallowing ability and if not absent, depressed gag reflex. Client is at the highest risk for aspiration when eating or drinking that is why NGT is initiated early in the hospitalization. B prevent EXTERNAL ROTATION in hip or leg fracture. Footboards and splint prevents FOOTDROP seen in clients that has a severed peroneal nerve or prolonged immobilization usually due to fractures that eventually puts pressure on the peroneal nerve. A is not specific to clients with CVA.
86. What is the rationale for giving Mr. Franco frequent mouth care? [1]
A. He will be thirsty considering that he is doesn’t drink enough fluids
B. To remove dried blood when tongue is bitten during a seizure
C. The tactile stimulation during mouth care will hasten return to consciousness
D. Mouth breathing is used by comatose patient and it’ll cause oral mucosa dying and cracking.* Client will be on NGT once comatose, A is removed first. Client with CVA MAY have seizures, but it is RARE enough that it must require a frequent mouth care, B is eliminated next. Knowing that tactile stimulation is done by touching the patient and not by peforming mouth care will lead you to letter D. Comatose patient uses the mouth to breathe predisposing himself to drying, cracking and infections.
87. One of the complications of prolonged bed rest is decubitus ulcer. Which of the following can best prevent its occurrence? [1]
A. Massage reddened areas with lotion or oils
B. Turn frequently every 2 hours
C. Use special water mattress
D. Keep skin clean and dry* Frequent turning and positioning is the single most important nursing intervention to prevent ulcer formation. Skins are massaged but once the areas are reddened already [ CLASS I Ulcer ], It is not anymore massaged as not to prevent further breakdown. Lotions and Oils are not use in clients skin because it will further enhance skin breakdown. Water matress are used in BURN patients to limit the pressure on the skin by his own body weight. An alternating-inflatable air matress is much more compatible in periodic distribution of pressure in clients with prolong immobility. Keeping skin clean and dry is important but not as important as frequent turning and positioning.
88. If Mr. Franco’s Right side is weak, What should be the most accurate analysis by the nurse? [4]
A. Expressive aphasia is prominent on clients with right sided weakness
B. The affected lobe in the patient is the Right lobe
C. The client will have problems in judging distance and proprioception
D. Clients orientation to time and space will be much affected* If the client’s right side is weak, the affected lobe is the LEFT LOBE which is where the broca’s area is located. Client will exhibit expressive aphasia, careful and slow movements and right sided weakness. Judging distance and proprioception is usually impaired in clients with RIGHT sided stroke. Telling that the clients orientation to time and space will be much affected is a blind shot analysis. This is seen on clients with severe and massive hemorrhagic stroke with recovery failure related to aneurysms producing long term and permanent coma. Mr. Franco right side is weak, not paralysed, meaning, some functions are still left intact.
SITUATION : [ From JUN 1988 NLE ] a 20 year old college student was rushed to the ER of PGH after he fainted during their ROTC drill. Complained of severe right iliac pain. Upon palpation of his abdomen, Ernie jerks even on slight pressure. Blood test was ordered. Diagnosis is acute appendicitis.
89. Which result of the lab test will be significant to the diagnosis? [1]
A. RBC : 4.5 TO 5 Million / cu. mm.
B. Hgb : 13 to 14 gm/dl.
C. Platelets : 250,000 to 500,000 cu.mm.
D. WBC : 12,000 to 13,000/cu.mm* WBC increases with inflammation and infection.
90. Stat appendectomy was indicated. Pre op care would include all of the following except? [1]
A. Consent signed by the father
B. Enema STAT
C. Skin prep of the area including the pubis
D. Remove the jewelries* Refer to ABDOMINAL ASSESSMENT : STORY TOWARDS MASTERY
91. Pre-anesthetic med of Demerol and atrophine sulfate were ordered to : [3]
A. Allay anxiety and apprehension
B. Reduce pain
C. Prevent vomiting
D. Relax abdominal muscle* Pain is not reduced in appendicits. Clients are not given pain medication as to assess whether the appendix ruptured. A sudden relief of pain indicates the the appendix has ruptured and client will have an emergency appendectomy and prevent peritonitis. Demerol and Atropine are used to allay client’s anxiety pre operatively.
92. Common anesthesia for appendectomy is [3]
A. Spinal
B. General
C. Caudal
D. Hypnosis* Spinal anesthesia is the most common method used in appendectomy. Using this method, Only the area affected is anesthetized preventing systemic side effects of anesthetics like dizziness, hypotension and RR depression.
93. Post op care for appendectomy include the following except [1]
A. Early ambulation
B. Diet as tolerated after fully conscious
C. Nasogastric tube connect to suction
D. Deep breathing and leg exercise* Client’s peristalsis will return in 48 to 72 hours post-op therefore, Fluid and food are witheld until the bowel sounds returns. Remember that ALL PROCUDURES requiring GENERAL and SPINAL anesthesia above the nerves that supply the intestines will cause temporary paralysis of the bowel. Specially when the bowels are traumatized during the procedure, it may take longer for the intestinal peristalsis to resume.
94. Peritonitis may occur in ruptured appendix and may cause serious problems which are [2]
1. Hypovolemia, electrolyte imbalance
2. Elevated temperature, weakness and diaphoresis
3. Nausea and vomiting, rigidity of the abdominal wall
4. Pallor and eventually shockA. 1 and 2
B. 2 and 3
C. 1,2,3
D. All of the above* Peritonitis will cause all of the above symptoms. The peritoneum has a natural tendency to GUARD and become RIGID as to limit the infective exudate exchange inside the abdominal cavity. Hypovolemia and F&E imbalance are caused by severe nausea and vomiting in patients with peritonitis because of acute pain. As inflammation and infection spreads, fever and chills will become more apparent causing elevation in temperature, weakness and sweating. If peritonitis is left untreated, Client will become severely hypotensive leading to shock and death.
95. If after surgery the patient’s abdomen becomes distended and no bowel sounds appreciated, what would be the most suspected complication? [1]
A. Intussusception
B. Paralytic Ileus
C. Hemorrhage
D. Ruptured colon* Paralytic Ileus is a mechanical bowel obstruction where in, the patients intestine fails to regain its motility. It is usually caused by surgery and anesthesia. Intusussusception, Appendicitis and Peritonitis also causes paralytic ileus.
96. NGT was connected to suction. In caring for the patient with NGT, the nurse must [2]
A. Irrigate the tube with saline as ordered
B. Use sterile technique in irrigating the tube
C. advance the tube every hour to avoid kinks
D. Offer some ice chips to wet lips* NGT after appendectomy is used not to deliver nutrients but to decompress the GI tract because of the absence of peristalsis after appendectomy. The stomach and intestines are not sterile, Clean technique is sufficient during irrigation. NGT is placed and not anymore advanced as long as it already reach the stomach. Naso enteric tubes are the one that are advanced periodically until obstruction is reached in the intestine. The client still needs assessment and confirmation of the return of peristalsis before anything is given per orem. Irrigations are done to prevent obstruction in the tube.
97. When do you think the NGT tube be removed? [1]
A. When patient requests for it
B. Abdomen is soft and patient asks for water
C. Abdomen is soft and flatus has been expelled
D. B and C only* When flatus is expelled, it means that peristalsis has returned and theres is no need for continuing the NGT.
Situation: Amanda is suffering from chronic arteriosclerosis Brain syndrome she fell while getting out of the bed one morning and was brought to the hospital, and she was diagnosed to have cerebrovascular thrombosis thus transferred to a nursing home.
98. What do you call a STROKE that manifests a bizarre behavior? [4]
A. Inorganic Stroke
B. Inorganic Psychoses
C. Organic Stroke
D. Organic Psychoses* Organic psychoses is a broad and collective term used for psychoses and schizophrenia that has an organic cause. [ Due to Creutzfeldt jakob disease, huntington, hydrocephalus, increase ICP, dementia, stroke etc. ] Manifesting signs and symptoms like hallucination, delustions, illusion, ideas of reference etc. that is similar to schizophrenia and psychoses in absence of organic causes.
99. The main difference between chronic and organic brain syndrome is that the former [2]
A. Occurs suddenly and reversible
B. Is progressive and reversible
C. tends to be progressive and irreversible
D. Occurs suddenly and irreversible* Chronic brain syndrome tends to be progressive and irreversible. Organic brain syndrome is acute and irreversible or reversible depending on the causative factor.
100. Which behavior results from organic psychoses? [4]
A. Memory deficit
B. Disorientation
C. Impaired Judgement
D. Inappropriate affect* B, C and D are all behaviors that results from organic psychoses. The questions seems to ask EXCEPTION which is A. MEMORY DEFICIT. Organic psychoses is the same as the usual psychoses except that the causative factor of organic psychoses is evidently caused by a disease process of the brain or affecting the brain. Example are patients who suffer stroke suddenly experience hallucinations and delusions. Organic psychoses is simply a psychoses that has an IDENTIFIED CAUSE. Knowing this will lead you to understand that psychoses is manifested by B,C, and D but NOT MEMORY DEFICIT.
DISCLAIMER: Answers to the above questions are all accurate and correct and researched thoroughly with all my skills and capabilities . If you disagree with any answers form the above rationales, please comment up and we can work on it.
INTERNATIONAL FACTOR MOVEMENTS AND MULTINATIONAL ENTERPRISES
INTERNATIONAL FACTOR MOVEMENTS AND
MULTINATIONAL ENTERPRISES
MULTIPLE-CHOICE QUESTIONS
- “Risk spreading” is a motive most likely to be served when firms undergo:
- Horizontal integration
- Vertical integration
- Conglomerate integration
- None of the above
- The source (home) location of most of the world’s leading multinational enterprises is:
- North America and Europe
- North America and Asia
- Europe and South America
- Europe and Asia
- Which type of multinational diversification occurs when the parent firm establishes foreign subsidiaries to produce intermediate goods going into the production of finished goods?
- Forward vertical integration
- Backward vertical integration
- Forward horizontal integration
- Backward horizontal integration
- Suppose that an American automobile manufacturer establishes foreign subsidiaries to market the automobiles. This practice is referred to as:
- Forward vertical integration
- Forward conglomerate integration
- Backward vertical integration
- Backward conglomerate integration
- Suppose that a steel manufacturer headquartered in Japan sets up a subsidiary in Canada to produce steel. This practice is referred to as:
- Conglomerate integration
- Forward vertical integration
- Backward vertical integration
- Horizontal integration
- During the 1970s, American oil companies acquired nonenergy companies (e.g., copper, auto components) in response to anticipated decreases in investment opportunities in oil. This type of diversification is referred to as:
- Horizontal integration
- Conglomerate integration
- Forward vertical integration
- Backward vertical integration
- Which of the following best refers to the outright construction or purchase abroad of productive facilities, such as manufacturing plants, by domestic residents?
- Direct investment
- Portfolio investment
- Short-term capital investment
- Long-term capital investment
- In recent years, the largest amount of U.S. direct investment abroad has occurred in:
- Central America
- South America
- Europe
- Japan
- In recent years, most foreign direct investment in the United States has come from:
- Western Europe
- Central America
- South America
- Asia
- Most U.S. direct investment abroad occurs in:
- Communications
- Petroleum
- Finance and insurance
- Manufacturing
- Most foreign direct investment in the United States occurs in:
- Public utilities
- Communications
- Manufacturing
- Mining and smelting
- Which of the following is not a significant motive for the formation of multinational enterprises?
- Avoiding tariffs by obtaining foreign manufacturing facilities
- Obtaining the benefits from overseas comparative advantages
- The acquisition of natural resource supply sources
- Subsidies granted by the home government to overseas corporations
- Suppose General Motors charges its Mexican subsidiary $1 million for auto assembly equipment that could be purchased on the open market for $800,000. This practice is best referred to as:
- International dumping
- Cost-plus pricing
- Transfer pricing
- Technological transfer
- Multinational enterprises may provide benefits to their source (home) countries because they may:
- Secure raw materials for the source country
- Shift source country technology overseas via licensing
- Export products which reflect source-country comparative disadvantage
- Result in lower wages for source-country workers
- Trade analysis involving multinational enterprises differs from our conventional trade analysis in that multinational enterprise analysis emphasizes:
- Absolute cost differentials rather than comparative cost differentials
- The international movement of factor inputs rather than finished goods
- Purely competitive markets rather than imperfectly competitive markets
- Portfolio investments rather than direct foreign investments
- Direct foreign investment has taken all of the following forms except:
- Investors buying bonds of an existing firm overseas
- The creation of a wholly owned business enterprise overseas
- The takeover of an existing company overseas
- The construction of a manufacturing plant overseas
- Which of the following would best explain why foreign direct investment might be attracted to the United States?
- U.S. price ceilings that hold down the price of energy
- U.S. wage rates exceeding the productivity of U.S. labor
- Artificially high prices being charged for the stock of U.S. firms
- Anticipations of future reductions in U.S. tariff levels
- Both Coca-Cola Co. and Pepsi-Cola Co. are multinational firms in that their soft drinks are bottled throughout the world. This practice illustrates:
- Backward vertical integration
- Forward vertical integration
- Horizontal integration
- Conglomerate integration
- The market power effect of an international joint venture can lead to welfare losses for the domestic economy unless offset by cost reductions. Which type of cost reduction would not lead to offsetting welfare gains for the overall economy?
- R&D generating improved technology
- Development of more productive machinery
- New work rules promoting worker efficiency
- Lower wages extracted from workers
- All of the following are potential advantages of an international joint venture except:
- Sharing research and development costs among corporations
- Forestalling protectionism against imports
- Establishing work rules promoting higher labor productivity
- Operating at diseconomy-of-scale output levels
- Which term best describes the New United Motor Manufacturing Co.?
- Multinational enterprise
- International joint venture
- Multilateral contract
- International commodity agreement
- Multinational enterprises:
- Increase the transfer of technology between nations
- Make it harder for nations to foster activities of comparative advantage
- Always enjoy political harmony in nations where their subsidiaries operate
- Require governmental subsidies in order to conduct worldwide operations
- Firms undertake multinational operations in order to:
- Hire low-wage workers
- Manufacture in nations they have difficulty exporting to
- Obtain necessary factor inputs
- All of the above
- Multinational enterprises face problems since they:
- Cannot benefit from the advantages of comparative advantage
- May raise political problems in countries where their subsidiaries operate
- Can invest only at home, but not overseas
- Can invest only overseas, but not at home
- American labor unions have recently maintained that U.S. multinational enterprises have been:
- Exporting American jobs by investing overseas
- Exporting American jobs by keeping investment in the United States
- Importing cheap foreign workers by shifting U.S. investment overseas
- Importing cheap foreign workers by keeping U.S. investment at home
- American labor unions accuse U.S. multinational firms of all of the following except that such firms:
- Enjoy unfair advantages in taxation
- Export jobs by shifting technology overseas
- Export jobs by shifting investment overseas
- Operate at output levels where scale economies occur
- Which of the following refers to the price charged for products sold to a subsidiary of a multinational enterprise by another subsidiary in another nation?
- Transfer pricing
- International dumping
- Price discrimination
- Full-cost pricing
- Which business device involves the creation of a new business by two or more companies, often for a limited period of time?
- Multinational enterprise
- International joint venture
- Horizontal merger
- Vertical merger
- International joint ventures can lead to welfare losses when the newly established firm:
- Adds to the preexistent productive capacity
- Enters markets neither parent could have entered individually
- Yields cost reductions unavailable to parent firms
- Gives rise to increased amounts of market power
- Multinational enterprises:
- Always produce primary goods
- Always produce manufactured goods
- Produce primary goods or manufactured goods
- None of the above
Figure 9.1 illustrates the market conditions facing Sony Company and American Company initially operating as competitors in the domestic ball-bearing market. Each firm realizes constant long-run costs, MC0 = AC0. Answer the Questions 31–37 on the basis of this information.
Figure 9.1. International Joint Venture
- Consider Figure 9.1. With Sony Company and American Company behaving as competitors, the equilibrium price and output respectively equal:
- $4 and 2 units
- $4 and 4 units
- $6 and 2 units
- $6 and 4 units
- Consider Figure 9.1. At the equilibrium price that was calculated in Question #31, domestic households attain ________ of consumer surplus.
- $4
- $8
- $12
- $16
- Consider Figure 9.1. Suppose that Sony Company and American Company jointly form a new firm, Venture Company, whose ball bearings replace the output sold by the parents in the domestic market. Assuming that Venture Company operates as a monopoly and that its costs equal MC0= AC0, the firm’s price, output, and total profit would respectively equal:
- $6, 2 units, $4
- $4, 2 units, $2
- $6, 4 units, $4
- $4, 4 units, $2
- Consider Figure 9.1. Compared to the market equilibrium position achieved by Sony Company and American Company as competitors, Venture Company as a monopoly leads to a deadweight loss of consumer surplus of:
- $2
- $4
- $6
- $8
- Consider Figure 9.1. Assume Venture Company’s formation yields new cost reductions, indicated by MC1= AC1, which result from technological advances. Realizing that Venture Company results in a deadweight loss of consumer surplus, the net effect of Venture Company’s formation on the welfare of the domestic economy is:
- No change
- Gain of $2
- Gain of $4
- Loss of $2
- Consider Figure 9.1. Refer to Question #35 and suppose the new cost reductions resulted from wage concessions accepted by Venture Company employees. The net effect of Venture Company’s formation on the welfare of the domestic economy is:
- No change
- Gain of $2
- Loss of $2
- Loss of $4
- Consider Figure 9.1. Refer to Question #35 and suppose the new cost reductions resulted from changes in work rules by Venture Company employees that led to higher worker productivity. The net effect of Venture Company’s formation on the welfare of the domestic economy is:
- No change
- Gain of $2
- Gain of $4
- Loss of $2
Figure 9.2 represents the U.S. labor market. Assume that labor and capital are the only factors of production. Also assume the initial supply schedule of labor is denoted by S0 and consists entirely of native U.S. workers. The demand schedule of labor is denoted by D0. On the basis of this information, answer the Questions 38–42.
Figure 9.2. U.S. Labor Market
- Consider Figure 9.2. At labor market equilibrium, workers are hired at a wage rate of $________ per hour, while total wages equal ________.
- 2, $12, $24
- 2, $12, $36
- 3, $9, $27
- 3, $9, $36
- Consider Figure 9.2. At labor market equilibrium, the payment to U.S. capital owners equals:
- $3
- $6
- $9
- $12
- Consider Figure 9.2. If Mexican migration to the United States results in the labor force increasing to 3 workers, denoted by schedule S1, the:
- Wage rate for native U.S. workers decreases and the payments to U.S. capital owners increases
- Wage rate for native U.S. workers decreases and the payments to U.S. capital owners decreases
- Wage rate for native U.S. workers increases and the payments to U.S. capital owners increases
- Wage rate for native U.S. workers increases and the payments to U.S. capital owners decreases
- Consider Figure 9.2. As the result of the Mexican migration to the United States:
- U.S. capital owners lose
- Native U.S. workers lose
- U.S. capital owners and native U.S. workers lose
- U.S. capital owners and native U.S. workers gain
- Consider Figure 9.2. Policies that permit Mexican workers to freely migrate to the United States would likely be resisted by:
- U.S. capital owners
- Native U.S. workers
- U.S. capital owners and native U.S. workers
- Neither U.S. capital owners nor native U.S. workers
- ________ refers to highly educated and skilled people who migrate from poor developing countries to wealthy industrial countries.
- Direct investment
- Portfolio investment
- Transfer pricing
- Brain drain
- “Guest worker” programs generally result in temporary migration of workers from:
- Wealthy nations to wealthy nations
- Wealthy nations to impoverished nations
- Impoverished nations to wealthy nations
- Impoverished nations to impoverished nations
- Mexico’s ________ refer to an assemblage of U.S.–owned companies that use U.S.–owned parts and Mexican assembly to manufacture goods that are exported to the United States.
- Multinational corporations
- International joint ventures
- Maquiladoras
- Transplants
- Critics of U.S. trade and immigration policy maintain that:
- It has depressed wages for many Americans
- It has increased the supply of less educated workers in the United States
- It has an adverse impact on the employment opportunities of less-skilled, American workers
- All of the above
- American critics of U.S. multinational enterprises contend that they promote:
- Runaway jobs
- Technology transfers abroad
- Tax evasion
- All of the above
- Joint ventures may lead to:
- Welfare increases
- Welfare decreases
- No changes in welfare
- All of the above
- Foreign direct investment typically occurs when:
- The earnings of the parent company are invested in plant expansion overseas
- The parent company transfers jobs overseas
- The parent company closes its foreign production plants
- The parent company purchases bonds of foreign governments
TRUE-FALSE QUESTIONS
T F 1. International trade in goods and services and flows of productive factors are substitutes for each other.
T F 2. Most multinational corporations have a low ratio of foreign sales to total sales, usually 5 percent or less.
T F 3. Vertical integration occurs if a parent multinational corporation establishes foreign subsidiaries to produce intermediate goods or inputs that go into the production of a finished good.
T F 4. Exxon Oil Co. would undertake forward vertical integration if its retailing division acquired oil wells in the Middle East.
T F 5. Forward vertical integration would occur if a U.S. automobile manufacturer acquired a German subsidiary.
T F 6. Most vertical foreign investment, as implemented by multinational corporations, is “forward” in nature rather than “backward.”
T F 7. Horizontal integration would occur if General Motors sets up a subsidiary in Mexico to produce automobiles identical to those that it produces in the United States.
T F 8. Multinational corporations sometimes locate manufacturing subsidiaries abroad to avoid tariff barriers which would place their products at a competitive disadvantage in a foreign country.
T F 9. Foreign direct investment would occur if Mobile Inc. of the United States acquired sufficient common stock in a foreign oil company to assume voting control.
T F 10. Foreign direct investment would occur if Microsoft Inc. of the United States purchased securities of the French government.
T F 11. Conglomerate integration would occur if General Motors Inc. of the United States acquired a controlling interest in a British chemical company.
T F 12. Both economic theory and empirical studies support the notion that foreign direct investment is conducted in anticipation of future profits.
T F 13. Multinational corporations often locate manufacturing operations abroad in order to take advantage of foreign resource endowments or wage scales.
T F 14. If the size of the Canadian market is large enough to permit efficient production in Canada, a U.S. firm would profit by establishing a Canadian manufacturing subsidiary or licensing rights to a Canadian firm to manufacture and sell its product in Canada.
T F 15. There is virtually universal agreement among economists that foreign direct investment in the United States has reduced the economic welfare of the average U.S. citizen.
T F 16. Foreign-owned companies in the United States operate under more strict antitrust, environmental, and other regulations than U.S.–owned companies.
T F 17. During the 1980s and 1990s, Japanese auto firms established manufacturing facilities in the United States known as “transplants.”
T F 18. By establishing transplant factories in the United States, Japanese automakers were able to avoid export restrictions imposed by the Japanese government, but not import restrictions imposed by the U.S. government.
T F 19. Mergers differ from joint ventures in that they involve the creation of a new business firm, rather than the union of two existing companies.
T F 20. Developing countries, such as Mexico and India, often close their borders to foreign companies unless they are willing to take on partner companies in developing countries.
T F 21. In natural-resource-oriented industries, such as oil and copper, joint ventures have often been formed by several companies since the cost of resource extraction may be prohibitively large for a particular company.
T F 22. International joint ventures tend to yield a welfare increasing market-power effect and a welfare decreasing cost-reduction effect.
T F 23. A joint venture leads to increases in national welfare if the cost-reduction effect is due to wage concessions and if it more than offsets the market-power effect.
T F 24. A joint venture leads to increases in national welfare if its cost-reduction effect is due to productivity gains and if it more than offsets the market-power effect.
T F 25. Joint ventures lead to losses in national welfare when the newly established business adds to preexisting production capacity and fosters additional competition.
T F 26. Joint ventures lead to national welfare gains if the newly established business yields productivity increases that would have been unavailable if each parent performed the same function separately.
T F 27. A joint venture along two large competing companies tends to yield a market-power effect, which results in a reduction in consumer surplus, that is not offset by a corresponding gain to producers.
T F 28. If a joint venture among competing firms is able to cut costs by extracting wage concessions from domestic workers, national welfare increases.
T F 29. Critics of multinational corporations maintain that they often abandon domestic workers in order to take advantage of lower wage scales abroad.
T F 30. The theory of multinational enterprise is totally inconsistent with the principle of comparative advantage.
T F 31. Due to transfer-pricing problems, multinational corporations must shift profits away from countries with low corporate tax rates to high tax-rate countries, thus absorbing a larger tax bite.
T F 32. Maquiladoras refer to an assemblage of U.S.–owned companies that combine Mexican parts and U.S. assembly to manufacture goods that are exported to Mexico.
T F 33. Opposition to Mexico’s maquiladoras has come from U.S. labor unions which claim that maquiladoras have resulted in job losses for U.S. workers.
T F 34. As workers migrate from low-wage Mexico to high-wage United States, wages tend to rise in Mexico and fall in the United States.
T F 35. The migration of workers from Mexico to the United States tends to exert downward pressure on the wages of native U.S. workers that compete against Mexican workers for jobs.
T F 36. The effect of workers migrating from low-wage Mexico to high-wage United States is to redistribute income from capital to labor in the United States and from labor to capital in Mexico.
T F 37. In the United States, labor unions have generally resisted efforts to implement restrictions on the number of foreigners allowed into the country.
T F 38. Developing countries have sometimes feared open immigration policies of developed countries on the grounds that highly educated and skilled people may emigrate to the developed countries, thus limiting the growth potential of the developing countries.
T F 39. The United States has discouraged the “brain drain” problem by permitting the immigration of unskilled workers while restricting the immigration of skilled persons.
T F 40. Labor migration tends to increase output and decrease wages in the country of immigration while decreasing output and increasing wages in the country of emigration.
ANSWERS
Answers to Multiple-Choice Questions
- c
- a
- b
- a
- d
- b
- a
- c
- a
- d
- c
- d
- c
- a
- b
- a
- a
- c
- d
- d
- b
- a
- d
- b
- a
- d
- a
- b
- d
- c
- b
- b
- a
- a
- b
- c
- b
- a
- b
- a
- b
- b
- d
- c
- c
- d
- d
- d
- a
Answers to True-False Questions
- T
- F
- T
- F
- F
- F
- T
- T
- T
- F
- T
- T
- T
- T
- F
- F
- T
- F
- F
- T
- T
- F
- F
- T
- F
- T
- T
- F
- T
- F
- F
- F
- T
- T
- T
- F
- F
- T
- F
- T
SHORT ANSWER QUESTIONS
- What are the typical ways in which multinational enterprises have diversified their operations?
Answer: Multinational enterprises have diversified their operations along vertical, horizontal, and conglomerate lines.
- What are Mexican maquiladoras?
Answer: Maquiladoras are assemblages of foreign-owned companies that use foreign parts and Mexican assembly to produce goods that are exported to the United States.
ESSAY QUESTIONS
- Are there any differences between the theory of multinational enterprises and conventional trade theory?
Answer: There are major differences. The conventional model assumes that commodities are traded between independent, competitive businesses. However, multinational enterprises are often vertically integrated businesses with substantial intrafirm sales. Also, multinational enterprises may use transfer pricing to maximize overall company profits of any single subsidiary.
- What are the disadvantages of forming joint ventures?
Answer: A joint venture is a cumbersome organization compared with a single organization. Control is divided, creating problems of “two masters.” Success or failure depends on how well companies work together despite having different objectives, corporate cultures and ways of doing things. The action of corporate chemistry is hard to predict, but it is critical because joint-venture agreements usually provide both partners an ongoing role in management. When joint-venture ownership is divided equally, as often occurs, deadlocks in decision making can take place. Even when negotiated balance is achieved, it can be upset by changing corporate goals or personnel.
ACCOUNTING INFORMATION SYSTEMS Answers below
ACCOUNTING INFORMATION SYSTEMS
CONTROLS AND PROCESSES
TURNER / WEICKGENANNT
CHAPTER 1: Introduction to AIS
TEST BANK – CHAPTER 1 – TRUE/FALSE:
1. A business process has a well-defined beginning and end.
2. Each business process has a direct effect on the financial status of an organization.
3. Few accounting information systems rely on computer hardware and software to track business
processes.
4. The rethinking and redesigning that occur during business process reengineering are aided by
the use of information technology.
5. There are very few business processes that have the potential to be improved by IT
enablement.
6. Business process reengineering should leverage the capabilities of information technology to
improve the efficiency of business processes.
7. It is important for accountants to have some understanding of basic computer terminology.
8. When files are organized as sequential access, and the user needs to access record number 250,
the previous 249 records will be read by the computer before reading record number 250.
9. When files are organized as sequential access, the sequence is normally based on one key
record in each file.
10. Batch processing is best suited to applications that have large volumes of similar transactions
that can be processed as regular intervals.
11. Online processing is the opposite of real-time processing.
12. Batch processing is best suited to sequential access files.
13. Online processing is best suited to sequential access files.
14. Online processing is best suited to situations were there is a large volume of records but only a
few records are needed to process any individual transaction.
15. Each time a new transaction is completed, parts of the data warehouse must be updated.
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16. Data in the data warehouse are called nonvolatile because they do not change rapidly in the
same way that operational data change.
17. A system of local area networks connected over any distance via other net work connections is
called a WAN, or wide area network.
18. E-business is a type of e-commerce.
19. The “intercompany” component of electronic data interchange means that two or more
companies are conducting business electronically.
20. In order to have an automated matching system it is necessary to have access to paper copies
of purchase orders and invoices.
21. When automated matching is used, the system will not approve an invoice for payment unless
the items and quantities match with the packing slip and the prices match the purchase order
prices.
22. The evaluated receipt settlement system is an IT enabled system that reduces the time and cost
of processing customer payments.
23. ERP systems are based on a relational database system.
24. Traditional accounting software is much more comprehensive and encompassing that ERP
software.
25. Before ERP software systems, modules such as human resources were in separate software but
well integrated with the accounting software.
26. Although accountants are heavily involved in the creation, implementation, and monitoring of
the control structure, management has the ultimate responsibility to establish a control
environment.
27. Once a company has decided on the control processes needed, it is not necessary to have an
ongoing assessment of risks.
28. A code of ethics should reduce opportunities for employees to conduct fraud if management
emphasizes the cost and disciplines or discharges those who violate it.
29. IT systems are to be chosen and implemented to support the attainment of strategies and
objectives.
30. It is likely that an accountant will select a career path, within accounting, that will not in some
way, involve the use of an accounting information system.
31. An auditor cannot make informed decisions necessary to complete the audit without an
understanding of the accounting information system.
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32. The accounting information system is often the tool used to commit or cover up unethical
behavior.
ANSWERS TO TEST BANK – CHAPTER 1 – TRUE/FALSE:
1. True 8. True 15. False 22. False 29. True
2. False 9. False 16. True 23. True 30. False
3. False 10. True 17. True 24. False 31. True
4. True 11. False 18. False 25. False 32. True
5. False 12. True 19. True 26. True
6. True 13. False 20. False 27. False
7. True 14. True 21. True 28. True
TEST BANK – CHAPTER 1 – MULTIPLE CHOICE
33. A prescribed sequence of work steps preformed in order to produce a desired result for the
organization is called a(n):
A. Accounting Information System.
B. Business Process.
C. Financial Transaction.
D. Capital Transaction Process.
34. The process that must identify the transactions to be recorded, capture all the important details
of the transactions, properly process the transaction details, and provide reports is termed the:
A. Revenue Process.
B. Expenditure Process.
C. Accounting Information System.
D. Business Process.
35. An accounting information system serves many functions – which of the following is NOT one of
those functions?
A. Capture the details of a transaction
B. Implement the start of a transaction
C. Provide reports of transactions
D. Process the transactions details into appropriate accounts
36. The proper order of activity in an accounting information system would be as follows:
A. Capture, Record, Process, Report.
B. Process, Record, Capture, Report.
C. Capture, Process, Report, Record.
D. Record, Capture, Process, Report.
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37. Which of the following is not one of the general types of business processes identified by the
textbook?
A. Revenue Processes
B. Expenditure Processes
C. Conversion Processes
D. Human Resource Processes
38. Which of the following statements, related to business processes, is false?
A. Each business process has a direct effect on the financial status of the organization.
B. A business process is initiated by a particular kind of event.
C. A business process has a well-defined beginning and end.
D. Each business process is usually completed in a relatively short period.
39. Which of the following is least likely to be part of an accounting information system function?
A. Record the accounting data in the appropriate records
B. Generation of data to be part of the information system.
C. Process the detailed accounting data.
D. Report the summarized accounting data.
40. Work steps that are internal controls within the business process would include:
A. Using an electronic register to record all sales transactions.
B. Combining both manual and computer based records.
C. Reconciling a cash register at the end of each day.
D. Preparation of internal reports to monitor the performance of a specific department.
41. Five different components of the accounting information system were presented in the textbook.
Which of the following is not one of those components?
A. Work steps within a business process intended to capture accounting data as the business
process occurs.
B. Work steps that are internal controls within the business process to safeguard assets and
to ensure the accuracy and completeness of the data.
C. Work steps that generate both internal and external reports.
D. Work steps to assure that all business processes are recorded using computer-based
procedures.
42. Output from an accounting information system would include:
A. Checks to vendors.
B. Invoices from vendors.
C. Customer statements.
D. Purchase orders.
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43. The entities, processes, and information flows that involve the movement of materials, funds,
and related information through the full logistics process, from the acquisition of raw materials
to the delivery of the finished produces to the end use is a set of linked activities referred to as:
A. Management Information System.
B. Supply Chain.
C. Accounting Information System.
D. Logistics Management.
44. The management and control of all materials, funds, and related information in the logistics
process, from the acquisition of raw materials to the delivery of finished products to the end
user is referred to as:
A. Supply Chain Management.
B. Management Information System.
C. Logistics Management.
D. IT Enablement.
45. When discussing the supply chain:
A. Any concern about vendors would relate only to those vendors with which a company has
direct contact.
B. Service providers would not be part of the supply chain.
C. Concern would not extend beyond the point where the product is shipped to a customer.
D. An entity may not be able to directly control all of the interrelated activities within the
supply chain.
46. Using IT systems to enhance efficiency and effectiveness of internal or supply chain processes is
called:
A. Information Technology Enablement.
B. Information Systems Control.
C. Information Technology Process Engineering.
D. Information Technology Business Processes.
47. The purposeful and organized changing of business processes to make them more efficient is
referred to as:
A. Information Technology Engineering.
B. Information Systems Management.
C. Business Process Reengineering.
D. Business Process Supply Chain.
48. The use of BPR is a two-fold: (1) Aligns business processes with the IT systems used to
recorded processes and, (2):
A. Improves the efficiency and effectiveness of these processes.
B. Reduces the cost of these processes.
C. Enhances the usefulness of these processes.
D. Increases the accuracy of the process.
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49. The smallest unit of information in a computer system can have only one of two values, zero or
one, and is referred to as a(n):
A. Field.
B. Record.
C. Byte.
D. Bit.
50. A unit of storage that represents one character is referred to as a:
A. Byte.
B. Bit.
C. Bat.
D. Field.
51. A set of related fields is referred to as a:
A. File.
B. Record.
C. Byte.
D. Binary Digit.
52. Each record is made up of related:
A. Files.
B. Bytes.
C. Name.
D. Fields.
53. A collection of data stored on a computer in a form that allows the data to be easily accessed,
retrieved, manipulated, and stored is referred to as a(n):
A. Accounting Information System.
B. Information Technology.
C. Database.
D. Master File.
54. A collection of data stored in several small two-dimensional tables that can be joined together in
many varying ways to represent many different kinds of relationships among the data is referred
to as a(n):
A. Database.
B. Master File.
C. Relational Database.
D. Relation Based Accounting Software.
55. Accounting software traditionally uses two different types of files. The file type that is relatively
permanent and used to maintain the detailed data for each major process is a(n):
A. General Ledger.
B. Master File.
C. Transaction File.
D. Subsidiary File.
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56. Accounting software traditionally uses two different types of files. The file type that is the set of
relatively temporary records that will be process to update the permanent file is referred to as
a(n):
A. Master File.
B. General File.
C. Transaction File.
D. Subsidiary File.
57. The chart of accounts would be a good example of a:
A. Transaction File.
B. Master File.
C. Field.
D. Record.
58. The organization of files in a computer system normally uses one of two different access
methods. The access method where the files store records in sequence, with one record stored
immediately after another is referred to as:
A. Chronological Access.
B. Sequential Access.
C. Random Access.
D. Numerical Access.
59. The organization of files in a computer system normally uses one of two different access
methods. The access method where the files are not stored in sequence, one record not stored
immediately after another, is referred to as:
A. Indexed Access.
B. Batch Access.
C. Sequential Access.
D. Random Access.
60. There are two modes of processing transactions in accounting systems. The mode that requires
all similar transactions be grouped together and be processed at the same time, is referred to
as:
A. Batch Processing.
B. Online Processing.
C. Real-time Processing.
D. Sequential Processing.
61. There are two modes of processing transactions in accounting systems. The mode that will
record transactions, one at a time, is referred to as:
A. Batch Processing.
B. Online Processing.
C. Real-Time Processing.
D. Sequential Processing.
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62. A type of online processing where a transaction is processed immediately so that the output is
available immediately is termed:
A. Virtual Processing.
B. Sequential Processing.
C. Real-Time Processing.
D. Batch Processing.
63. An integrated collection of enterprise-wide data that includes five to ten fiscal years of non-
volatile data, used to support management in decision making and planning is referred to as:
A. Operational Database.
B. Relational Database.
C. Data Storage.
D. Data Warehouse.
64. This type of database contains the data that are continually updated as transactions are
processed and includes data for the current fiscal year and supports day-to-day operations is
referred to as a(n):
A. Data Warehouse.
B. Data Storage.
C. Relational Database.
D. Operational Database.
65. The data in the data warehouse are said to be enterprise-wide because:
A. The data relate to all areas of the business.
B. The data are pulled from each of the operational databases and maintained in the data
warehouse for many fiscal periods.
C. All areas of the business are able to access the data warehouse.
D. All transactions across the all areas of the business are recorded in the data warehouse.
66. The process of searching data within the data warehouse for identifiable patterns that can be
used to predict future behavior is referred to as:
A. Data mining.
B. Data digging.
C. Data housing.
D. Data querying.
67. Two or more computers linked together to share information and / or resources is referred to as
a(n):
A. Computer Intranet.
B. Computer Internet.
C. Computer System.
D. Computer Network.
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68. This type of computer network is one that spans a relatively small area – often confined to a
single building or group of buildings, and are intended to connect computers within an
organization.
A. Local Area Network
B. Land Arena Network
C. Extranet
D. Internet
69. The global computer network, or “information super highway”, is the:
A. WAN.
B. Intranet.
C. Internet.
D. LAN.
70. A company’s private network, accessible only to the employees of that company is the:
A. WAN.
B. Intranet.
C. Internet.
D. LAN.
71. This computer network is similar to a company’s intranet except that it does allow access to
selected outsiders, such as buyers, suppliers, distributors, and wholesalers.
A. Ultranet
B. Internet
C. Extranet
D. LAN
72. The use of electronic means to enhance business processes is termed:
A. E-business.
B. Electronic data interchange.
C. Point of sale system.
D. E-commerce.
73. The intercompany, computer-to-computer transfer of business documents in a standard
business format is called:
A. E-business.
B. E-commerce.
C. Local area network.
D. Electronic data interchange.
74. Which of the following is NOT one of the three components of electronic data interchange?
A. Commerce – encompasses all forms of electronic trading.
B. Intercompany – two or more companies conducting business electronically.
C. Standard business format – necessary so that the various companies can interact and trade
electronically.
D. Computer to computer – indicates that each company’s computers are connected via a
network.
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75. This term refers to a system of hardware and software that captures retail sales transactions by
standard bar coding.
A. E-business
B. Electronic data interchange
C. Point of sale system
D. E-commerce
76. When a point of sale system is used and a customer checks out through a cash register, which
of the following processes occurs?
A. Net income is computed
B. Inventory values are updated
C. Accounts payable balances are updated
D. Replacement inventory is purchased
77. A system of computer hardware and software in which the software matches an invoice to its
related purchase order and receiving report is called:
A. Point of sale system.
B. Electronic data interchange.
C. Automated matching.
D. Evaluated receipt settlement.
78. An invoice-less system in which computer hardware and software complete an invoice-less
match that is a comparison of the purchase order with the goods received is termed:
A. Evaluated receipt settlement.
B. Automated matching.
C. Electronic invoice presentation and payment.
D. Enterprise resource planning.
79. This system enables a vendor to present an invoice to its trading partner via the Internet,
eliminating the paper, printing, and postage costs of traditional paper invoicing.
A. Evaluated receipt settlement
B. Electronic invoice presentation and payment
C. Automated matching
D. Electronic data interchange
80. A multi-module software system designed to manage all aspects of an enterprise usually broken
down into modules such as financials, sales, human resources, and manufacturing, is referred to
as a(n):
A. Electronic data system.
B. Electronic data interchange.
C. Enterprise resource planning.
D. Electronic resource program.
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81. The ability to lessen risks or risk impacts is true of nearly all risks that organizations face.
Management can undertake steps to lessen the risk or reduce the impact of the risk, these
processes are called:
A. Programs.
B. Risk assessment.
C. Information evaluation.
D. Controls.
82. Which of the following groups of professionals within an organization have a history of designing
and implementing the controls to lessen risks?
A. Management
B. Accountants
C. Human Resources
D. Lawyers
83. Which of the following is not one of broad categories of controls?
A. The risk that assets will be stolen or misused.
B. The risk of errors in accounting data or information.
C. The risk of loss due to a natural disaster.
D. The risk of fraudulent activity by employees.
84. Which of the following is not a risk inherent in an IT system?
A. Computer security breaches.
B. Computers being stolen.
C. Erroneous input of data.
D. Hardware or software failure.
85. A comprehensive report on enterprise risk management was issued by this organization is 2004.
A. American Accounting Association
B. New York Stock Exchange
C. Institute of Internal Auditors
D. Committee on Sponsoring Organizations
86. A process, affected by an entity’s board of directors, management and other personnel, applied
in strategy setting and across the enterprise, designed to identify potential events that may
affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance
regarding the achievement of entity objectives is referred to as:
A. Enterprise resource planning.
B. Enterprise risk management.
C. IT system control structure.
D. Corporate governance structure.
87. In order to achieve the objective of managing risk, management should establish control
structures that include, at a minimum:
A. Accounting internal controls.
B. Accounting internal controls, IT controls, corporate governance, enterprise risk
management, and IT governance.
C. IT controls IT governance, corporate governance, and accounting internal controls.
D. IT controls and accounting internal controls.
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88. The company’s development and adherence to this should reduce the opportunities for
managements or employees to conduct fraud.
A. Code of ethics
B. Internal control structure
C. Application controls
D. Corporate governance
89. The COSO report, Internal Controls – Integrated Framework, issued in 1992, identified
interrelated components of internal control. Which of the following is not one of those
components?
A. Monitoring
B. Risk assessment
C. Control activities
D. Enterprise risk management
90. IT controls can be divided into two categories. Which of the following is a correct statement of
one of those categories?
A. Application controls apply overall to the IT accounting system.
B. Application controls apply to the prevention of erroneous or incomplete input or processing
of data.
C. Application controls are used specifically in accounting applications to control inputs,
processing, and output.
D. Application controls are used to prohibit fraudulent financial reporting.
91. An elaborate system of checks and balances, whereby a company’s leadership is held
accountable for building shareholder value and creating confidence in the financial reporting
processes, is referred to as:
A. Enterprise risk management.
B. Corporate governance.
C. Application controls.
D. Internal control structure.
92. The purpose of this 2002 act was to improve financial reporting and reinforce the importance of
corporate ethics.
A. Foreign Corrupt Practices Act
B. Sarbanes-Oxley Act
C. Securities and Exchange Act
D. Treadway Act
93. Which of the following is not one of the corporate functions interrelated within the corporate
governance system?
A. Management Oversight
B. Ethical Conduct
C. Risk Assessment
D. Financial Stewardship
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94. The proper management, control, and use of IT systems are known as:
A. IT Governance.
B. IT Controls.
C. IT Risk Management.
D. IT Code of Ethics.
95. Accountants have several possible roles related to accounting information systems. Which of
the following is not normally one of those roles?
A. Auditor of an AIS
B. User of the AIS
C. Programmer of the AIS
D. Design of the AIS
96. There are many reasons for accountants to become aware of potential unethical behaviors.
Which of the following is not one of the reasons identified by the authors?
A. Accountants are responsible for identifying unethical and illegal activities.
B. Accounts assist in developing and implementing internal control structures that should
decrease the chance of unethical actions.
C. Accountants are often pressured to assist in, or cover up, unethical actions.
D. Accountants deal with assets or records that could easily tempt accountants to engage in
unethical behavior.
ANSWERS TO TEST BANK – CHAPTER 1 – MULTIPLE CHOICE:
33. B 46. A 59. D 72. A 85. D
34. C 47. C 60. A 73. D 86. B
35. B 48. A 61. B 74. A 87. C
36. A 49. D 62. C 75. C 88. A
37. D 50. A 63. D 76. B 89. D
38. A 51. B 64. D 77. C 90. C
39. B 52. D 65. B 78. A 91. B
40. C 53. C 66. A 79. B 92. B
41. D 54. C 67. D 80. C 93. C
42. B 55. B 68. A 81. D 94. A
43. B 56. C 69. C 82. B 95. C
44. A 57. B 70. B 83. C 96. A
45. D 58. B 71. C 84. B
TEST BANK – CHAPTER 12 – END OF CHAPTER QUESTIONS
97. When a customer returns goods that were purchased, the business process to accept the return
would most likely be a(n):
A. Administrative process.
B. Conversion process.
C. Expenditure process.
D. Revenue process.
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98. Which of the following is least likely to be an output of the accounting information system?
A. A check
B. A report
C. An invoice
D. A bar code
99. Which of the following is not true of the supply chain?
A. The supply chain includes vendors.
B. The supply chain excludes customers.
C. The supply chain includes information flows.
D. The supply chain include secondary suppliers.
100. Which of the following is not an objective of IT enablement?
A. Increased accuracy of data
B. Reduced cost
C. Reduced security problems
D. Increased efficiency
101. The correct order of the computer data hierarchy is:
A. Byte, bit, record, field, file, database.
B. Bit, byte, record, field, file, database.
C. Bit, byte, field, record, file, database.
D. Bit, byte, field, record, database, file.
102. The process of searching for identifiable patterns in data is called:
A. Sequential processing.
B. Data warehousing.
C. Data mining.
D. Real-time processing.
103. An IT enabled system for purchasing that is an “invoice-less” system is called a(n):
A. Automated matching system.
B. Evaluated receipt settlement.
C. E-payables.
D. Point of sale system.
104. The COSO report written for the purpose of assisting managers in the challenge of managing
risk in their organization is entitled:
A. Internal Control – Integrated Framework.
B. Enterprise Risk Management – Integrated Framework.
C. Corporate Governance.
D. IT Governance.
105. Accountants have some form of use of the AIS in all but which role?
A. User
B. Programmer
C. Auditor
D. Designer
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106. Which of the following is not true of unethical behavior?
A. The only category of unethical behavior for accountants is inflating revenue.
B. Accountants are often pressured to help commit or cover-up unethical behavior.
C. Hacking is an unethical behavior that accountants should be concerned about.
D. An accounting information system can be used to cover up unethical behavior.
TEST BANK – CHAPTER 12 – ANSWERS TO END OF CHAPTER QUESTIONS
97. D 102. C
98. D 103. B
99. B 104. A
100. C 105. B
101. C 106. A
TEST BANK – CHAPTER 12 –SHORT ANSWER QUESTIONS
107. How might the sales and cash collection processes at a Wal-Mart store differ from the sales and
cash collection processes at McDonald’s?
Answer: Wal-Mart sells items that are pre-priced and bar coded with that price. Therefore the
cash registers at Wal-Mart use bar code scanners. However, McDonalds sells fast foods that are
not bar coded. The cash registers at McDonalds use touch screen systems that require a cashier
to indicate the items purchased. The cash collection processes are not different. In both cases,
the employee collects the cash or credit card, and returns any change.
108. Can you think of any procedures in place at McDonald’s that are intended to ensure the
accuracy of your order?
Answer: Student responses may vary, however, following are a few examples: Often, at either
the drive-through or the inside cash register, the customer can see a screen that displays the
items ordered. In addition, a fast food restaurant uses pre-designed slots to hold certain types of
menu items. When a customer orders a particular sandwich, the person filling the order knows
exactly which slot to pull the sandwich from. Each customer receives a printed receipt with the
items listed and the customer can verify the accuracy.
109. How might the sales and cash collection processes at Boeing Co. (maker of commercial
passenger jets) differ from the sales and cash collection processes at McDonald’s?
Answer: Boeing does not sell to end-user consumers, but to companies such as airlines.
Therefore Boeing does not have stores, nor inventory in stores, nor cash registers to process
sales. Boeing is more likely to maintain a sales force that visits potential customers to solicit
sales. Those sales may be entered by the salesperson into a laptop computer connected to
Boeing’s network. McDonald’s, on the other hand, sells to consumers, uses order input touch
screens at each location, and maintains supplies of perishable food products.
110. Are there business processes that do not in some way affect accounting records or financial
statements?
Answer: There may be processes that do not directly affect accounting records (such as recruiting
and hiring a new employee), but all processes have a direct or indirect affect on accounting
records. All processes use resources such as material or employee time. Therefore, all processes
have expenses related to those processes that will affect the accounting records.
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111. Briefly describe the five components of an accounting information system.
Answer: 1. Work steps within a business process that capture accounting data as
the business process occurs.
2. Manual or computer-based records that record the accounting data from
the business processes.
3. Internal controls within the business process that safeguard assets and
ensure accuracy and completeness of the data.
4. Work steps that process, classify, summarize, and consolidate the raw
accounting data.
5. Work steps that generate both internal and external reports.
112. Describe how sales data is captured and recorded at a restaurant such as Applebee’s.
Answer: A server at Applebee’s writes the order on a pad and carries that pad to a cash register.
The server enters the order on a touch screen terminal. The order information is then displayed
on a terminal in the kitchen. When the customer has finished the meal, the server prints a check
and delivers the check to the table. The customer pays the server by using cash or a credit card.
The server processes the payment on the touch screen register and returns the change or credit
card slip to the customer.
113. What occurs in an accounting information system that classifies accounting transactions?
Answer: For each business process that affects accounting records, the accounting information
system must capture any resulting accounting data, record the data, process it through
classification, summarization, and consolidation, and generate appropriate reports.
114. What are the differences between internal reports and external reports generated by the
accounting information system?
Answer: Internal reports are used by management to oversee and direct processes within the
organization. External reports are the financial statements used by investors and creditors.
115. What types of businesses are in the supply chain of an automobile manufacturer?
Answer: The types of businesses in an automaker’s supply chain are often manufacturers of parts
used in cars. This would include manufacturers of tires, batteries, steel, plastic, vinyl and leather,
as well as many other manufacturers making the thousands of parts in a car.
116. When a company evaluates a supplier of materials, what kinds of characteristics might be
evaluated?
Answer: The supplier’s characteristics that are likely to be evaluated include price and payment
terms, quality, reliability of the materials, as well as whether the supplier can deliver materials
when needed.
117. How do you think a company may be able to influence a supplier to meet its business
processing requirements?
Answer: A company may be able to influence a supplier by choosing only suppliers that meet
expectations regarding the terms of price, quality, and delivery timing. Those suppliers that do
not meet these expectations may not be used in the future. This exerts some influence over
suppliers to meet requirements.
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118. Describe any IT enablement that you have noticed at a large retail store such as Wal-Mart or
Target.
Answer: The most noticeable IT enablement is the use of bar coded systems on the products and
how they are read by the cash registers.
119. How do you think the World Wide Web (WWW) has led to business process reengineering at
companies such as Lands End or J. Crew?
Answer: Prior to the World Wide Web, customers placed orders either on the phone or by mail.
Both phone and mail orders require people to take the order and enter it into the computer
system. Using online sales, the customer enters his own order and no company personnel are
needed to key orders into the computer system. Therefore, there was a major change in the
number of people employed to key orders.
120. What two kinds of efficiency improvement result from business process reengineering in
conjunction with IT systems?
Answer: The use of IT systems usually leads to two kinds of efficiency improvements. First, the
underlying processes are reengineered (through rethinking and redesign) so as to be conducted
more efficiently. Second, the IT systems improve the processing efficiency of the underlying
processes.
121. Explain the differences between a field, record, and file.
Answer: A field is one set of characters that make up a single data item. For example, last name
would be a field in a customer database. A record is a collection of related fields for a single
entity. For example, last name, first name, address, phone number, and credit card number fields
might make up a single customer record. A file is a collection of similar records. For example, all
customer records together would be a customer file.
122. Explain why random access files would be preferable to sequential access files when payroll
personnel are changing a pay rate for a single employee.
Answer: When the desired action is to access a single record, random access is preferable. If
sequential access storage is used, all records must be read in sequence until the desired record is
reached. On the other hand, random access allows a single record to be accessed without the
necessity of reading other records. This makes it more efficient to access a particular employee
record to change the pay rate.
123. Why do real-time systems require direct access files?
Answer: If transactions are to be processed online and in real-time, it is necessary that the
computer access a single record immediately. Thus, direct access files are required so the records
can be accessed in real-time.
124. Why is data contained in the data warehouse called non-volatile?
Answer: Each time a new transaction is completed, parts of the operational data must be
updated. Therefore, the operational database is volatile; with constantly changing information.
However, the data warehouse does not change with each transaction. The data warehouse is
only changed when periodic updates occur. The data is non-volatile because it does not change
constantly.
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125. How is an extranet different from the Internet?
Answer: The extranet allows access only to selected outsiders, while the Internet is open to an
unlimited number of outsiders (essentially anyone having access to the Internet). On the other
hand, extranets are typically used by companies to interact with specific suppliers and customers
who have been granted access to a company’s network.
126. Prepare a list of the types of businesses that you have been in that were using Point of Sale
systems.
Answer: Student responses may vary, but are likely to include grocery stores, department stores,
restaurants, specialty stores, gas stations, and car washes.
127. What do you think would be the advantages of an e-payables system over a traditional system
that uses paper purchase orders and invoices?
Answer: An e-payables system should be faster and more efficient than a paper-based system. In
addition, an e-payables system is likely to have fewer errors in processing than a paper-based
system.
128. Describe why enterprise risk management is important.
Answer: All organizations face risks and Enterprise Risk Management assists management in
reducing and controlling risk. It also involves personnel across the entire business organization, as
they implement strategies to achieve the organization’s objectives.
129. What is the difference between general controls and application controls?
Answer: General controls are those controls that apply overall to the IT accounting system. They
are controls that are not restricted to any particular accounting application. An example of a
general control is the use of passwords to allow only authorized users to log into an IT based
accounting system. Application controls are those controls that are used specifically in accounting
applications to control inputs, processing, and output. Application controls are intended to insure
that inputs are accurate and complete, processing is accurate and complete, and that outputs are
properly distributed, controlled, and disposed.
130. In what way is a code of ethics beneficial to an organization?
Answer: If top management institutes a code of ethics and emphasizes this code by modeling its
principles and disciplining or discharging those who violate the code of ethics, it can help reduce
unethical behavior in the organization.
131. What roles do accountants have in relation to the accounting information system?
Answer: Accountants are users of the AIS, they assist in the design of the AIS, and they are
auditors of the AIS.
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TEST BANK – CHAPTER 12 –SHORT ESSAY
132. For each category of business processes (revenue, expenditure, conversion, administrative),
give an example of a business process.
Answer: Student responses are likely to vary greatly, as they may refer to any of the sub-
processes within each category. For example, the revenue processes include sales, sales returns,
and cash collections; the expenditure processes include purchasing, purchase returns, cash
disbursements, payroll and fixed asset processes; the conversion processes include planning,
resource management, and logistics, and; administrative processes include capital processes,
investments, and general ledger processes. Accordingly, any type of business process can be
cited to answer this question, but the student must match the example with the appropriate
process.
133. Think of a company that you have worked for or with which you have done business. Which
departments within the company need reports generated by the accounting information
systems?
Answer: Student responses are likely to vary greatly, as nearly every department within a
business organization uses reports generated by the accounting information systems. For
example, sales departments need customer account information to help in their efforts to sell
products to customers. Purchasing departments need product information to help in their efforts
to purchase products needed in the business. Each of these types of information is maintained in
accounting information systems. There are numerous additional examples that could apply.
134. Explain a supply chain linkage and give an example.
Answer: A supply chain linkage is the connection of activities in the supply chain, which includes
the entities, processes, and information flows, that involve the movement of materials, funds, and
related information through the full logistics process, from the acquisition of raw materials to the
delivery of finished products to the end user. It therefore includes the linked activities of vendors,
service providers, customers, and intermediaries. In addition to the example of McDonald’s buns
given in the text, another example would be a shirt sold by the Gap. The Gap’s supply chain
linkage would likely include a supplier from whom the shirt was purchased, a manufacturer who
assembled and sewed the shirt, a secondary supplier that likely provided the fabric from which
the shirt was constructed, and a farmer who raised cotton used to make the fabric.
135. Explain how business process reengineering occurs. Also, explain how it differs from the typical
changes in company policies.
Answer: With business process reengineering, the underlying business processes are
reengineered so as to be conducted more efficiently. In other words, a comprehensive rethinking
and redesign takes place in order to enhance performance of the process. A key component of
BPR is the leveraging of the capabilities of IT to improve the efficiency of the process. BPR differs
from typically organizational change in that it involves “thinking outside the box” in order to offer
completely new and improved methods for business processes.
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136. For an accounts receivable system, what kind of data would be found in the master files and
transaction files respectively?
Answer: An accounts receivable master file would include relatively permanent data necessary to
process customer transactions. This would include a record for each customer. The data in the
master file would probably include customer name, address, phone numbers, credit limit, and
current balance. A transaction file for accounts receivable would contain the relatively temporary
data that must be processed to update the master file, such as details from individual sales and
cash collections from customers.
137. Describe the differences in the three types of processing.
Answer:
a. Batch processing involves the grouping of similar transactions to be processed together;
b. Online processing involves processing individual transactions, one-at-a-time; and
c. Real-time processing is an online processing method that involves the immediate processing of
individual transactions.
138. The networks discussed in this chapter were LANs, Internet, intranet, and extranet. Explain
each.
Answer: A LAN is a computer network that spans a relatively small area such as a building or
group of buildings within a business organization. The Internet is the global computer network
made up of millions upon millions of computers and sub-networks throughout the world. An
intranet is an organization’s private computer network, accessible only by employees of that
organization to share data and manage projects. An extranet is an expansion of an intranet that
allows limited access to designated outsiders such as customers and suppliers of the organization.
139. Give a brief summary of enterprise risk management, corporate governance, and IT
governance.
Answer:
d. Enterprise risk management is an ongoing strategy-setting and risk assessment process that is
effected by top management but involves personnel across the entire entity.
e. Corporate governance is an elaborate system of checks and balances whereby a company’s
leadership is held accountable for building shareholder value and creating confidence in the
financial reporting process.
f. IT governance is the corporate governance process that applies specifically to the proper
management, control, and use of IT systems.
140. Describe why accountants should be concerned about ethics.
Answer: Accountants should be concerned about ethics because accounting information systems
are often the tools used to commit or cover up unethical behavior. Accountants need to be aware
of the possibility of fraud within the AIS so that they can assist in developing and implementing
effective internal controls to reduce the risk of such unethical acts. In addition, accountants need
to be prepared to resist the temptation to commit unethical acts and to avoid being coerced into
assisting with a fraudulent cover-up.
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141. Adrienne Camm is currently pursuing her accounting degree at Ridge University. She has
excelled in each of her major courses to date; however, she has always struggled with her
computer classes and with assignments requiring use of computer technology. Nevertheless,
Adrienne confidently claims that she will become an excellent accountant. Comment on the
practical and ethical implications of her position.
Answer: Adrienne is mistaken in her position for the following reasons:
• Practically speaking, accountants need to be well-informed about the operation of accounting
information systems, which nearly always involve computer technology. The AIS is the
foundation of most accounting functions, so to resist computer technology would be
unreasonable, if not impossible. Also, in order to assist in developing internal controls,
accountants must understand the processes within the AIS, including the use of technology,
so that effective controls can be developed and implemented to reduce risks.
• Ethically speaking, accountants need to be well-informed about the operation of the AIS so
that they are poised to recognize fraud and errors that may occur. Without an
understanding of the underlying technology, accountants would be unable to effectively
capture and monitor business processes. Rather than fulfilling her responsibility as an
accountant to develop and implement internal controls, Adrienne’s ignorance of the AIS could
actually allow for fraud to be perpetrated without being prevented or detected.
For these reasons, Adrienne’s viewpoint is quite dangerous.
TEST BANK – CHAPTER 12 –PROBLEMS
142. If an accounting information system was entirely a manual system (no computers used), explain
how data would be captured, recorded, classified, summarized, and reported. Discuss how the
sophistication of the company’s computer system impacts the accounting output and,
alternatively, how the requirements for accounting outputs impact the design of the accounting
information system.
Answer: In a manual accounting information system, data would be captured on source
documents and recorded by hand in subsidiary ledgers or special journals. Account classifications
would be determined by the accountants responsible for recording the transaction. The
accountants would perform mathematical computations to summarize the records and post them
to a general ledger. The general ledger would be manually summarized at the end of the period
so that financial statements could be prepared. The financial reports would be manually compiled
based on the ending general ledger balances. Since a great deal of paper and human processing
are required for a manual system, a manual system is prone to error. More sophisticated,
computer-based systems tend to produce more output that is more accurate because they are
programmed to process data consistently. They also use programming to perform mathematical
computations, which promotes accuracy and time savings. Therefore, IT usage to support
business processes results in increased accuracy, increased efficiency, and reduced costs.
The requirements for accounting outputs impact the design of the AIS. Work steps within a
business process can be designed to capture data in a manner that is consistent with the desired
content and format of the related output. This promotes efficiency and effectiveness of the
overall process. When business process reengineering is used to design business processes, IT
systems can be introduced to take advantage of the speed and efficiency of computers to
enhance the AIS.
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143. Classify each of the following processes as either a revenue process, expenditure process,
conversion process, or administrative process:
a. Selling common stock to raise capital
b. Purchasing electronic components to manufacture DVD players
c. Moving electronic components from the stockroom to the production floor to begin making
DVD players
d. Paying employees at the end of a payroll period
e. Preparing financial statements
f. Receiving cash payments from customers
g. Buying fixed assets
h. Moving manufactured DVD players from the production floor to the warehouse
Answer:
a. ADMINISTRATIVE
b. EXPENDITURE
c. CONVERSION
d. EXPENDITURE
e. ADMINISTRATIVE
f. REVENUE
g. EXPENDITURE
h. CONVERSION
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144. Business processes are composed of three common stages: an initial event, a beginning, and an
end. For each of the processes a through h in Problem 47, identify the applicable initial event,
beginning, and end of the process. Student responses may vary as their experiences are likely to
be different.
Answer: Different businesses may have different events that trigger these processes;
however, the following are common examples:
a. Selling common stock to raise capital: Initial Event – Contacting and communicating with
investors; Beginning – Receiving consideration from investor; End – Recording transactions in
the accounting records.
b. Purchasing electronic components to manufacture DVD players: Initial Event – Receiving a
purchase request from operations personnel; Beginning – Placing an order with a supplier; End
– Recording the payment for the component parts.
c. Moving electronic components from the stockroom to the production floor to begin making DVD
players: Initial Event – Receiving a request from the Production department for the movement
of materials; Beginning – Removing inventory from the stockroom; End – Recording the receipt
of goods in the production area.
d. Paying employees at the end of a payroll period: Initial Event – Receiving a time sheet or other
indication of time worked; Beginning – Recording hours in the payroll records; End –
Distributing paychecks or depositing paychecks in employee accounts.
e. Preparing financial statements: Initial Event – Preparing end-of-period adjusting entries;
Beginning – Summarizing adjusted account balances; End – Compiling data in financial
statement format and writing related disclosure notes.
f. Receiving cash payments from customers: Initial Event – Communicating with customer about a
sale; Beginning – Notifying customer of amounts owed related to the sale; End – Recording the
receipt of cash and deposit in a bank account.
g. Buying fixed assets: Initial Event – Planning for an expenditure as part of a capital budgeting
process; Beginning – Placing an order for the fixed asset; End – Receiving the asset and
recording it in a subsidiary ledger.
h. Moving manufactured DVD players from the production floor to the warehouse: Initial Event –
Receiving notification from the Production department regarding completion of products;
Beginning – Removing finished goods from the production floor; End – Recording the receipt of
finished goods in the warehouse.
To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com
145. Each of the points listed next represents an internal control that may be implemented within a
company’s accounting information system to reduce various risks. For each point, identify the
appropriate business process (revenue, expenditure, conversion, administrative). In addition,
refer to the description of business processes under Study Objective 1 in the chapter, and
identify the appropriate sub-process. (Some sub-processes may be used more than once, and
others may not be used at all.)
Answer:
a. Customer credit must be authorized before a business transaction takes place. Revenue processes,
sales sub-processes
b. An authorized price list of goods for sale is provided. Revenue processes, sales sub-processes
c. A shipping report is prepared for all shipments of goods so that customers may be billed in a timely
manner. Revenue processes, sales sub-processes
d. Access to personnel files and paycheck records is available only in accordance with management
specifications. Expenditure processes, payroll sub-processes
e. New vendors are required to be authorized before a business transaction takes place. Expenditure
processes, purchasing sub-processes
f. Access to cash is restricted to those employees authorized by management. Revenue or
Expenditure processes, Cash collection or cash disbursement sub-processes, respectively
g. Costs of goods manufactured is properly summarized, classified, recorded, and reported.
h. Conversion processes, resource management sub-processes
i. Amounts due to vendors are reconciled by comparing company records with statements received
from the vendors. Expenditure processes, cash disbursements sub-processes
j. Employee wage rates and paycheck deductions must be authorized by management. Expenditure
processes, payroll sub-processes
k. Specific procedures such as the performance of a background check are carried out for all new
employee hires. Expenditure processes, payroll sub-processes
l. The purchasing manager is notified when stock levels are low so that items may be restocked to
prevent backorders. Conversion processes, resource management sub-processes
m. Two signatures are required on checks for payments in excess of $5000. Expenditure processes,
cash disbursement sub-processes
n. When excess cash is on hand, the funds are invested in short-term securities. Administrative
processes, investment sub-processes
o. Goods received are inspected and damaged, or unmatched, items are promptly communicated to
the vendor. Revenue processes, sales sub-processes
p. The monthly bank statement is reconciled to the company’s cash records by an outside
accountant. Revenue or Expenditure processes, Cash collection or cash disbursement sub-
processes, respectively
Brain Teasers
IQ Test Questions with Answers – Brain Teasers & Puzzles
This IQ test comprise of a collection of puzzles, and the questions in this IQ test are interesting and will involve the
reader while solving them. The puzzles are short in length but will force you to exercise your brain and use your logical
skills. The puzzles are of a wide range and they vary from simple ones to the more difficult ones.
IQ Test Questions
There are 17 questions to test your IQ. Do not look at the answers found at the end of this document, that would be
cheating. Write each of your answers down, it makes a difference. Good Luck for the IQ Test!
1. Two people were walking in opposite directions. Both of them walked 6 miles forward then took right and walked 8
miles. How far is each from starting positions?
a) 14 miles and 14 miles
b) 10 miles 10 miles
c) 6 miles 6 miles
2. A person has certain number of cows and birds. They have 172 eyes and 344 legs. How many cows and birds does he
have?
3. A person has 14 red socks and 14 white socks in a drawer. What is the minimum number of socks that he should take to
get a correct pair?
4. When a number is multiplied by 13, it becomes greater to 105 by an amount with which it is lesser to 105 by now. What is
the number
5. When asked in an exam how much time is left, the teacher answered that the amount of time left is 1/5 of the time
already completed. How much time is left?
6. Two people on cycle are traveling at 10 miles/hour in opposite direction. When they are at a distance of 50 miles, a
housefly lands on the first cyclist and then flies to the other at a speed of 16 miles/hour. What is the distance covered by fly?
7. My successor’s father is my father’s son. and I don’t have any brothers or sons. Who is my successor?
a) Nephew
b) Niece
c) Daughter
d) Myself
8. A fast train leaves London for Brighton and at the same time a slow train leaves Brighton for London. The fast train leaves
at 80 mph and the slow train travels at 35 mph. When they meet, which is farther from London?
9. A girl, a boy, and a dog start walking down a road. They start at the same time, from the same point, in the same
direction. The boy walks at 5 km/h, the girl at 6 km/h. The dog runs from boy to girl and back again with a constant speed of
10 km/h. The dog does not slow down on the turn. How far does the dog travel in 1 hour?
10. A pool has four taps. The first tap takes two days to fill the pool, the second tap three days, the third four days and the
last one only 6 hours. How long will it take to fill the pool using all 4 taps at once?
11. This was a burglary in the Silver City jewelry store last Sunday. Three suspects: Robert, Scott, and Tommy were caught
and questioned. Each person said, “One of the other two stole it. I did not do it.” Later on the police found out that Tommy
was lying and there was only one thief. Who was the thief?
12. James visited an island. There were 2 tribes living on this island. The east tribal people always tell a lie. The west tribal
people always tell the truth. James saw a guy passing him. He asked the tour guide to ask that guy where he lives. The tour
guide asked the guy and came back with the answer: he lives over west. Did the tour guide tell the truth or tell a lie?
13. I have a horse. Do you know what color it is? Allan said, “I guess it is not black”. Brian said, “It is either brown, or gray”.
Charlie said “I know it is brown”. I said, “At least one of you is right and at least one of you is wrong.” What is the color of
my horse if the color is one of the above?
14. A lady and a gentleman are sister and brother. We do not know who is older. Someone asked them: Who is older? The
sister said: I am older. The brother said: I am younger. At least one of them was lying. Who is older?
15. A six digit number 312132 has two 1’s, two 2’s and two 3’s. This number has a very interesting attribute: 1 digit exists
between two 1’s, 2 digits exist between two 2’s and 3 digits exist between two 3’s. Can we add two more 4s to become an
eight digit number and still holding the above attributes plus 4 digits exist between two 4s?
16. Suppose 8 monkeys take 8 minutes to eat 8 bananas. (a) How many minutes would it take 3 monkeys to eat 3 bananas?
(b) How many monkeys would it take to eat 48 bananas in 48 minutes?
17. A group of friends went to a hotel for Dinner. After having their dinner the Bill Amount was of Rs 2400. So they decided
to distribute it into equal amount for each. In the group two friends forget to bring their purses along with them. So later on
it has been decided that Rs 100 has to be paid more by the other friends on calculated amount. So total how many friends
were there in the Group?
IQ Test Answers
The answers to IQ test questions asked above are given below.
1. 10 miles each according to Pythagoras Theorem.
2. Each Cow has 2 eyes and 4 legs and each bird has 2 eyes and 2 legs. Lets call each eye as x and each leg as y. Also each
bird is n and each cow is m so:
n(2x+2y) + m(2x + 4y) = 172x + 344y
2x (n+m) + 2y(n+2m) = 172x + 344y
(n+m) = 86 and (n+2m) = 172
n = 86 – m
86 – m + 2m = 172 or m = 86
This implies n = 0.
So, the owner has 0 birds and 86 cows.
3. This is a classic probability puzzle and many puzzles are based on this logic. If the person picks up two socks then there is
a possibility of them being different in colour. If he picks up three socks then they are guaranteed red or white. So the
minimum number of socks required are three.
4. Let the number be x
105 – x = y
x = 105 – y
13x = 105 + y
14 x = 210
x = 15
5. 10 minutes. The total time was one hour and already 50 minutes are over.
6. You can assume that when the fly lands on cyclist 1 they are 50 miles apart. The fly has to travel 50 + x miles at 16
miles/hour. Here x is the additional distance at 10 miles/hour. So the problem is now simplified as
y = 50 + x (distance)
(50 + x)/16 = x/10 (time)
500 + 10x = 16x
6x = 500
x = 250/3 = 83.33
y = 133.33
7. Daughter
8. When they meet they are both at the same distance away from London.
9. 10 km. Because the dog’s speed is 10 km/h.
10. First, work out how much of the pool gets filled by each tap in one hour. The first tap takes 48 hours to fill the pool, so in
one hour it fills 1/48 of the pool. The second tap 1/72. The third tap 1/96. And the fourth tap fills 1/6 of the pool in one hour.
We need to add all those fractions together:
1/48 + 1/72 + 1/96 + 1/6 = 61/288
So, in one hour the pool will be 61/288 full and it will be completely full in 288/61 hours = 4 hours 43 minutes and 17
seconds.
11. Tommy was the thief. He was not telling the truth. He stole it.
12. If the guy was from the west, he should answer the truth: I am from the west. If the guy was from the east, he also
should tell a lie: I am from the west. The answer will always be: ‘I am from the west’. So we know the tour guide was telling
the truth.
13. If the horse is brown. then every one is right. This is not the answer. If the horse is black, then every one is wrong. This
is not the answer either. Therefore, the horse is gray. To verify the answer, Allan was right, Brian was right, but Charlie was
wrong.
14. Since there is no conflict between what they said, it meant that either they both told a lie or both told the truth. In this
case they both told a lie. The answer is the brother is older.
15. The number will be 41312432 or 23421314. Of course these 2 numbers are actually the same, just reverse the direction
from one to become another one. The way to solve this is, first all, put down two 4s and reserve 4 spaces between these two
4s. Then you determonw the positions for two 3s. Since you can not put both 3s between 4s, one 3 must be outside of two
4s. After that you just need to try a few cases to find out he answer.
16. (a) 8 Minutes because each monkey takes 8 minutes to eat a banana. (b) 8 Monkeys are required to eat 48 bananas in
48 minutes. Each money will eat 6 bananas.
17. There were 8 friends in the group. Each friend was to share Rs 300 to cover the cost of 2400.
FINA 43100 Exam result
FINA 43100 Exam results
You are estimating your company’s external financing needs for the next year. At the end of the year you expect that owners’ equity will be $80 million, total assets will amount to $170 million, and total liabilities will be $70 million. How much will your firm need to borrow, or otherwise acquire, from outside sources during the year?
- $20 million
- $70 million
- $150 million
- $160 million
- $180 million
To estimate Missed Places Inc.’s (MP) external financing needs, the CFO needs to figure out how much equity her firm will have at the end of next year. At the end of the most recent fiscal year, MP’s retained earnings were $158,000. The Controller has estimated that over the next year, gross profits will be $360,700, earnings after tax will total $23,400, and MP will pay $12,400 in dividends. What are the estimated retained earnings at the end of next year?
- $169,000
- $170,400
- $181,400
- $506,300
- $518,700
- None of the above.
158,000 + 23,400 – 12,400 = $169,000
The most common approach to developing pro forma financial statements is called the:
- cash budget method.
- financial planning method.
- seasonality approach.
- percent-of-sales method.
- market-oriented approach.
Which of the following are viable techniques to cope with the uncertainty inherent in realistic financial projections?
- Simulation
- Ad hoc adjustments
III. Scenario analysis
- Sensitivity analysis
- II and IV only
- III and IV only
- II, III, and IV only
- I, II, and III only
- I, III, and IV only
- I, II, III, and IV
Which one of the following statements is correct concerning the cash balance of a firm?
- Most firms attempt to maintain a zero cash balance at all times.
- The cumulative cash surplus shown on a cash budget is equal to the ending cash balance plus the minimum desired cash balance.
- Most firms attempt to maximize the cash balance at all times.
- A cumulative cash deficit on a cash budget indicates the need to acquire additional funds.
- The ending cash balance must equal the minimum desired cash balance.
Assume each month has 30 days and AmDocs has a 60-day accounts receivable period. During the second calendar quarter of the year (April, May, and June), AmDocs will collect payment for the sales it made during which of the months listed below?
- October, November, and December
- November, December, and January
- December, January, and February
- January, February, and March
- February, March, and April
The Limited collects 25 percent of sales in the month of sale, 60 percent of sales in the month following the month of sale, and 15 percent of sales in the second month following the month of sale. During the month of April, the firm will collect:
- 60 percent of February sales.
- 15 percent of April sales.
- 60 percent of March sales.
- 15 percent of March sales.
- 25 percent of February sales.
Steve has estimated the cash inflows and outflows for his sporting goods store for next year. The report that he has prepared summarizing these cash flows is called a:
- pro forma income statement.
- sales projection.
- cash budget.
- receivables analysis.
- credit analysis.
- None of the above.
You are developing a financial plan for a corporation. Which of the following questions will be considered as you develop this plan?
- How much will our sales grow?
- Will additional fixed assets be required?
III. Will dividends be paid to shareholders?
- How much new debt must be obtained?
- I and IV only
- II and III only
- I, III, and IV only
- II, III, and IV only
- I, II, III, and IV
Ruff Wear expects sales of $560, $650, $670, and $610 for the months of May through August, respectively. The firm collects 20 percent of sales in the month of sale, 70 percent in the month following the month of sale, and 8 percent in the second month following the month of sale. The remaining 2 percent of sales is never collected. How much money does the firm expect to collect in the month of August?
- $621
- $628
- $633
- $639
- $643
August collections = 0.20($610) + 0.70($670) + 0.08($650) = $643
On May 1, Vaya Corp. had a beginning cash balance of $175. Vaya’s sales for April were $430 and May sales were $480. During May, the firm had cash expenses of $110 and made payments on accounts payable of $290. Vaya’s accounts receivable period is 30 days. What is the firm’s beginning cash balance on June 1?
- $145
- $155
- $205
- $215
- $265 Cash balance = $175 – $110 – $290 + $430 = $205
You are preparing pro forma financial statements for 2014 using the percent-of-sales method. Sales were $100,000 in 2013 and are projected to be $120,000 in 2014. Net income was $5,000 in 2013 and is projected to be $6,000 in 2014. Equity was $45,000 at year-end 2012 and $50,000 at year-end 2013. Assuming that this company never issues new equity, never repurchases equity, and never changes its dividend payout ratio, what would be projected for equity at year-end 2014?
- $55,000
- $56,000
- $60,000
- Insufficient information is provided to project equity in 2014.
All of net income was added to equity in 2013, so all of net income will be added to equity in 2014. $50,000 + $6,000 = $56,000.
Which of the following statements is correct if a firm’s pro forma financial statements project net income of $12,000 and external financing required of $5,000?
- Total assets cannot grow by more than $10,000
- Dividends cannot exceed $10,000.
- Retained earnings cannot grow by more than $12,000.
- Long-term debt cannot grow by more than $5,000.
Please refer to Oscar’s financial statements above. What was Oscar’s increase in retained earnings during 2014?
- $450
- $1,380
- $1,830
- $2,280
- None of the above.
Please refer to Oscar’s financial statements above. Sales are projected to increase by 3 percent next year. The profit margin and the dividend payout ratio are projected to remain constant. What is the projected addition to retained earnings for next year?
- $1,309.19
- $1,421.40
- $1,884.90
- $2,667.78
- $3,001.40
- None of the above.
Please refer to Oscar’s financial statements above. All of Oscar’s costs and current asset accounts vary directly with sales. Sales are projected to increase by 10 percent. What is the pro forma accounts receivable balance for next year?
- $949
- $1,034
- $1,113
- $1,730
- $2,670
- None of the above.
Please refer to Oscar’s financial statements above. Assume a constant profit margin and dividend payout ratio, and further assume all of Oscar’s assets and current liabilities vary directly with sales. Assume long-term debt and common stock remain unchanged. Sales are projected to increase by 10 percent. What is Oscar’s external financing need for next year?
- -$410
- -$260
- $235
- $1,320
- $7,240
- None of the above.
Please refer to Oscar’s financial statements above. Assume a constant debt-equity ratio, net profit margin and dividend payout ratio, and further assume all of Oscar’s expenses, assets and current liabilities vary directly with sales. What is the pro forma net fixed asset value for next year if sales are projected to increase by 7.5 percent?
- $10,857.50
- $10,931.38
- $11,663.75
- $15,587.50
- $18,987.50
- None of the above.
In the above financial statements, Royal Corporation has prepared (incomplete) pro forma financial statements for 2014, based on actual financial statements for 2013. Royal Corp. used the percent-of-sales method assuming a sales growth rate of 10% for 2014. If capital expenditures are planned to be $1,615 in 2014, then what would be the appropriate projection for net fixed assets in 2014?
- $4,453
- $4,563
- $4,663
- $5,663
Please refer to the pro forma financial statements for Royal Corporation above. If Royal Corporation plans to issue $100 in new equity in 2014, what should be the projection for shareholders’ equity for 2014?
- $5,349
- $5,436
- $5,451
- $5,536
Please refer to the pro forma financial statements for Royal Corporation above. Assume that net fixed assets are projected to be 5,000 for 2014 and that shareholders’ equity is projected to be 5,500 for 2014. If long-term debt is the plug figure, what should be the projection for long-term debt for Royal Corporation in 2014?
- $2,206
- $2,363
- $2,455
- $2,847
Please refer to the spreadsheet above. Selected assumptions are given for preparing pro forma financial statements for 2015. Which of the following formulas would correctly give the forecast for sales in cell C8?
- =B8*B2
- =B8 + B8*B2
- =(1 + B8)*B2
- =(1/B2)*B8
- None of the above.
Please refer to the spreadsheet above. Selected assumptions are given for preparing pro forma financial statements for 2015. When the pro formas are completed, which of the following formulas would correctly give the forecast for cost of goods sold in cell C9?
- =B9*B3
- =B9 + B9*B3
- =B8*B3
- =B9*B2
- None of the above.
Please refer to the spreadsheet above. Selected assumptions are given for preparing pro forma financial statements for 2015. Assume that no new equity will be issued in 2015. When the pro formas are completed, which of the following formulas would correctly give the forecast for shareholders’ equity in cell G19?
- =F19*B2
- =F19*(1 + B2)
- =F19 + (1 – B4)*C16
- =F19 + B4*C16
- None of the above.
Which one of the following will increase the sustainable rate of growth a corporation can achieve?
- avoidance of external equity financing
- increase in corporate tax rates
- reduction in the retention ratio
- decrease in the dividend payout ratio
- decrease in sales given a positive profit margin
- None of the above.
Which of these ratios are the determinants of a firm’s sustainable growth rate?
- Assets-to-equity ratio
- Profit margin
III. Retention ratio
- Asset turnover ratio
- I and III only
- II and III only
- II, III, and IV only
- I, II, and III only
- I, II, III, and IV
- None of the above.
The retention ratio is:
- equal to net income divided by the change in total equity.
- the percentage of net income available to the firm to fund future growth.
- equal to one minus the asset turnover ratio.
- the change in retained earnings divided by the dividends paid.
- the dollar increase in net income divided by the dollar increase in sales.
- None of the above.
Which of the following statements is true?
- Rapid growth spurs increases in market share and profits and thus, is always a blessing
- Firms that grow rapidly only very rarely encounter financial problems.
- The cash flows generated in a given time period are equal to the profits reported.
- Profits provide assurance that cash flow will be sufficient to maintain solvency.
- Due to required cash investments in current assets, fast-growing and profitable companies can literally “grow broke”.
Which one of the following correctly defines the retention ratio?
- one plus the dividend payout ratio
- additions to retained earnings divided by net income
- additions to retained earnings divided by dividends paid
- net income minus additions to retained earnings
- net income minus cash dividends
Which one of the following policies most directly affects the projection of the retained earnings balance to be used on a pro forma statement?
- net working capital policy
- capital structure policy
- dividend policy
- capital budgeting policy
- capacity utilization policy
Which of the following questions are appropriate to address upon conducting sustainable growth analysis and the financial planning process?
- Should the firm merge with a competitor?
- Should additional equity be sold?
III. Should a particular division be sold?
- Should a new product be introduced?
- I, II, and III only
- I, II, and IV only
- I, III, and IV only
- II, III, and IV only
- I, II, III, and IV
- None of the above.
The sustainable growth rate of a firm is best described as the:
- minimum growth rate achievable assuming a 100 percent retention ratio.
- minimum growth rate achievable if the firm maintains a constant equity multiplier.
- maximum growth rate achievable excluding external financing of any kind.
- maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.
- maximum growth rate achievable with unlimited debt financing.
The sustainable growth rate:
- assumes there is no external financing of any kind.
- assumes no additional long-term debt is available.
- assumes the debt-equity ratio is constant.
- assumes the debt-equity ratio is 1.0.
- assumes all income is retained by the firm.
Which of the following can affect a firm’s sustainable rate of growth?
- Asset turnover ratio
- Profit margin
III. Dividend policy
- Financial leverage
- III only
- I and III only
- II, III, and IV only
- I, II, and IV only
- I, II, III, and IV
- None of the above.
Gujarat Corporation doubled its shareholders’ equity during the year 2014. Gujarat did not issue any new equity, repurchase any equity, or pay out any dividends during the year. What is Gujarat’s sustainable growth rate for 2014?
- 50%
- 100%
- 150%
- 200%
If equity doubled, then g* = change in equity/equity bop = 100%. For example, if equity bop was 25, the change in equity must also be 25 in order to double equity.
Hayesville Corporation had net income of $5 million this year on net sales of $125 million per year. At the beginning of this year, its debt-to-equity ratio was 1.5 and it held $75 million in total liabilities. It paid out $2 million in dividends for the year. What is Hayesville Corporation’s sustainable growth rate?
- 3%
- 4%
- 5%
- 6%
ROEbop × Retention ratio = (5/50) × 0.6 = 6%
Milano Corporation has experienced growth of 20% for each of the last 5 years. Over this 5-year period, Milano’s return on equity has never exceeded 15%, its profit margin has held steady at 5%, and its total asset turnover has not changed. Over the 5-year period, Milano paid no dividends and issued no new equity. Based on this information, which of the following can you most likely infer about Milano’s performance over the past 5 years?
- Milano’s leverage has decreased.
- Milano’s leverage has remained constant.
- Milano’s leverage has increased.
- None of the above.
Note first that g > g because g = 20% and g<15%.
With g > g* one of PRAT must increase. P has held steady at 5%, R has remained at 100%, A has not changed. Thus T (leverage) must have increased.
Which of the following would increase a company’s need for external finance, all else equal?
- An increase in the dividend payout ratio
- A decrease in sales growth
- An increase in profit margin
- A decrease in the collection period
You constructed a pro forma balance sheet for next year and found that external financing required was negative (i.e., the company projected a financing surplus). Which of the following options, all else equal, would NOT correct the projected imbalance?
- A stock repurchase
- A decrease in accounts payable
- An increase in cash and marketable securities
- An increase in the retention ratio
The sustainable growth rate:
- is the highest growth rate attainable for a firm that pays no dividends.
- is the highest growth rate attainable for a firm without issuing new stock.
- can never be greater than the return on equity.
- can be increased by decreasing leverage.
Wax Music expects sales of $437,500 next year. The profit margin is 4.8 percent and the firm has a 30 percent dividend payout ratio. What is the projected increase in retained earnings?
- $14,700
- $17,500
- $18,300
- $20,600
- $21,000
- None of the above.
Change in retained earnings = $437,500 × 0.048 × (1 – 0.30) = $14,700
Komatsu has a 4.5 percent profit margin and a 15 percent dividend payout ratio. The asset turnover ratio is 1.6 and the assets-to-equity ratio (using beginning-of-period equity) is 1.77. What is Komatsu’s sustainable rate of growth?
- 1.91%
- 6.12%
- 10.83%
- 11.26%
- 12.74%
Sustainable growth = PRAT = 0.045 × (1 – 0.15) × 1.6 × 1.77 = 10.83%
A firm has a retention ratio of 40 percent and a sustainable growth rate of 6.2 percent. Its asset turnover ratio is 0.85 and its assets-to-equity ratio (using beginning-of-period equity) is 1.80. What is its profit margin?
- 3.79%
- 5.69%
- 6.75%
- 10.13%
- 18.24%
0.062 = PRAT = profit margin × 0.40 × 0.85 × 1.80
profit margin = 0.062/(0.40 × 0.85 × 1.80) = 10.13%
Westcomb, Inc. had equity of $150,000 at the beginning of the year. At the end of the year, the company had total assets of $195,000. During the year, the company sold no new equity. Net income for the year was $72,000 and dividends were $44,640. What is Westcomb’s sustainable growth rate?
- 15.32 percent
- 15.79 percent
- 17.78 percent
- 18.01 percent
- 18.24 percent
Change in Equity = Retained earnings = $72,000 – $44,640 = $27,360
Sustainable growth rate = g* = Change in Equity/Equitybop = $27,360/$150,000 = 18.24%
Alternative: g* = R × ROEbop = (72,000 – 44,640)/72,000 × 72,000/150,000 = 0.38 × 0.48 = 0.1824
Which of the following actions would help a firm’s growth problem if its actual sales growth exceeds its sustainable rate of growth?
- Increase prices
- Decrease financial leverage
III. Decrease dividends
- Prune away less-profitable products
- I and II only
- I and III only
- I, II, and IV only
- I, III, and IV only
- I, II, III, and IV
- None of the above.
Please refer to the selected financial information for Boss Stores above. What is the retention ratio for 2013?
- 0.32
- 0.68
- 0.97
- 1.00
- None of the above.
Please refer to the selected financial information for Boss Stores above. What is the actual sales growth rate for 2013?
- – 17.6%
- – 7.9%
- 8.51%
- 21.4%
- None of the above.
Please refer to the selected financial information for Boss Stores above. What is the sustainable growth rate for 2013?
- – 17.6%
- – 7.9%
- 9.97%
- 10.27%
- 12.23%
- 21.40%
Please refer to the selected financial information for Boss Stores above. What is the difference between Boss’s sustainable growth rate and its actual growth rate for 2014?
- – 11.40%
- – 7.09%
- – 3.04%
- 5.47%
- 13.98%
- 21.40%
Financial leverage:
- increases expected ROE but does not affect its variability.
- increases breakeven sales, like operating leverage, but increases the rate of earnings per share growth once breakeven is achieved.
III. is a fundamental financial variable affecting sustainable growth.
- increases expected return and risk to owners.
- I and II only
- I and III only
- II and IV only
- II, III, and IV only
- I, II, III, and IV
- None of the above.
The best financing choice is the one that:
- sets the debt-to-assets ratio equal to 1.
- trades off the tax disadvantage of debt against the signaling effects of equity.
- maximizes expected cash flows.
- ignores the false comfort of financial flexibility.
- results in the lowest possible financial distress costs.
Homemade leverage is:
- the incurrence of debt by a corporation in order to pay dividends to shareholders.
- the exclusive use of debt to fund a corporate expansion project.
- the borrowing or lending of money by individual shareholders as a means of adjusting their level of financial leverage
- best defined as an increase in a firm’s debt-equity ratio.
- the term used to describe the capital structure of a levered firm.
- None of the above.
The basic lesson of the M&M theory is that the value of a firm is dependent upon:
- the firm’s capital structure.
- the total cash flow of the firm.
- minimizing the marketed claims.
- the amount of marketed claims to that firm.
- the size of the stockholders’ claims.
- None of the above.
The term “financial distress costs” includes which of the following?
- Direct bankruptcy costs
- Indirect bankruptcy costs
III. Direct costs related to being financially distressed, but not bankrupt
- Indirect costs related to being financially distressed, but not bankrupt
- I only
- III only
- I and II only
- III and IV only
- I, II, III, and IV
- None of the above.
Which of the following is/are helpful for evaluating the effect of leverage on a company’s risk and potential returns?
- Estimated pro forma coverage ratios
- The recognition that financing decisions do not affect firm or shareholder value
III. A range of earnings chart and proximity of expected EBIT to the breakeven value
- A conservative debt policy that obviates the need to evaluate risk
- I only
- III only
- I and III only
- II and III only
- IV only
- None of the above.
In general, the capital structures used by non-financial U.S. firms:
- typically result in debt-to-asset ratios between 60 and 80 percent.
- tend to converge to the same proportions of debt and equity.
- tend to be those that maximize the use of the firm’s available tax shelters.
- vary significantly across industries.
- None of the above.
Which of the following factors favor the issuance of debt in the financing decision?
- Market signaling
- Distress costs
III. Tax benefits
- Financial flexibility
- I and II only
- I and III only
- II and IV only
- I, II, and III only
- I, II, and IV only
- None of the above.
Which of the following factors favor the issuance of equity in the financing decision?
- Market signaling
- Distress costs
III. Management incentives
- Financial flexibility
- I and II only
- I and III only
- II and IV only
- II, III, and IV only
- I, II, and IV only
- None of the above.
Which of the following factors favor the issuance of debt in the financing decision?
- Market signaling
- Distress costs
III. Management incentives
- Financial flexibility
- I and II only
- I and III only
- II and IV only
- I, II, and III only
- I, II, and IV only
- None of the above.
Which of the following is NOT a likely financing policy for a rapidly growing business?
- Adopt a modest dividend payout policy that enables the company to finance most of its growth externally.
- Borrow funds rather than limit growth, thereby limiting growth only as a last resort.
- Maintain a conservative leverage ratio to ensure continuous access to financial markets.
- If external financing is necessary, use debt to the point it does not affect financial flexibility.
- None of the above.
According to the pecking order theory proposed by Stewart Myers of MIT, which of the following are correct?
- For financing needs, firms prefer to first tap internal sources such as retained profits and excess cash.
- There is an inverse relationship between a firm’s profit level and its debt level.
III. Firms prefer to issue new equity rather than source external debt.
- A firm’s capital structure is dictated by its need for external financing.
- I and III only
- II and IV only
- I, III, and IV only
- I, II, and IV only
- I, II, III, and IV
- None of the above.
Which of the following is NOT an implication of the pecking order theory of capital structure?
- On average, a firm’s stock price drops when it announces an equity issue.
- Firms may want to maintain a reserve of cash or unused borrowing capacity.
- More-profitable firms (all else equal) should have higher debt ratios.
- Firms may fail to undertake positive-NPV projects if they would have to be financed with a new issue of equity.
Salinas Corporation has net income of $15 million per year on net sales of $90 million per year. It currently has no long-term debt, but is considering a debt issue of $20 million. The interest rate on the debt would be 7%. Salinas Corp. currently faces an effective tax rate of 40%. What would be the annual interest tax shield to Salinas Corp. if it goes through with the debt issuance?
- $560,000
- $1,400,000
- $8,000,000
- $20,000,000
Interest tax shield = interest rate × amount of debt × tax rate = 0.07 × 20,000,000 × 0.40= $560,000
Which of the following statements regarding interest tax shields is correct?
- Taxes are reduced by the amount of a firm’s interest-bearing debt.
- Taxable income is reduced by the amount of a firm’s interest-bearing debt.
- Taxes are reduced by the amount of the interest on a firm’s debt.
- Taxable income is reduced by the amount of the interest on a firm’s debt.
Which of the following would not be considered a cost of financial distress?
- Lack of interest tax shields
- Bankruptcy costs
- Excessive risk-taking by shareholders
- Loss of customers or suppliers
When considering the impact of distress costs on capital structure, which of the following facts should lead ABC Corporation to set a higher target debt ratio than XYZ Corporation (all else equal)?
- ABC’s cash flows from operations are less volatile than XYZ’s.
- ABC is a computer software firm, and XYZ is an electric utility.
- ABC operates in a more competitive industry than XYZ.
- ABC’s assets have lower resale values than XYZ’s assets.
According to the pecking order theory of capital structure, why do firms avoid issuing equity?
- Because fees associated with issuing new equity are so high
- Because they want to avoid dilution of earnings per share
- Because they don’t want to commit to paying dividends on the new equity
- Because equity issuance signals that managers believe their stock is overvalued, which causes the price of the stock to fall
Under the simplifying assumptions of Modigliani and Miller, an increase in a firm’s financial leverage will:
- increase the variability in earnings per share.
- reduce the operating risk of the firm.
- increase the value of the firm.
- decrease the value of the firm.
The interest tax shield has no value when a firm has:
- no taxable income.
- debt-equity ratio of 1.
III. zero debt.
- no leverage.
- I and III only
- II and IV only
- I, III, and IV only
- II, III, and IV only
- I, II, and IV only
- None of the above.
Please refer to the financial information for Squamish Equipment above. For next year, calculate Squamish’s times-burden-covered ratio if Squamish sells 2 million new shares at $20 a share.
- 1.03
- 1.38
- 1.60
- 1.89
- 2.10
- None of the above.
Please refer to the financial information for Squamish Equipment above. For next year, calculate Squamish’s earnings per share if Squamish sells 2 million new shares at $20 a share.
- 1.28
- 1.39
- 2.00
- 2.22
- 4.00
- None of the above.
Please refer to the financial information for Squamish Equipment above. Calculate Squamish’s times-interest-earned ratio for next year assuming the firm raises $40 million of new debt at an interest rate of 7 percent.
- 2.00
- 3.09
- 3.66
- 4.35
- None of the above.
Please refer to the financial information for Squamish Equipment above. Calculate Squamish’s times-burden-covered ratio for the next year assuming the firm raises $40 million of new debt at an interest rate of 7 percent and that annual sinking fund payments on the new debt will equal $8 million.
- 1.01
- 1.08
- 1.38
- 1.49
- 1.95
- None of the above.
Please refer to the financial information for Squamish Equipment above. Calculate Squamish’s earnings per share next year assuming Squamish raises $40 million of new debt at an interest rate of 7 percent.
- 1.28
- 2.00
- 2.12
- 2.22
- 3.06
- None of the above.
Which of the following is NOT an important step in the financial evaluation of an investment opportunity?
- Calculate a figure of merit for the investment.
- Estimate the accounting rate of return for the investment.
- Estimate the relevant cash flows.
- Compare the figure of merit to an acceptance criterion.
- All of the above are important steps.
Which of the following figures of merit might not use all possible cash flows in its calculations?
- Payback period
- Internal rate of return
III. Net present value (NPV)
- Benefit-cost ratio
- III only
- I & III only
- II & III only
- I only
- III & IV only
- I, II, III, and IV
Which of the following figures of merit does not directly take into consideration the time value of money?
- Payback period
- Internal rate of return
III. Net present value (NPV)
- Accounting rate of return
- IV only
- I & III only
- II & III only
- I & II only
- I & IV only
- I, II, III, and IV
Ian is going to receive $20,000 six years from now. Sunny is going to receive $20,000 nine years from now. Which one of the following statements is correct if both Ian and Sunny apply a 7 percent discount rate to these amounts?
- The present values of Ian and Sunny’s monies are equal.
- In future dollars, Sunny’s money is worth more than Ian’s money.
- In today’s dollars, Ian’s money is worth more than Sunny’s.
- Twenty years from now, the value of Ian’s money will be equal to the value of Sunny’s money
- Sunny’s money is worth more than Ian’s money given the 7 percent discount rate.
- None of the above.
Which of the following is NOT a reason why a dollar today is worth more than a dollar in the future?
- Inflation reduces the purchasing power of future dollars.
- The value of a dollar in the future will be compounded more than the value of a dollar today.
- There is more uncertainty of receiving dollars further into the future.
- A dollar today can be productively invested in the time before receiving a dollar in the future.
You plan to buy a new Mercedes four years from now. Today, a comparable car costs $82,500. You expect the price of the car to increase by an average of 4.8 percent per year over the next four years. How much will your dream car cost by the time you are ready to buy it?
- $98,340.00
- $98,666.67
- $99,517.41
- $99,818.02
- $100,023.16
- None of the above.
Future value = $82,500 × (1 + 0.048)4 = $99,517.41
Your grandmother invested a lump sum 26 years ago at 4.25 percent interest. Today, she gave you the proceeds of that investment which totaled $51,480.79. How much did she originally invest?
- $15,929.47
- $16,500.00
- $17,444.86
- $17,500.00
- $17,999.45
- None of the above.
Present value = $51,480.79/(1 + 0.0425)26 = $17,444.86
Naomi plans on saving $3,000 a year and expects to earn an annual rate of 10.25 percent. How much will she have in her account at the end of 45 years?
- $1,806,429
- $1,838,369
- $2,211,407
- $2,333,572
- $2,508,316
You are the beneficiary of a life insurance policy. The insurance company informs you that you have two options for receiving the insurance proceeds. You can receive a lump sum of $200,000 today or receive payments of $1,400 a month for 20 years. You can earn a 6 percent annual rate on your money, compounded monthly. Which option should you take and why?
- You should accept the monthly payments because they are worth $209,414 to you.
- You should accept the $200,000 lump sum because the monthly payments are only worth $16,057 to you today.
- You should accept the monthly payments because they are worth $336,000 to you.
- You should accept the $200,000 lump sum because the monthly payments are only worth $189,311 to you today.
- You should accept the $200,000 lump sum because the monthly payments are only worth $195,413 to you today.
- None of the above.
The number of monthly periods = 20 × 12 = 240
The monthly interest rate = 6%/12 = 0.5%
Your brother will borrow $17,800 to buy a car. The terms of the loan call for monthly payments for 5 years at an 8.6 percent annual interest rate, compounded monthly. What is the amount of each payment?
- $287.71
- $296.67
- $301.12
- $342.76
- $366.05
The number of monthly periods = 5 × 12 = 60
The monthly interest rate = 8.6%/12 = 0.71667%
EAC Nutrition offers a 9.5 percent coupon bond with annual payments, maturing 11 years from today. Your required return is 11.2 percent. What price are you willing to pay for this bond if the face (or par) value is $1,000?
- $895.43
- $896.67
- $941.20
- $946.18
- $953.30
Price = present value of coupons and face value
Coupon payment = 0.095 × 1000 = $95 per year
A project will produce after-tax operating cash inflows of $3,200 a year for 5 years. The after-tax salvage value of the project is expected to be $2,500 in year 5. The project’s initial cost is $9,500. What is the net present value of this project if the required rate of return is 16 percent?
- -$311.02
- $2,168.02
- $4,650.11
- $9,188.98
- $21,168.02
Solve for the PV of the cash inflows, and then subtract the initial investment:
NPV = 11668.02 – 9,500 = $2,168.02
Which of the following should be included in the cash flow projections for a new product?
- Money already spent for research and development of the new product
- Capital expenditures for equipment to produce the new product
III. Increase in working capital needed to finance sales of the new product
- Interest expense on the loan used to finance the new product launch
- II and III only
- II and IV only
- I, II, and III only
- II, III, and IV only
- I, II, III, and IV
Pro forma free cash flows for a proposed project should:
- exclude the cost of employing existing assets that could be sold anyway.
- exclude interest expense.
III. include the depreciation tax shield related to the project.
- exclude any required increase in operating current assets.
- I and II only
- II and III only
- II and IV only
- I, III, and IV only
- I, II, III, and IV
Which of the following statements related to the internal rate of return (IRR) are correct?
- The IRR is the discount rate at which an investment’s NPV equals zero.
- An investment should be undertaken if the discount rate exceeds the IRR.
III. The IRR tends to be used more than net present value simply because its results are easier to comprehend.
- The IRR is the best tool available for deciding between mutually exclusive investments.
- I and II only
- I and III only
- II and III only
- I, II, and IV only
- I, II, III, and IV
You plan to pay $50 for a share of preferred stock that pays a $2.40 dividend per year forever. What annual rate of return will you realize?
- 0.48%
- 2.40%
- 4.80%
- 5.10%
- 20.83%
r = A/P = $2.40/$50 = 4.80%
Sol’s Sporting Goods is expanding, and as a result expects additional operating cash flows of $26,000 a year for 4 years. This expansion requires $39,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires an additional $3,000 of net working capital throughout the life of the project; Sol expects to recover this amount at the end of the project. What is the net present value of this expansion project at a 16 percent required rate of return?
- $18,477.29
- $21,033.33
- $28,288.70
- $29,416.08
- $32,409.57
The initial investment consists of the fixed assets and incremental working capital: $39,000 + $3000 = $42,000. The working capital amount is recovered at the end of year 4. Solve for the PV of the cash inflows, and then subtract the initial investment:
NPV = 74,409.57 – 42,000 = $32,409.57
What is the benefit-cost ratio for an investment with the following cash flows at a 14.5 percent required return?
YEAR CASH FLOW
0 $(46,500)
1 $12,200
2 $38,400
3 $11,300
- 0.94
- 0.98
- 1.02
- 1.06
- 1.11
PVinflows = (12,200/1.145) + (38,400/1.1452) + (11,300/1.1453) = $47,472.78
BCR = $47,472.78/$46,500 = 1.02
When making a capital budgeting decision, which of the following is/are NOT relevant?
- The size of a cash flow.
- The risk of a cash flow.
III. The accounting earnings from a cash flow.
- The timing of a cash flow.
- I only
- II only
- III only
- II and III only
- III and IV only
- They are all relevant.
Giant Corp. is considering a project that requires a $1,500 initial cost for a new machine that will be depreciated straight line to a salvage value of 0 on a 5-year schedule. The project will require a one-time increase in the level of net working capital of $300. The project will generate an additional $1,600 in revenues and $700 in operating expenses each year. The project will end at the end of year 2, at which time the machinery is expected to be sold for $800. Giant’s tax rate is 50%. In a discounted cash flow analysis of this project, what would be the projected Year 0 free cash flow?
- -$1,200
- -$1,500
- -$1,800
- -$2,100
In a discounted cash flow analysis of Giant Corp.’s project described in the problem above, what would be the projected Year 1 free cash flow?
- $300
- $600
- $750
- $900
In a discounted cash flow analysis of Giant Corp.’s project described in the problem above, what would be the projected Year 2 free cash flow?
- $1,300
- $1,450
- $1,700
- $1,750
A divisional manager submitted a project proposal to the chief financial officer, complete with a calculated NPV for the project. The chief financial officer studied the proposal and pointed out that the divisional manager had failed to account for a one-time increase in net working capital of $60,000 that will be required over the life of the seven-year project. Assuming the full value of net working capital will be recovered at the end of the project, how will the project’s NPV change after making the chief financial officer’s adjustment? Assume a discount rate of 9%.
- The NPV will decrease by $16,411.
- The NPV will decrease by $32,822.
- The NPV will decrease by $60,000.
- The NPV will not be affected.
- None of the above.
In Year 0 there is a $60,000 outflow.
In Year 5 there is a $60,000 inflow, which has a present value of 60,000/1.097 = $32,822.
The decrease in NPV is 60,000 – 32,822 = $27,178.
You are to receive an annuity of $1,000 per year for 10 years. You will receive the first payment two years from today. At a discount rate of 10%, what is the present value of this annuity?
- $5,078.15
- $5,585.97
- $6,144.57
- $6,759.03
The PV = $6,144.57. But the first payment is received in two years, not one year, so discount the PV by one more year: 6,144.57/1.1 = $5,585.97
What is the difference in the value of a $5,000 annual perpetuity and an annuity of $5,000 for 100 years? Assume that the discount rate is 8% and that cash flows are received at the end of the year.
- $28
- $656
- $1,656
- $5,000
The present value of the perpetuity is 5,000/0.08 = $62,500. For the annuity:
The difference = 62,500 – 62,472 = $28
Group Project -Accounting and Financial Management
Group Project
This is a group project.
Please form groups of 4 students;
There will be one report per group.
This multiple part assignment has several due dates.
Select any publicly traded hospitality firm*
Assignment 1 – Sizing up your firm** (be guided by the methodology in chapter 2
(i) Analyze your firm’s 3-year financial performance using common-sized statements
(ii) Analyze your firm’s 3-year financial performance using ratio analysis
Assignment 2- Projecting your firm’s future performance
(i) Create proforma income statements and balance sheets for the next two years (use the spreadsheet from the Proforma Statement assignment)
(ii) Perform appropriate sensitivity analysis and alternate scenario, by varying the growth rate in sales and working capital variables (collection period, days sales in inventory and account payable period).
Assignment 3 – Cost of Capital – Due April 13 2020
(i) Compute the cost of equity for your firm (use CAPM; Assume the risk-free rate is 4% and the market risk premium is 5%; obtain beta from any finance website eg Yahoo Finance)
(ii) Compute the after-tax cost of debt
(iii) Compute the weighted average cost of capital using the book value of debt and the market value of equity.
Grading will be based on the following:
Presentation/Style: 15
Analysis and computations: 50
Consistency: 35
The final project should be a formal report including references– typed double spaced 12 point font.
The final report should include the content of assignments 1,2&3 and be no more than 7 pages.
However, you can use an unlimited number of appendices, spreadsheets, graphs etc.
*The instructor must approve the firm selected by each group