Find a company you are interested in, and you can bet there is an accountant in the picture planning...

Accountants work for almost any organization you can think of. Find a company you are interested in, and you can bet there is an accountant in the picture planning for next year’s budget, chasing down an expense report from the owner, or advising managers on financial issues. For-profit businesses, not-for-profit organizations, and public accounting firms all hire accountants.

Accounting career opportunities vary from the entry-level accounting clerk to the accountant who...

Accounting career opportunities vary from the entry-level accounting clerk to the accountant who handles a wide range of responsibilities. Some accountants work for public accounting firms and are certified public accountants. A certified public accountant (CPA) is licensed by the state to perform independent audits of corporations. Public accounting firms provide many job opportunities including

• auditing,

• financial planning,

• preparing tax returns, and

• forensic accounting.

Explain the characteristics and purposes of cost accounting.

Explain the characteristics and purposes of cost accounting.

Describe the flow of costs in a job order costing system.

Explain the nature and importance of a job cost sheet.

Use these strategies to set and accomplish career goals

Use these strategies to set and accomplish career goals:

• Map out a plan.

• Consider the education required.

• Find a part-time job to get some on-the-job training.

• Check into internships available in your field of interest.

Prepare journal entries for each type of manufacturing cost.

Prepare journal entries for each type of manufacturing cost.

(a) Raw material purchases of $4,200 on account.

Raw Materials Inventory	4,200
Accounts Payable		4,200

(b)Incurs factory labor of $18,000. Of that amount, $15,000 relates to wages payable and $3,000 relates to payroll taxes payable.

Factory Labor	18,000
Factory Wages Payable		15,000
Employer Payroll Taxes Payable		3,000

Prepare the summary entry for manufacturing overhead in Wallace Manufacturing Company.

Wallace Manufacturing incurs $32,000 of factory labor costs. Of that amount, $27,000 relates to wages payable and $5,000 relates to payroll taxes payable in February. What is the entry of record factory labor for the month is?

Using assumed data, Prepare the summary entry for manufacturing overhead in Wallace Manufacturing Company.

In January 2006, the five managing partners of Infosys Consulting (ICI), also known to the...

Infosys Consulting in 2006 Leading the Next Generation of Business and Information Technology Consulting

In January 2006, the five managing partners of Infosys Consulting (ICI), also known to the leadership of ICI’s parent company Infosys Technologies as “the dream team,” congregated at the St. Regis resort in Orange County, California for their first team meeting of the year. CEO and managing director Steve Pratt, COO and managing director Paul Cole, managing director Romil Bahl, managing director and founder Raj Joshi, and managing director Ming Tsai (see Exhibit 1 for management bios) were all proud of how much the company had achieved since its inception in April 2004 as a wholly owned U.S. subsidiary of Infosys Technologies. The firm had more than 100 consulting engagements and had grown from its inception in April 2004 to over 200 employees in January 2006, achieving its two year recruiting target. It was also on plan for both its own revenue target and its target contribution to Infosys Technologies’ revenue through the third quarter of its second year of existence. Moreover, ICI’s managing partners were confident that the subsidiary had contributed to Infosys Technologies’ ranking in Wired magazine’s Top Ten Company list in May 2005 and high ratings from analysts in 2004 and 2005 (see Exhibit 2). However, the five managing partners saw several challenges ahead for ICI. Driven by Infosys Technologies’ COO Kris Gopalakrishnan’s edict to “compete with the best,” the team aspired to be ranked alongside IBM and Accenture, leaders in the business and information technology consulting industry (see Exhibit 3 for company rankings). They also faced internal challenges of leveraging Infosys Technologies, interfacing productively with the parent company and managing growth as they built the organization. In addition, each managing partner was committed to “changing the rules of the game within the consulting industry” in the founding partner Raj Joshi’s words. By applying Infosys Technologies’ approach to global delivery, the leadership team at ICI believed the firm had created a unique model in business and information technology consulting that shortened the lifecycle from business consulting to technology implementation, reduced the costs of a typical client engagement and delivered measurable benefits to clients. Flashback to April 2004: The Inception of Infosys Consulting The evolution of global Information Technology (IT) service companies in India began in the 1990s with the procurement of application development and maintenance services by American companies. Business Process Outsourcing (BPO) work in India was largely conducted by captive units, for example, companies like General Electric would perform BPO through subsidiaries in India rather than work with third party companies like Infosys Technologies. From 1993 through 1999, as U.S. firms gained confidence in working with Indian companies and wanted to leverage the benefits of off shoring services by taking advantage of high quality services at lower price points, Indian companies like Infosys Technologies started expanding their footprint by adding service lines.

Indicate how the predetermined overhead rate is determined and used.

Indicate how the predetermined overhead rate is determined and used.

Prepare entries for jobs completed and sold.

Distinguish between under-and overapplied manufacturing overhead.

Throughout their long histories, N.V. Philips (Netherlands) and Matsushita Electric (Japan) had...

Philips versus Matsushita A New Century, a New Round

Throughout their long histories, N.V. Philips (Netherlands) and Matsushita Electric (Japan) had followed very different strategies and emerged with very different organizational capabilities. Philips built its success on a worldwide portfolio of responsive national organizations while Matsushita based its global competitiveness on its centralized, highly efficient operations in Japan. During the 1990s, both companies experienced major challenges to their historic competitive positions and organizational models, and at the end of the decade, both companies were struggling to reestablish their competitiveness. At the start of the new millennium, new CEOs at both companies were implementing yet another round of strategic initiatives and organizational restructurings. Observers wondered how the changes would affect their long running competitive battle. Philips: Background In 1892, Gerard Philips and his father opened a small light-bulb factory in Eindhoven, Holland. When their venture almost failed, they recruited Gerard’s brother, Anton, an excellent salesman and manager. By 1900, Philips was the third largest light-bulb producer in Europe. From its founding, Philips developed a tradition of caring for workers. In Eindhoven it built company houses, bolstered education, and paid its employees so well that other local employers complained. When Philips incorporated in 1912, it set aside 10% of profits for employees. Technological Competence and Geographic Expansion While larger electrical products companies were racing to diversify, Philips made only light-bulbs. This one-product focus and Gerard’s technological prowess enabled the company to create significant innovations. Company policy was to scrap old plants and use new machines or factories whenever advances were made in new production technology. Anton wrote down assets rapidly and set aside substantial reserves for replacing outdated equipment. Philips also became a leader in industrial research, creating physics and chemistry labs to address production problems as well as more abstract scientific ones. The labs developed a tungsten metal filament bulb that was a great commercial success and gave Philips the financial strength to compete against its giant rivals.

What is the entry of record this purchase on January 4 is?

Wallace Manufacturing purchases 2,000 handles (Stock No. AA2746) at $5 per unit ($10,000) and 800 modules (Stock No. AA2850) at $40 per unit ($32,000) for a total cost of $42,000 ($10,000 + $32,000). What is the entry of record this purchase on January 4 is?

To Record Transfer of Units to the Bottling Department:

Journalize the transfer of units as appropriate.

To Record Transfer of Units to the Bottling Department:

Work in Process—Bottling	19,000
Work in Process—Blending		19,000

To Record Transfer of Units to Finished Goods:

Finished Goods Inventory	11,000
Work in Process—Bottling		11,000

 

In 2006, the pharmaceutical giant Merck faced major challenges. Vioxx, the company’s once...

Merck, the FDA, and the Vioxx Recall

In 2006, the pharmaceutical giant Merck faced major challenges. Vioxx, the company’s once bestselling prescription painkiller, had been pulled off the market in September 2004 after Merck learned it increased the risk of heart attacks and strokes.When news of the recall broke, the company’s stock price had plunged thirty percent to $33 a share, its lowest point in eight years, where it had hovered since. Standard & Poor’s had downgraded the company’s outlook from “stable” to “negative.” In late 2004, the Justice Department had opened a criminal investigation into whether the company had “caused federal health programs to pay for the prescription drug when its use was not warranted.”1 The Securities and Exchange Commission was inquiring into whether Merck had misled investors. By late 2005, more than 6,000 lawsuits had been filed, alleging that Vioxx had caused death or disability. From many quarters, the company faced troubling questions about the development and marketing of Vioxx, new calls for regulatory reform, and concerns about its political influence on Capitol Hill. In the words of Senator Charles Grassley, chairman of a Congressional committee investigating the Vioxx case, “a blockbuster drug [had become] a blockbuster disaster.”2 Merck, Inc.3 Merck, the company in the eye of this storm, was one of the world’s leading pharmaceutical firms. As shown in Exhibit 1, in 2005 the company ranked fourth in sales, after Pfizer, Johnson & Johnson, and GlaxoSmithKline. In assets and market value, it ranked fifth. However, Merck ranked first in profits, earning $7.33 billion on $30.78 billion in sales (24 percent). Merck had long enjoyed a reputation as one of the most ethical and socially responsible of the major drug companies. For an unprecedented seven consecutive years (1987 to 1993), Fortune magazine had named Merck its “most admired” company. In 1987, Merck appeared on the cover of Time under the headline, “The Miracle Company.” It had consistently appeared on lists of best companies to work for and in the portfolios of social investment funds. The company’s philanthropy was legendary. In the 1940s, Merck had given its patent for streptomycin, a powerful antibiotic, to a university foundation. Merck was especially admired for its donation of Mectizan. Merck’s scientists had originally developed this drug for veterinary use, but later discovered that it was an effective cure for river blindness, a debilitating parasitic disease afflicting some of the world’s poorest people. When the company realized that the victims of river blindness could not afford the drug, it decided to give it away for free, in perpetuity.4 In 1950, George W. Merck, the company’s longtime CEO, stated in a speech: “We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they never fail to appear. The better we have remembered that, the larger they have been.”5 This statement was often repeated in subsequent years as a touchstone of the company’s core values. Merck was renowned for its research labs, which had a decades-long record of achievement, turning out one innovation after another, including drugs for tuberculosis, cholesterol, hypertension, and AIDS. In the early 2000s, Merck spent around $3 billion annually on research. Some felt that the company’s culture had been shaped by its research agenda. Commented the author of a history of Merck, the company was “intense, driven, loyal, scientifically brilliant, collegial, and arrogant.”6 In 2006, although Merck had several medicines in the pipeline— including vaccines for rotavirus and cervical cancer, and drugs for insomnia, lymphoma, and the effects of stroke—some analysts worried that the pace of research had slowed significantly.

The mathematical equation for computing required sales to obtain target net income is:

The mathematical equation for computing required sales to obtain target net income is:

Required sales =

a. Variable costs + Target net income.

b. Variable costs + Fixed costs + Target net income.

c. Fixed costs + Target net income.

d. No correct answer is given.

Marshall Company had actual sales of $600,000 when break-even sales were $420,000. What is the margin of safety ratio?

a. 25%.

b. 30%.

c. 33 1/3%.

d. 45%.

In January 2007, John Antioco, Blockbuster Inc.’s CEO, was reflecting on the challenges facing the...

Blockbuster’s Challenges in the Video Rental Industry

In January 2007, John Antioco, Blockbuster Inc.’s CEO, was reflecting on the challenges facing the company in the year ahead. The pace of change was quickening as Netflix’s online video rental business model was proving very robust. And there was a growing movement to directly download or stream videos using the Internet, which would bypass Blockbuster’s store. With its nearly 9,000 global stores, 6,000 in the United States alone, Blockbuster had an enviable brand name and enormous marketing clout, but how could it best use its resources to keep its number 1 place in the movie-rental market and keep its revenues and profits growing? What strategies needed to be developed to strengthen Blockbuster’s business model? Blockbuster’s History David Cook, the founder of Blockbuster, formed David P. Cook & Associates, Inc., in 1978 to offer consulting and computer services to the petroleum and real estate industries. He created programs to analyze and evaluate oil and gas properties and to compute oil and gas reserves.When oil prices began to decline in 1983 due to the breakdown of the OPEC cartel, his business started to decline, and Cook began evaluating alternative businesses in which he could apply his skills. He decided to exit his current business by selling his company and to enter the video-rental business based on a concept for a “video superstore.” He opened his first superstore, called “Blockbuster Video,” in October 1985 in Dallas. Cook developed his idea for a video superstore by analyzing the trends in the video industry that were occurring at that time. During the 1980s, the number of households that owned VCRs was increasing rapidly and, consequently, so were the number of video rental stores set up to serve their needs. In 1983, 7,000 video-rental stores were in operation, by 1985 there were 19,000, and by 1986 there were over 25,000, of which 13,000 were individually owned. These “mom-and-pop” video stores generally operated for only a limited number of hours, offered customers only a limited selection of videos, and were often located in out-of-the-way strip shopping centers. These small stores often charged a membership fee in addition to the tape rental charge, and generally, customers brought an empty box to the video-store clerk who would exchange it for a tape if it was available—a procedure that was often time consuming, particularly at peak times such as evenings and weekends. Cook realized that as VCRs became more widespread and the number of film titles available steadily increased, customers would begin to demand a larger and more varied selection of titles from video stores. Moreover, they would demand more convenient store locations and quicker in-store service than mom-and-pop stores could offer. He realized that the time was right for the development of the next generation of video stores, and he used this opportunity to implement his video superstore concept, which is still the center of Blockbuster’s strategy.

The small package express delivery industry is that segment of the broader postal and cargo...

The Evolution of the Small Package Express Delivery Industry, 1973–2006

The small package express delivery industry is that segment of the broader postal and cargo industries that specializes in rapid (normally one to three days) delivery of small packages. It is generally agreed that the modern express delivery industry in the United States began with Fred Smith’s vision for Federal Express Company, which started operations in 1973. Federal Express transformed the structure of the existing air cargo industry and paved the way for rapid growth in the overnight package segment of that industry. A further impetus to the industry’s development was the 1977 deregulation of the U.S. air cargo industry. This deregulation allowed Federal Express (and its emerging competitors) to buy large jets for the first time. The story of the industry during the 1980s was one of rapid growth and new entry. Between 1982 and 1989, small package express cargo shipments by air in the United States grew at an annual average rate of 31%. In contrast, shipments of air freight and air mail grew at an annual rate of only 2.7%.1 This rapid growth attracted new entrants such as United Parcel Service (UPS) and Airborne Freight (which operated under the name Airborne Express). The entry of UPS triggered severe price cutting, which ultimately drove some of the weaker competitors out of the market and touched off a wave of consolidation in the industry. By the mid-1990s, the industry structure had stabilized with four organizations—Federal Express, UPS, Airborne Express, and the U.S. Postal Service— accounting for the vast majority of U.S. express shipments. During the first half of the 1990s, the small package express industry continued to grow at a healthy rate, with shipments expanding by slightly more than 16% per annum.2 Despite this growth, the industry was hit by repeated rounds of price cutting as the three big private firms battled to capture major accounts. In addition to price cutting, the big three also competed vigorously on the basis of technology, service offerings, and the global reach of their operations. By the late 1990s and early 2000s, however, the intensity of price competition in the industry had moderated, with a degree of pricing discipline being maintained, despite the fact that the growth rate for the industry slowed down. Between 1995 and 2000, the industry grew at 9.8% per year. In 2001, however, the volume of express parcels shipped by air fell by 5.9%, partly due to an economic slowdown and partly due to the aftereffects of the September 11 terrorist attack on the United States.3 Growth picked up again in 2002, and estimates suggest that the global market for small package express delivery should continue to grow by a little over 6% per annum between 2005 and 2025. Most of that growth, however, is forecasted to take place outside of the now mature North American market, where the annual growth rate is predicted to be 3.8%.4 In North America, the biggest change to take place in the early 2000s was the 2003 entry of DHL into the North American market with the acquisition of Airborne Express for $1 billion. DHL is itself owned by Deutsche Post World Net, formally the German post office, which since privatization has been rapidly transforming itself into a global express mail and logistics operation. Prior to 2003 DHL lacked a strong presence in the all-important U.S. market. The acquisition of Airborne has given DHL a foothold in the United States. Still, DHL has a very long way to go before it can match the dominance of UPS and FedEx, particularly in the important air express market (see Exhibit 1), although the scale of its parent, which in 2005 had revenues of $60 billion, suggests that it could use its deep pockets to support aggressive expansion in North America.

Journalize the assignment of these costs to the two processes.

Journalize the assignment of these costs to the two processes.

To Record Materials Used:

Work in Process—Blending	18,000
Work in Process—Bottling	4,000
Raw Materials Inventory		22,000

To Assign Factory Labor to Production:

Work in Process—Blending	12,000
Work in Process—Bottling	5,000
Factory Labor		17,000

To Assign Overhead to Production:

Work in Process—Blending	6,000
Work in Process—Bottling	2,500
Manufacturing Overhead		8,500

 

“The abandonment of fixed exchange rates after 1973 has meant that countries have pursued more...

1. The abandonment of fixed exchange rates after 1973 has meant that countries have pursued more independent monetary policies.” Is this statement true, false, or uncertain? Explain your answer.

2. Are controls on capital outflows a good idea? Why or why not?

3. Discuss the pros and cons of controls on capital inflows.

If the president of a bank told you that the bank was so well run that it has never had to call in...

1. Rank the following bank assets from most to least liquid:

a. Commercial loans

b. Securities

c. Reserves

d. Physical capital

2. If the president of a bank told you that the bank was so well run that it has never had to call in loans, sell securities, or borrow as a result of a deposit outflow, would you be willing to buy stock in that bank? Why or why not?

If the balance in the current account increases by $2 billion while the capital account is off $3.5...

1. If the dollar begins trading at $1.30 per euro, with the same interest rates given in Problem 3, and the ECB raises interest rates so that the rate on euro deposits rises by 1 percentage point, what will happen to the exchange rate (assuming that the expected future exchange rate is unchanged)?

2. If the balance in the current account increases by $2 billion while the capital account is off $3.5 billion, what is the effect on governmental international reserves?

Why might central banks in emerging-market countries find that engaging in a lender-of-last-resort...

1. Why might central banks in emerging-market countries find that engaging in a lender-of-last-resort operation might be counterproductive? Does this provide a rationale for having an international lender of last resort like the IMF?

2. Has the IMF done a good job in performing the role of the international lender of last resort?

3. What steps should an international lender of last resort take to limit moral hazard?

Many common stocks are traded over-the-counter, although the largest corporations usually have their...

1) Forty or so dealers establish a \"market\" in these securities by standing ready to buy and sell them.

A) Secondary stocks

B) Surplus stocks

C) U.S. government bonds

D) Common stocks

2) Which of the following statements about financial markets and securities is true?

A) Many common stocks are traded over-the-counter, although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange.

B) As a corporation gets a share of the broker\"s commission, a corporation acquires new funds whenever its securities are sold.

C) Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid.

D) Because of their short-terms to maturity, the prices of money market instruments tend to fluctuate wildly.

A corporation acquires new funds only when its securities are sold in the A) secondary market by an...

1) A corporation acquires new funds only when its securities are sold in the

A) secondary market by an investment bank.

B) primary market by an investment bank.

C) secondary market by a stock exchange broker.

D) secondary market by a commercial bank.

2) An important function of secondary markets is to

A) make it easier to sell financial instruments to raise funds.

B) raise funds for corporations through the sale of securities.

C) make it easier for governments to raise taxes.

D) create a market for newly constructed houses.

3) Secondary markets make financial instruments more

A) solid.

B) vapid.

C) liquid.

D) risky.

Which of the following is an example of an intermediate-term debt?

1) Which of the following is an example of an intermediate-term debt?

A) A thirty-year mortgage.

B) A sixty-month car loan.

C) A six month loan from a finance company.

D) A Treasury bond.

2) If the maturity of a debt instrument is less than one year, the debt is called ________.

A) short-term

B) intermediate-term

C) long-term

D) prima-term

3) Long-term debt has a maturity that is ________.

A) between one and ten years.

B) less than a year.

C) between five and ten years.

D) ten years or longer.

If the interest rate is 4% on euro deposits and 2% on dollar deposits, while the euro is trading at...

1. The Federal Reserve purchases $1,000,000 of foreign assets for $1,000,000. Show the effect of this open market operation using T-accounts.

2. Again, the Federal Reserve purchases $1,000,000 of foreign assets. However, to raise the funds, the trading desk sells $1,000,000 in T-bills. Show the effect of this open market operation using T-accounts.

3. If the interest rate is 4% on euro deposits and 2% on dollar deposits, while the euro is trading at $1.30 per euro, what does the market expect the exchange rate to be one year from now?

Why did the exchange rate peg lead to difficulties for the countries in the ERM when German...

1. How can persistent U.S. balance-of-payments deficits stimulate world inflation?

2. Why did the exchange rate peg lead to difficulties for the countries in the ERM when German reunification occurred?

3. Why is it that in a pure flexible exchange rate system, the foreign exchange market has no direct effects on the monetary base and the money supply? Does this mean that the foreign exchange market has no effect on monetary policy?

Which of the following statements about the characteristics of debt and equities is true?

Structure of Financial Markets

1) Which of the following statements about the characteristics of debt and equity is false?

A) They can both be long-term financial instruments.

B) They can both be short-term financial instruments.

C) They both involve a claim on the issuer\"s income.

D) They both enable a corporation to raise funds.

2) Which of the following statements about the characteristics of debt and equities is true?

A) They can both be long-term financial instruments.

B) Bond holders are residual claimants.

C) The income from bonds is typically more variable than that from equities.

D) Bonds pay dividends.

3) Which of the following statements about financial markets and securities is true?

A) A bond is a long-term security that promises to make periodic payments called dividends to the firm\"s residual claimants.

B) A debt instrument is intermediate term if its maturity is less than one year.

C) A debt instrument is intermediate term if its maturity is ten years or longer.

D) The maturity of a debt instrument is the number of years (term) to that instrument\"s expiration date.

Which of the following is not a secondary market?

1) Which of the following is not a secondary market?

A) foreign exchange market

B) futures market

C) options market

D) IPO market

2) ________ work in the secondary markets matching buyers with sellers of securities.

A) Dealers

B) Underwriters

C) Brokers

D) Claimants

3) A corporation acquires new funds only when its securities are sold in the

A) primary market by an investment bank.

B) primary market by a stock exchange broker.

C) secondary market by a securities dealer.

D) secondary market by a commercial bank.

Sherman Company employs 400 production, maintenance, and janitorial workers in eight separate...

Sherman Company employs 400 production, maintenance, and janitorial workers in eight separate departments. In addition to supervising operations, the supervisors of the departments are responsible for recruiting, hiring, and firing workers within their areas of responsibility. The organization attracts casual labor and experiences a 20 to 30 percent turnover rate in employees per year. Employees clock on and off the job each day to record their attendance on time cards. Each department has its own clock machine located in an unattended room away from the main production area. Each week, the supervisors gather the time cards, review them for accuracy, and sign and submit them to the payroll department for processing. In addition, the supervisors submit personnel action forms to reflect newly hired and terminated employees. From these documents, the payroll clerk prepares payroll checks and updates the employee records. The supervisor of the payroll department signs the paychecks and sends them to the department supervisors for distribution to the employees. A payroll register is sent to accounts payable for approval.

Based on this approval, the cash disbursements clerk transfers funds into a payroll clearing account.

Required

Discuss the risks for payroll fraud in the Sherman Company payroll system. What controls would you implement to reduce the risks? Use the SAS 78/COSO standard of control activities to organize your response.

When an investment bank ________ securities, it guarantees a price for a corporation\"s...

1) A financial market in which previously issued securities can be resold is called a ________ market.

A) primary

B) secondary

C) tertiary

D) used securities

2) An important financial institution that assists in the initial sale of securities in the primary market is the

A) investment bank.

B) commercial bank.

C) stock exchange.

D) brokerage house.

3) When an investment bank ________ securities, it guarantees a price for a corporation\"s securities and then sells them to the public.

A) underwrites

B) undertakes

C) overwrites

D) overtakes

When I purchase ________, I own a portion of a firm and have the right to vote on issues important...

1) When I purchase ________, I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.

A) bonds

B) bills

C) notes

D) stock

2) Equity holders are a corporation\"s ________. That means the corporation must pay all of its debt holders before it pays its equity holders.

A) debtors

B) brokers

C) residual claimants

D) underwriters

3) Which of the following benefit directly from any increase in the corporation\"s profitability?

A) a bond holder

B) a commercial paper holder

C) a shareholder

D) a T-bill holder

The higher a security\"s price in the secondary market the ________ funds a firm can raise by...

1) A liquid asset is

A) an asset that can easily and quickly be sold to raise cash.

B) a share of an ocean resort.

C) difficult to resell.

D) always sold in an over-the-counter market.

2) The higher a security\"s price in the secondary market the ________ funds a firm can raise by selling securities in the ________ market.

A) more; primary

B) more; secondary

C) less; primary

D) less; secondary

3) When secondary market buyers and sellers of securities meet in one central location to conduct trades the market is called a(n)

A) exchange.

B) over-the-counter market.

C) common market.

D) barter market.

Well-functioning financial markets A) cause inflation.

1) Well-functioning financial markets

A) cause inflation.

B) eliminate the need for indirect finance.

C) cause financial crises.

D) produce an efficient allocation of capital.

2) A breakdown of financial markets can result in

A) financial stability.

B) rapid economic growth.

C) political instability.

D) stable prices.

3) The principal lender-savers are

A) governments.

B) businesses.

C) households.

D) foreigners.

Securities are ________ for the person who buys them, but are ________ for the individual or firm...

1) Which of the following can be described as involving indirect finance?

A) You make a loan to your neighbor.

B) You buy shares in a mutual fund.

C) You buy a U.S. Treasury bill from the U.S. Treasury.

D) A corporation buys a short-term security issued by another corporation in the primary market.

2) Securities are ________ for the person who buys them, but are ________ for the individual or firm that issues them.

A) assets; liabilities

B) liabilities; assets

C) negotiable; nonnegotiable

D) nonnegotiable; negotiable

3) With ________ finance, borrowers obtain funds from lenders by selling them securities in the financial markets.

A) active

B) determined

C) indirect

D) direct

Which of the following can be described as direct finance?

1) Which of the following can be described as direct finance?

A) You take out a mortgage from your local bank.

B) You borrow $2500 from a friend.

C) You buy shares of common stock in the secondary market.

D) You buy shares in a mutual fund.

2) Assume that you borrow $2000 at 10% annual interest to finance a new business project. For this loan to be profitable, the minimum amount this project must generate in annual earnings is

A) $400.

B) $201.

C) $200.

D) $199.

3) You can borrow $5000 to finance a new business venture. This new venture will generate annual earnings of $251. The maximum interest rate that you would pay on the borrowed funds and still increase your income is

A) 25%.

B) 12.5%.

C) 10%.

D) 5%.

Distinguish between direct finance and indirect finance. Which of these is the most important source...

1.With direct finance funds are channeled through the financial market from the ________ directly to the ________.

A) savers, spenders

B) spenders, investors

C) borrowers, savers

D) investors, savers

2.Distinguish between direct finance and indirect finance. Which of these is the most important source of funds for corporations in the United States?

Distinguish between the sequential file and database approaches to data backup.

Distinguish between the sequential file and database approaches to data backup.

Is a data flow diagram an effective documentation technique for identifying who or what performs a particular task? Explain.

Is a flowchart an effective documentation technique for identifying who or what performs a particular task? Explain.

Which of the following can be described as involving indirect finance?

1) Which of the following can be described as involving direct finance?

A) A corporation issues new shares of stock.

B) People buy shares in a mutual fund.

C) A pension fund manager buys a short-term corporate security in the secondary market.

D) An insurance company buys shares of common stock in the over-the-counter markets.

2) Which of the following can be described as involving direct finance?

A) A corporation takes out loans from a bank.

B) People buy shares in a mutual fund.

C) A corporation buys a short-term corporate security in a secondary market.

D) People buy shares of common stock in the primary markets.

3) Which of the following can be described as involving indirect finance?

A) You make a loan to your neighbor.

B) A corporation buys a share of common stock issued by another corporation in the primary market.

C) You buy a U.S. Treasury bill from the U.S. Treasury.

D) You make a deposit at a bank.

Several of your co-workers take company supplies home for their personal use, such as pens, bags,...

Company Property

Many companies provide office supplies for their employees ’use while on the job. Imagine that you work for a large department store like JC Penney. Several of your co-workers take company supplies home for their personal use, such as pens, bags, hangers, and boxes. You need boxes to store some items at home, so you consider taking them from the supply room.

If you take a long position at 96.22 and later sell the contracts at 96.87, how much would the total...

1. Laura, a bond portfolio manager, administers a $10 million portfolio. The portfolio currently has a duration of 8.5 years. Laura wants to shorten the duration to 6 years using T-bill futures. T-bill futures have a duration of 0.25 years and are trading at $975 (face value = $1,000). How is this accomplished?

2. Futures are available on three-month T-bills with a contract size of $1 million. If you take a long position at 96.22 and later sell the contracts at 96.87, how much would the total net gain or loss be on this transaction?

How may batch processing be used to improve operational efficiency?

How may batch processing be used to improve operational efficiency?

Why might an auditor use a program flowchart?

How are system flowcharts and program flowcharts related?

What are the distinguishing features of a legacy system?

Explain why collusion between employees and management in the commission of a fraud is difficult to...

A profile of fraud perpetrators prepared by the Association of Certified Fraud Examiners revealed that adult males with advanced degrees commit a disproportionate amount of fraud. Explain these findings.

Explain why collusion between employees and management in the commission of a fraud is difficult to both prevent and detect.

Because all fraud involves some form of financial misstatement, how is fraudulent statement fraud different?

Explain the problems associated with lack of auditor independence.

Explain the problems associated with lack of director independence.

What are the two data processing approaches used in modern systems?

What are the two data processing approaches used in modern systems?

How is backup of database files accomplished?

What information is provided by a record layout diagram?

In one sentence, what does updating a master file record involve?

Bait ’n Reel was established in 1983 by Jamie Roberts, an avid fisherman and environmentalist.

Bait ’n Reel was established in 1983 by Jamie Roberts, an avid fisherman and environmentalist. Growing up in Pennsylvania’s Pocono Mountains region, Roberts was lucky enough to have a large lake right down the road, where he found himself fishing throughout the year. Unfortunately, he had to drive more than 15 miles to purchase his fishing supplies, such as lines, hooks, and bait, among other things. Throughout his early adulthood, Roberts frequently overheard other fishermen vocalizing their displeasure at not having a local fishing store to serve their needs. Because of this, Roberts vowed to himself that he would open his own store if he could ever save up enough money. By 1983, he had sufficient funds and the opportunity arose when a local grocery store went up for sale. He purchased the building and converted it into the ‘‘Bait ’n Reel’’ fishing store. His early business involved cash only transactions with local fishermen. By the mid- 1990s, however, the building expanded into a superstore that sold a wide range of sporting products and camping gear. People from all over the county shopped at Bait ’n Reel as Roberts increased his advertising efforts, emphasizing his ability to provide excellent service and the wide range of products. Roberts moved away from a cash-only business and began offering store credit cards to consumers and became a regional wholesaler to many smaller sporting goods stores. With the help of a friend, Roberts also installed a computer network. Although these computers did help to automate the company’s business processes and facilitated the sharing of data between departments, much interdepartmental communication continued to be via hard-copy documents. Revenue increased sharply during the four years after the implementation of the computer system. In spite of this, Roberts had some questions about the quality of processes, as many of the subsidiary accounts did not match the general ledger control accounts. This didn’t prove to be a material problem, however, until recently when the computers began listing supplies on hand that were not actually on the shelves. This created problems as customers became frustrated by stock-outs. Roberts knew something was wrong, but he couldn’t put his finger on it. You have been hired by Roberts to evaluate Bait ’n Reel’s processes and internal controls and make recommendations for improvement. Bait ’n Reel’s revenue cycle relating to the credit-based wholesale portion of the business is described in the following paragraphs. Revenue Cycle Sales Order Processing Procedures Wholesale customer orders are mailed or faxed to the sales department. When the order is received the sales clerk checks the customer’s creditworthiness from a computer terminal. After the customer’s credit is verified, the clerk then keys in the sales orders into his computer terminal. A digital copy of the order is distributed to the warehouse and the shipping department terminals for further processing. The computer system automatically records the sale in the sales journal. Finally, the clerk files the hard copy of the customer order in the sales department. Prompted by receipt of the digital sales order, the warehouse manager prints out two copies of it: the stock release and a shipping notice. Using the stock release copy, the warehouse clerk picks the selected goods from the shelves. The goods, accompanied by both documents, are sent to the shipping department. The manager then updates the inventory subsidiary ledger and the general ledger from his computer terminal. Once the shipping clerk receives the goods, the stock release, and the shipping notice, he matches them to the corresponding digital sales order from his terminal. Assuming everything matches, he prints out three hard copies of the bill of lading and a packing slip. Two of the bill of lading copies and the packing slip are sent, along with the goods, to the carrier. The stock release copy and the shipping notice are sent to the accounts receivable department. The third bill of lading copy is filed in the shipping department. When the accounts receivable clerk receives the stock release and shipping notice he manually creates a hard-copy invoice, which is immediately mailed to the customer. After mailing the invoice, the clerk goes to his terminal and updates the accounts receivable subsidiary ledger and general ledger from the information on the stock release. After the records are updated, the clerk files the stock release and shipping notice in the accounts receivable department. Cash Receipts Procedures Customer payments come directly to the general mail room along with other mail items. The mail clerk sorts through the mail, opens the customer payment envelope, removes the customer’s check and remittance advice, and reconciles the two documents. To control the checks and remittance advices the clerk manually prepares two hard copies of a remittance list. He sends one copy to the accounts receivable department along with the corresponding remittance advices. The other copy of the remittance list accompanies the checks to the cash receipts department. Once the checks and remittance list arrive in the cash receipts department, the treasurer reconciles the documents, signs the check, and manually prepares three hard copies of the deposit slip. He then updates the cash receipts journal and the general ledger on his computer terminal. Next the treasurer sends checks and two copies of the deposit slip are sent to the bank. Finally, he files the third copy of the deposit slip and the remittance in the department. When the accounts receivable clerk receives the remittance list and remittance advices from the mail room, he reconciles the two documents. Then, from his terminal, he updates the accounts receivable subsidiary ledger and the general ledger. Finally, the two documents are filed in the department.

Required

a. Create a data flow diagram of the current system.

b. Create a system flowchart of the existing system.

c. Analyze the internal control weaknesses in the system. Model your response according to the six categories of physical control activities specified in SAS 78/COSO.

d. Prepare a system flowchart of a redesigned computer-based system that resolves the control weaknesses you identified. Explain your solution.

Green Mountain Coffee Roasters, Inc., was founded in 1981 and began as a small cafe in Waitsfield,...

Green Mountain Coffee Roasters, Inc., was founded in 1981 and began as a small cafe in Waitsfield, Vermont, roasting and serving premium coffee on the premises. Green Mountain blends and distributes coffee to a variety of customers, including cafes, delis, and restaurants, and currently has about 6,700 customer accounts reaching states across the nation. As the company has grown, several beverages have been added to their product line, including signature blends, light and heavy roasts, decaffeinated coffee and teas, and herbal teas. Green Mountain Coffee Roasters, Inc., has been publicly traded since 1993. Green Mountain Coffee has a warehouse and manufacturing plant located in Wilton, Vermont, where it presently employees 250 full-time and part-time workers. The company receives its beans in bulk from a select group of distributors located across the world, with their largest supplier being Columbia Beans Co. Green Mountain Coffee also sells accessories that complement their products, including mugs, thermoses, and coffee containers that they purchase from their supplier, Coffee Lovers, Inc. In addition, Green Mountain purchases paper products such as coffee bags, coffee cups, and stirrers, which they distribute to their customers. Green Mountain’s accounting system consists of manual procedures supported by stand-alone PCs located in various departments. Because these computers are not networked they cannot share data digitally, and all interdepartmental communication is through hard-copy documents. Green Mountain is a new audit client for your CPA firm and as manager on the assignment you are examining their internal controls. The revenue cycle is described in the following paragraphs. Sales Order System The sales process begins when a customer sends a customer order to the sales clerk who does a credit check by manually reviewing the hard-copy customer sales history records. From the approved customer order, the sales clerk then manually prepares several hard copies of a sales order. These include a customer copy, a stock release, two file copies, a packing slip, an invoice, and a ledger copy. The invoice, ledger copy, and a file copy are sent to the billing department. The second file copy and the stock release are sent to Sara in the warehouse. The packing slip is sent to the shipping department. The clerk files the approved customer order in the department. The billing department clerk reviews the source documents that she received from sales and adds prices to the invoice. Using the department PC, the clerk then enters the billing information into the computer to record the sale in the sales journal. The invoice is mailed to the customer, the ledger copy is sent to the accounts receivable clerk in the accounting department, and the file copy is filed in the billing department. At the end of the day a journal voucher is printed from the PC and sent to Vic, the general ledger clerk. Sara in the warehouse uses the stock release and file copies to pick the goods from the shelf. She files the file copy in the warehouse. Guided by the information on the stock release copy, she then updates the digital inventory subsidiary ledger from the warehouse PC. Next, she sends the stock release copy, along with the goods, to the shipping department. At the end of the day, Sara prepares a journal voucher from the PC and sends it to the general ledger clerk. The shipping clerk reconciles the stock release copy with the packing slip from sales. The clerk then manually prepares a hard-copy bill of lading and records the shipment into the hard-copy shipping log. The bill of lading, packing slip, and goods are sent to the carrier and the stock release copy is filed in the shipping department. In the accounting department, relevant information taken from the ledger copy (sent from billing) is entered into the computer to update the accounts receivable records. A summary (end of day) is sent to Vic. The ledger copy is then filed in the accounting department. Vic reconciles the accounts receivable summary with the journal vouchers and then updates the digital general ledger from the department PC. All documents are then filed. Cash Receipts System The mail room clerk receives the checks and remittance advices from the customer. He reconciles the checks with the remittance advices and prepares two copies of a remittance list. The checks and a remittance list are then sent to John, in the accounts receivable department. John uses a PC to process the cash receipts, update the cash receipts journal, and prepare a journal voucher and three deposit slips. The journal voucher is sent to Vic, the general ledger clerk. The checks and two deposit slips are sent to the bank to be deposited into Green Mountain Coffee’s account. The third deposit slip and the remittance list are filed. The second remittance list and the remittance advices are sent to Mary, another accounts receivable clerk who, using the same PC, updates the accounts receivable subsidiary ledger and prepares an account summary, which is sent to Vic. The remittance list and the remittance advice are then filed. Vic uses the journal voucher and the account summary to update the general ledger. These two documents are then filed.

Required

a. Create a data flow diagram of the current system.

b. Create a system flowchart of the existing system.

c. Analyze the internal control weaknesses in the system. Model your response according to the six categories of physical control activities specified in SAS 78/COSO.

d. Prepare a system flowchart of a redesigned computer-based system that resolves the control weaknesses you identified. Explain your solution.

Create a data flow diagram of the current system.

Walker Books, Inc., is one of the fastest-growing book distributors in the United States. Established in 1981 in Palo Alto, California, Walker Books was originally a side project of founder and current president Curtis Walker, who at the time was employed by a local law firm. Because reading was much more than just a hobby of his, he decided to use some of his savings to buy an abandoned restaurant and convert it into a neighborhood bookstore, mainly selling used books that were donated and obtained from flea markets. When the doors first opened, Walker’s wife, Lauren, was the only employee during the week and Curtis worked weekends. At the end of the first fiscal year, Walker Books had grossed $20,000 in sales. As the years passed, Curtis Walker quit the law firm and began concentrating fully on his bookstore. More employees were hired, more books were traded in, and more sales were attained each year that passed. During the mid-1990s, however, Walker was faced with two problems: many large, upscale bookstores were being built in the area, and the use of the Internet for finding and ordering books was becoming cheaper and more popular for current customers. In 1995, Walker’s sales started to decline. Deciding to take a risk because of the newfound competition, he closed his doors to the neighborhood, invested more money to expand the current property, and transformed his company from simply selling used books to being a distributor of new books. His business model was to obtain books from publishers at a discount, store them in his warehouse, and resell them to large bookstore chains. Walker Books, Inc., has rapidly become one of the largest book distributors in the country. Although they are still at their original location in Palo Alto, California, they distribute books to all 50 states and because of that, the company now sees gross sales of about $105,000,000 per year. When Mr. Walker is asked about his fondest memory, he always responds that he will never forget how the little bookstore, with two employees, has expanded to now have more than 145 employees. Under his current business model, all of Walker’s customers are large-chain bookstores who themselves see many millions of dollars in revenue per year. Some of these customers, however, are now experiencing problems with Walker Books that threaten their business relationship. Such problems as books being ordered but not sent, poor inventory management by Walker causing stock-outs, and the inability of Walker to provide legitimate documentation of transactions have become common. One potential source of these problems rests with Walker’s antiquated accounting system, which is a combination of manual procedures supported by stand-alone PC workstations. These computers are not networked and cannot share data between departments. All interdepartmental communication takes place through hardcopy documents. You have been hired as an independent expert to express an opinion on the appropriateness of Walker Books’ business processes and internal controls. The expenditure cycle is described next. Expenditure Cycle Purchases System The purchases process begins with the purchasing agent, who monitors the levels of books available via a computer terminal listing current inventory. Upon noticing deficiencies in inventory levels, the agent manually generates four hard copies of a purchase order: one is sent to accounts payable, one is sent to the vendor, one is sent to the receiving department, and the last is filed within the department. Vendors will generally ship the products within five business days of the order. When goods arrive in the receiving department, the corresponding packing slip always accompanies them. The receiving department clerk unloads the goods and then reconciles the packing slip with the purchase order. After unloading the goods, the clerk manually prepares three hard copies of the receiving report. One copy goes with the goods to the warehouse, another is sent to the purchasing department, and the final copy is filed in the receiving department. In the warehouse, the copy is simply filed once the goods are stored on the shelves. In the purchasing department, the clerk receives this copy of the receiving report and files it with the purchase order. When the accounts payable department receives the purchase order, it is temporarily filed until the respective invoice arrives from the vendor. Upon receipt of the invoice, the accounts payable clerk removes the purchase order from the temporary file and reconciles the two documents. The clerk then manually records the liability in the hard copy accounts payable subsidiary ledger. Finally, the clerk files the purchase order and invoice in the open accounts payable file in the department. At the end of the day, the clerk prepares a hardcopy journal voucher and sends it to the general ledger department. Once the general ledger department receives the journal voucher, the clerk examines it for any obvious errors and then enters the relevant data into the department PC to update the appropriate digital general ledger accounts. Cash Disbursements System The accounts payable clerk periodically reviews the open accounts payable file for liabilities that are due. To maximize returns on invested cash yet still take advantage of vendor discounts, the clerk will pull the invoice two days before its applicable due date. Upon finding an open accounts payable file in need of payment, the clerk manually prepares a check for the amount due as per the invoice. The hard copy accounts payable ledger is also updated by the accounts payable clerk. The check number, dollar amount, and other pertinent data are manually recorded in the hard-copy check register. The check is then sent to the cash disbursements department. Finally, the invoice is discarded as it no longer has any relevant information that hasn’t already been recorded elsewhere. When the cash disbursements clerk receives the unsigned check, she examines it to ensure that no one has tampered with any of the information and that no errors have been made. Because she is familiar with all of the vendors with whom Walker deals, she can identify any false vendors or any payment amounts that seem excessive. Assuming everything appears in order, she signs the check using a signature block that displays the name of the assistant treasurer, Tyler Matthews. Only Matthews’ signature can validate a vendor check. The cash disbursements clerk then photocopies the check for audit trail purposes. Once the check is signed, it is sent directly to the supplier. The photocopy of the check is marked as paid and then filed in the cash disbursements department. The clerk then creates a journal voucher, which is sent to the general ledger department. Once the general ledger department receives the journal voucher, the clerk examines it for any obvious errors and then enters the relevant data into the department PC to update the appropriate digital general ledger accounts.

Required

a. Create a data flow diagram of the current system.

b. Create a system flowchart of the existing system.

c. Analyze the internal control weaknesses in the system. Model your response according to the six categories of physical control activities specified in SAS 78/COSO.

d. Prepare a system flowchart of a redesigned computer based system that resolves the control weaknesses you identified. Explain your solution.

Premier Sports Memorabilia is a medium-sized, rapidly growing online and catalogue-based retailer...

Premier Sports Memorabilia is a medium-sized, rapidly growing online and catalogue-based retailer centered in Brooklyn, New York. The company was founded in 1990 and specializes in providing its customers with authentic yet affordable sports memorabilia from their favorite players and teams, past and present. Traditionally the company’s customers were located in the northeast region of the United States. Recently, however, Premier launched a successful ad campaign to expand its customer base. This has increased sales, which has in turn placed a strain on the organization’s operational resources. The company currently employs 205 employees who are spread out among its three warehouses and two offices in the tri-state area. The firm purchases from a large number of manufacturers and memorabilia dealers around the country and is always looking for additional contacts that have new or rare items to offer. The company has a computer network installed, which, until recently, has served it well. The firm is now, however, experiencing operational inefficiencies and accounting errors. Your firm has been hired to evaluate Premier’s business processes and internal controls. The revenue cycle is described in the following paragraphs. Premier’s revenue process is initiated when a customer places an order either online, by mail, or through a telephone representative. The order is then manually entered into the computer system for mail or telephone orders, while online orders are automatically entered upon arrival. When the customer order is entered, the system automatically performs an online credit check. If credit is approved, the sales process continues. If credit is denied, the process ends and the customer is notified of the automatic rejection. For approved order, the clerk manually prepares four hard copies of each sales order. One copy is entered into the terminal in the sales department and filed. The approved sale is automatically posted to the digital sales journal. A second copy is sent to the billing department, where it is further processed. A third copy is sent to the warehouse. A final copy is sent to the customer as a receipt stating that the order has been received and processed. At the warehouse, the sales order is used as a stock release, authorizing a warehouse clerk to physically pick the requested items from the shelves. The clerk then manually prepares a bill of lading and packing slip, which accompany the goods to the carrier. The warehouse clerk then accesses the computer terminal and creates a digital shipping notice for the billing department. Finally, the clerk files the stock release hard copy in the warehouse. From a terminal, the billing department clerk reconciles the hard-copy sales order and the digital shipping notice and prints two hard copies of an invoice. One copy is sent to the customer as a bill and the other is sent to the accounts receivable department. The clerk then files the sales order copy in the department. Upon receipt of the hard-copy invoice, the accounts receivable clerk creates a digital record in the accounts receivable subsidiary ledger from his terminal. The clerk then files the invoice copy in the department. Customer payments and remittance advices come into the mail room. A clerk separates the documents and sends the remittance advice to accounts receivable and the checks to the cash receipts department. Upon receipt of the remittance advice, the accounts receivable clerk accesses the customer’s account in the accounts receivable subsidiary ledger from a terminal and adjusts the balance accordingly. The clerk files the remittance advices in the department. The cash receipts clerk receives the checks and posts them to the cash receipts journal from her terminal. The clerk then manually prepares a hard-copy deposit slip and sends it with the cash to the bank. Finally, at the end of each day the system prepares batch totals of all sales and cash receipts transactions and posts them automatically to the control accounts in the digital general ledger.

Required

a. Create a data flow diagram of the current system.

b. Create a system flowchart of the existing system.

c. Analyze the internal control weaknesses in the system. Model your response according to the six categories of physical control activities specified in SAS 78/COSO.

d. Prepare a system flowchart of a redesigned computer-based system that resolves the control weaknesses you identified. Explain your solution.

Identify the internal control weaknesses in the system. Model your response according to the six...

ABE Plumbing, Inc., opened its doors in 1979 as a wholesale supplier of plumbing equipment, tools, and parts to hardware stores, home-improvement centers, and professional plumbers in the Allentown-Bethlehem- Easton metropolitan area. Over the years they have expanded their operations to serve customer across the nation and now employ over 200 people as technical representatives, buyers, warehouse workers, and sales and office staff. Most recently ABE has experienced fierce competition from the large online discount stores such as Harbor Freight and Northern Supply. In addition the company is suffering from operational inefficiencies related to its archaic information system. ABE’s expenditure cycle procedures are described in the following paragraphs. Expenditure Cycle ABE uses a centralized accounting system for managing inventory purchases and recording transactions. The system is almost entirely paperless. Each department has a computer terminal that is networked to the ‘‘Purchases/ Accounts Payable System’’ that is run from a small data processing department. All accounting records are maintained on centralized computer files that are stored on a file server in the data processing department. Purchasing The process begins in the purchasing department. Each morning the purchasing agent reviews the inventory levels from his department terminal and searches for items that have fallen to their reorder points and need to be replenished. The purchasing agent then selects the vendors and creates digital purchase orders in the purchase order file. He then prints two hard copies of each purchase order and sends them to the respective vendors. Receiving When the items are received, the receiving department clerk reconciles the goods with the attached packing slip and the digital purchase order, which he accesses from his computer terminal. The clerk then creates a digital receiving report, stating the condition of the materials received. The system automatically closes the purchase order previously created by the purchasing agent. In addition, the receiving clerk prints a hard copy of the receiving report, which he sends with the inventory to the warehouse where the items are stored. Warehouse Upon receipt of the inventory, the warehouse clerk reconciles the items with the receiving report and updates the inventory subsidiary ledger. The accounting system automatically and immediately updates the inventory control account in the general ledger. Accounts Payable Once the accounts payable clerk receives the vendor’s invoice, she reconciles it with the purchase order and receiving report from her terminal. The clerk then creates a digital cash disbursement voucher record and sets a due date for payment. The system automatically updates the AP control account in the general ledger. Daily, the accounts payable clerk reviews the open cash disbursement voucher records from her terminal looking for items that need to be paid. The clerk then creates a record for the payment in the digital check register and closes the open cash disbursement voucher. Finally, the clerk prints a hard copy of the check and sends it to the vendor. The system automatically updates the accounts payable and cash general ledger accounts. Required

a. Create a data flow diagram of the current system.

b. Create a system flowchart of the existing system.

c. Identify the internal control weaknesses in the system. Model your response according to the six categories of physical control activities specified in SAS 78/COSO.

d. Prepare a system flowchart of a redesigned computer based system that resolves the control weaknesses you identified. Explain your solution.

Hayes Company maintains an ending inventory of raw materials equal to 10% of the next quarter’s...

Hayes Company

Inadequate inventories could result in temporary shutdowns of production. Because of its close proximity to suppliers,

Hayes Company maintains an ending inventory of raw materials equal to 10% of the next quarter’s production requirements.

The manufacture of each Kitchen-Mate requires 2 pounds of raw materials, and the expected cost per pound is $4.

Assume that the desired ending direct materials amount is 1,020 pounds for the fourth quarter of 2011.

Prepare a Direct Materials Budget.

HAYES COMPANY Sales Budget For the Year Ending December 31,2011
	Quarter
	1	2	3	4	Year
Expected unit sales	3,000	3,500	4,000	4,500	15,000
Unit Selling price	×$60	×$60	×$60	×$60	×$60
Total sales	$180,000	$210,000	$240,000	$270,000	$900,000

 

Explain why traditional cost allocation methods fail in a computer-integrated manufacturing...

1. Discuss the disadvantages of activity-based costing.

2. Explain why traditional cost allocation methods fail in a computer-integrated manufacturing environment.

3. Explain the concept of a product family and its relationship to value stream accounting.

4. Explain the relationship between MRP II and ERP.

Which of the following is not an advantageous reason to reduce inventories?

1. Which of the following is not an advantageous reason to reduce inventories?

a. Inventories provide a competitive advantage.

b. Inventories can invite overproduction.

c. Inventories are expensive to maintain.

d. Inventories may conceal problems.

e. All of these are good reasons to reduce inventories.

2. The fundamental EOQ model

a. provides for fluctuating lead times during reorder cycles.

b. is relatively insensitive to errors in demand, procurement costs, and carrying costs.

c. focuses on the trade-off between production costs and carrying costs.

d. is stochastic in nature.

e. is best used in conjunction with a periodic inventory system.

3. Refer to the equation for the EOQ in the text. Car Country, a local Ford dealer, sells 1,280 small SUVs each year. Keeping a car on the lot costs Car Country $200 per month, so the company prefers to order as few SUVs as is economically feasible. However, each time an order is placed, the company incurs total costs of $300. Of this $300, $240 is fixed and $60 is variable. Determine the company’s economic order quantity.

a. 8

b. 16

c. 18

d. 56

e. 62

How is the primary key critical in preserving the audit trail?

1. What are the key features of a POS system?

2. How is the primary key critical in preserving the audit trail?

3. What are the advantages of real-time processing?

4. Why does billing receive a copy of the sales order when the order is approved but does not bill until the goods are shipped?

5. Why was EDI devised?

Prepare a data flow diagram and a system flowchart of the payroll procedures previously described.

The following describes the payroll procedures for a hypothetical company. Every Thursday, the timekeeping clerk sends employee time cards to the payroll department for processing. Based on the hours worked reflected on the time cards, the employee pay rate and withholding information in the employee file, and the tax rate reference file, the payroll clerk calculates gross pay, withholdings, and net pay for each employee. The clerk then manually prepares paychecks for each employee, files hard copies of the paychecks in the payroll department, and posts the earnings to the hard-copy employee records. Finally, the clerk manually prepares a payroll summary and sends it and the paychecks to the cash disbursements department. The cash disbursements clerk reconciles the payroll summary with the paychecks and manually records the transaction in the hard-copy cash disbursements journal. The clerk then files the payroll summary and sends the paychecks to the treasurer for signing. The signed checks are then sent to the paymaster, who distributes them to the employees on Friday morning.

Required

Prepare a data flow diagram and a system flowchart of the payroll procedures previously described.

Which of the following is NOT a principle of lean manufacturing?

1. Which of the following is NOT a principle of lean manufacturing?

a. Products are pushed from the production end to the customer.

b. All activities that do not add value and maximize the use of scarce resources must be eliminated.

c. Achieve high inventory turnover rate.

d. A lean manufacturing firm must have established and cooperative relationships with vendors.

e. All of the above are lean manufacturing principles.

2. All of the following are problems with traditional accounting information EXCEPT:

a. Managers in a JIT setting require immediate information.

b. The measurement principle tends to ignore standards other than money.

c. Variance analysis may yield insignificant values.

d. The overhead component in a manufacturing company is usually very large.

e. All of these are problems associated with traditional accounting information.

3. Which of the following is NOT a problem associated with standard cost accounting?

a. Standard costing motivates management to produce large batches of products and build inventory.

b. Applying standard costing leads to product cost distortions in a lean environment.

c. Standard costing data are associated with excessive time lags that reduce its usefulness.

d. The financial orientation of standard costing may promote bad decisions.

e. All of the above are problems with standard costing.

4. Which one of the following statements is true? a. ERP evolved directly from MRP.

b. ERP evolved into MRP and MRP evolved into MRP II.

c. MRP II evolved from MRP and MRP II evolved into ERP.

d. None of the above is true.

How are cost structures fundamentally different between the traditional and computer-integrated...

1. How are cost structures fundamentally different between the traditional and computer-integrated manufacturing environments?

2. How can a firm control against excessive quantities of raw materials being used in the manufacturing process?

3. What is a value stream map?

4. Discuss the advantages of activity-based costing.

Assuming that the average duration of its assets is four years, while the average duration of its...

1) If interest rates rise by 5 percentage points, say from 10 to 15%, bank profits (measured using gap analysis) will

A) decline by $0.5 million.

B) decline by $1.5 million.

C) decline by $2.5 million.

D) increase by $2.0 million.

2) Assuming that the average duration of its assets is four years, while the average duration of its liabilities is three years, then a 5 percentage point increase in interest rates will cause the net worth of First National to ________ by ________ of the total original asset value.

A) decline; 5 percent

B) decline; 10 percent

C) decline; 15 percent

D) increase; 20 percent

3) Duration analysis involves comparing the average duration of the bank\"s ________ to the average duration of its ________.

A) securities portfolio; non-deposit liabilities

B) assets; liabilities

C) loan portfolio; deposit liabilities

D) assets; deposit liabilities

4) Because of an expected rise in interest rates in the future, a banker will likely

A) make long-term rather than short-term loans.

B) buy short-term rather than long-term bonds.

C) buy long-term rather than short-term bonds.

D) make either short or long-term loans; expectations of future interest rates are irrelevant.

Identify three areas where the consumer directly uses computer-aided design software applications to...

1. Identify three areas where the consumer directly uses computer-aided design software applications to aid in designing the product.

2. How can poor quality be expensive to the firm, especially if low-cost raw materials are used to reduce cost of goods sold and raise net income?

3. Discuss how an emphasis on financial performance of cost centers, as measured by traditional cost accounting information, may lead to inefficient and ineffective production output.

4. How can activity-based costing be used to switch the management of business activities from a custodial task to a continuous improvement activity?

From the standpoint of ________, specialization in lending is surprising but makes perfect sense...

1) From the standpoint of ________, specialization in lending is surprising but makes perfect sense when one considers the ________ problem.

A) moral hazard; diversification

B) diversification; moral hazard

C) adverse selection; diversification

D) diversification; adverse selection

2) Provisions in loan contracts that prohibit borrowers from engaging in specified risky activities are called

A) proscription bonds.

B) restrictive covenants.

C) due-on-sale clauses.

D) liens.

3) To reduce moral hazard problems, banks include restrictive covenants in loan contracts. In order for these restrictive covenants to be effective, banks must also

A) monitor and enforce them.

B) be willing to rewrite the contract if the borrower cannot comply with the restrictions.

C) trust the borrower to do the right thing.

D) be prepared to extend the deadline when the borrower needs more time to comply.

All else the same, if a bank\"s liabilities are more sensitive to interest rate fluctuations...

1) When banks offer borrowers smaller loans than they have requested, banks are said to

A) shave credit.

B) rediscount the loan.

C) raze credit.

D) ration credit.

2) Credit risk management tools include

A) deductibles.

B) collateral.

C) interest rate swaps.

D) duration analysis.

3) How can specializing in lending help to reduce the adverse selection problem in lending?

4)Managing Interest-Rate Risk  Risk that is related to the uncertainty about interest rate movements is called

A) default risk.

B) interest-rate risk.

C) the problem of moral hazard.

D) security risk.

5) All else the same, if a bank\"s liabilities are more sensitive to interest rate fluctuations than are its assets, then ________ in interest rates will ________ bank profits.

A) an increase; increase

B) an increase; reduce

C) a decline; reduce

D) a decline; not affect

Assuming that the average duration of its assets is five years, while the average duration of its...

1) If the First National Bank has a gap equal to a negative $30 million, then a 5 percentage point increase in interest rates will cause profits to

A) increase by $15 million.

B) increase by $1.5 million.

C) decline by $15 million.

D) decline by $1.5 million.

2) Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap times the change in the interest rate is called

A) basic duration analysis.

B) basic gap analysis.

C) interest-exposure analysis.

D) gap-exposure analysis.

3) Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap for several maturity subintervals times the change in the interest rate is called

A) basic gap analysis.

B) the maturity bucket approach to gap analysis.

C) the segmented maturity approach to gap analysis.

D) the segmented maturity approach to interest-exposure analysis.

10) If interest rates rise by 5 percentage points, say, from 10 to 15%, bank profits (measured using gap analysis) will

A) decline by $0.5 million.

B) decline by $1.5 million.

C) decline by $2.5 million.

D) increase by $1.5 million.

4) Assuming that the average duration of its assets is five years, while the average duration of its liabilities is three years, then a 5 percentage point increase in interest rates will cause the net worth of First National to decline by ________ of the total original asset value.

A) 5 percent

B) 10 percent

C) 15 percent

D) 25 percent

A bank failure is less likely to occur when A) a bank holds less U.S. government securities.

1) A bank failure is less likely to occur when

A) a bank holds less U.S. government securities.

B) a bank suffers large deposit outflows.

C) a bank holds fewer excess reserves.

D) a bank has more bank capital.

2) The leverage ratio is the ratio of a bank\"s

A) assets divided by its liabilities.

B) income divided by its assets.

C) capital divided by its total assets.

D) capital divided by its total liabilities.

3) To be considered well capitalized, a bank\"s leverage ratio must exceed ________.

A) 10%

B) 8%

C) 5%

D) 3%

4) Off-balance-sheet activities

A) generate fee income with no increase in risk.

B) increase bank risk but do not increase income.

C) generate fee income but increase a bank\"s risk.

D) generate fee income and reduce risk.

If a bank has ________ rate-sensitive assets than liabilities, then ________ in interest rates will...

1) If a bank has ________ rate-sensitive assets than liabilities, then ________ in interest rates will increase bank profits.

A) more; a decline

B) more; an increase

C) fewer; an increase

D) fewer; a surge

2) If a bank has ________ rate-sensitive assets than liabilities, a ________ in interest rates will reduce bank profits, while a ________ in interest rates will raise bank profits.

A) more; rise; decline

B) more; decline; rise

C) fewer; decline; decline

D) fewer; rise; rise

3) If a bank\"s liabilities are more sensitive to interest rate movements than are its assets, then

A) an increase in interest rates will reduce bank profits.

B) a decrease in interest rates will reduce bank profits.

C) interest rates changes will not impact bank profits.

D) an increase in interest rates will increase bank profits.

4) The difference of rate-sensitive liabilities and rate-sensitive assets is known as the

A) duration.

B) interest-sensitivity index.

C) rate-risk index.

D) gap.

A bank that wants to monitor the check payment practices of its commercial borrowers, so that moral...

1) A bank that wants to monitor the check payment practices of its commercial borrowers, so that moral hazard can be prevented, will require borrowers to

A) place a bank officer on their board of directors.

B) place a corporate officer on the bank\"s board of directors.

C) keep compensating balances in a checking account at the bank.

D) purchase the bank\"s CDs.

2) Of the following methods that banks might use to reduce moral hazard problems, the one not legally permitted in the United States is the

A) requirement that firms keep compensating balances at the banks from which they obtain their loans.

B) requirement that firms place on their board of directors an officer from the bank.

C) inclusion of restrictive covenants in loan contracts.

D) requirement that individuals provide detailed credit histories to bank loan officers.

3) When a lender refuses to make a loan, although borrowers are willing to pay the stated interest rate or even a higher rate, the bank is said to engage in

A) coercive bargaining.

B) strategic holding out.

C) credit rationing.

D) collusive behavior.

A bank\"s commitment to provide a firm with loans up to pre-specified limit at an interest rate...

1) Long-term customer relationships ________ the cost of information collection and make it easier to ________ credit risks.

A) reduce; screen

B) increase; screen

C) reduce; increase

D) increase; increase

2) Unanticipated moral hazard contingencies can be reduced by

A) screening.

B) long-term customer relationships.

C) specialization in lending.

D) credit rationing.

3) A bank\"s commitment to provide a firm with loans up to pre-specified limit at an interest rate that is tied to a market interest rate is called

A) an adjustable gap loan.

B) an adjustable portfolio loan.

C) loan commitment.

D) pre-credit loan line.

4) Property promised to the lender as compensation if the borrower defaults is called ________.

A) collateral

B) deductibles

C) restrictive covenants

D) contingencies

A well-capitalized financial institution has ________ to lose if it fails and thus is ________...

1) The result of the too-big-to-fail policy is that ________ banks will take on ________ risks, making bank failures more likely.

A) small; fewer

B) small; greater

C) big; fewer

D) big; greater

2) A problem with the too-big-to-fail policy is that it ________ the incentives for ________ by big banks.

A) increases; moral hazard

B) decreases; moral hazard

C) decreases; adverse selection

D) increases; adverse selection

3) The too-big-to-fail policy

A) reduces moral hazard problems.

B) puts large banks at a competitive disadvantage in attracting large deposits.

C) treats large depositors of small banks inequitably when compared to depositors of large banks.

D) allows small banks to take on more risk than large banks.

4) Regulators attempt to reduce the riskiness of banks\" asset portfolios by

A) limiting the amount of loans in particular categories or to individual borrowers.

B) encouraging banks to hold risky assets such as common stocks.

C) establishing a minimum interest rate floor that banks can earn on certain assets.

D) requiring collateral for all loans.

27) A well-capitalized financial institution has ________ to lose if it fails and thus is ________ likely to pursue risky activities.

A) more; more

B) more; less

C) less; more

D) less; less

Loss aversion can explain why very little ________ actually takes place in the securities market.

1) Loss aversion can explain why very little ________ actually takes place in the securities market.

A) short selling

B) bargaining

C) bartering

D) negotiating

2) Psychologists have found that people tend to be ________ in their own judgments.

A) underconfident

B) overconfident

C) indecisive

D) insecure

3) ________ and ________ may provide an explanation for stock market bubbles.

A) Overconfidence; social contagion

B) Underconfidence; social contagion

C) Overconfidence; social isolationism

D) Underconfidence; social isolationism

The government safety net creates ________ problem because risk -loving entrepreneurs might find...

1) The government safety net creates ________ problem because risk -loving entrepreneurs might find banking an attractive industry.

A) an adverse selection

B) a moral hazard

C) a lemons

D) a revenue

2) Since depositors, like any lender, only receive fixed payments while the bank keeps any surplus profits, they face the ________ problem that banks may take on too ________ risk.

A) adverse selection; little

B) adverse selection; much

C) moral hazard; little

D) moral hazard; much

3) Acquiring information on a bank\"s activities in order to determine a bank\"s risk is difficult for depositors and is another argument for government ________.

A) regulation

B) ownership

C) recall

D) forbearance

4) The existence of deposit insurance can increase the likelihood that depositors will need deposit protection, as banks with deposit insurance

A) are likely to take on greater risks than they otherwise would.

B) are likely to be too conservative, reducing the probability of turning a profit.

C) are likely to regard deposits as an unattractive source of funds due to depositors\" demands for safety.

D) are placed at a competitive disadvantage in acquiring funds.

Other things being equal, an increase in the default risk of corporate bonds shifts the demand curve...

1) If the possibility of a default increases because corporations begin to suffer losses, then the default risk on corporate bonds will ________, and the bonds\" returns will become ________ uncertain, meaning that the expected return on these bonds will decrease, everything else held constant.

A) increase; less

B) increase; more

C) decrease; less

D) decrease; more

2) Other things being equal, an increase in the default risk of corporate bonds shifts the demand curve for corporate bonds to the ________ and the demand curve for Treasury bonds to the ________.

A) right; right

B) right; left

C) left; right

D) left; left

In May 1991, the FDIC announced that it would sell the government\"s final 26% stake in...

1) In May 1991, the FDIC announced that it would sell the government\"s final 26% stake in Continental Illinois, ending government ownership of the bank that it had rescued in 1984. The FDIC took control of the bank, rather than liquidate it, because it believed that Continental Illinois

A) was a good investment opportunity for the government.

B) could be the Chicago branch of a new governmentally-owned interstate banking system.

C) was too big to fail.

D) would become the center of the new midwest region central bank system.

2) If the FDIC decides that a bank is too big to fail, it will use the ________ method, effectively ensuring that ________ depositors will suffer losses.

A) payoff; large

B) payoff; no

C) purchase and assumption; large

D) purchase and assumption; no

3) Federal deposit insurance covers deposits up to $100,000, but as part of a doctrine called \"too-big-to-fail\" the FDIC sometimes ends up covering all deposits to avoid disrupting the financial system. When the FDIC does this, it uses the

A) \"payoff\" method.

B) \"purchase and assumption\" method.

C) \"inequity\" method.

D) \"Basel\" method.

Bank loans from the Federal Reserve are called ________ and represent a ________ of funds.

1) Bank loans from the Federal Reserve are called ________ and represent a ________ of funds.

A) discount loans; use

B) discount loans; source

C) fed funds; use

D) fed funds; source

2) Which of the following is not a source of borrowings for a bank?

A) Federal funds

B) Eurodollars

C) Transaction deposits

D) Discount loans

3) Bank capital is equal to ________ minus ________.

A) total assets; total liabilities

B) total liabilities; total assets

C) total assets; total reserves

D) total liabilities; total borrowings

4) Bank capital is listed on the ________ side of the bank\"s balance sheet because it represents a ________ of funds.

A) liability; use

B) liability; source

C) asset; use

D) asset; source

1) ________ is the field of study that applies concepts from social sciences such as psychology and...

Behavioral Finance

1) ________ is the field of study that applies concepts from social sciences such as psychology and sociology to help understand the behavior of securities prices.

A) Behavioral finance

B) Strategical finance

C) Methodical finance

D) Procedural finance

2) If a market participant believes that a stock price is irrationally high, they may try to borrow stock from brokers to sell in the market and then make a profit by buying the stock back again after the stock falls in price. This practice is called

A) short selling.

B) double dealing.

C) undermining.

D) long marketing.

3) ________ means people are more unhappy when they suffer losses than they are happy when they achieve gains.

A) Loss fundamentals

B) Loss aversion

C) Loss leader

D) Loss cycle

Mordett is a company with the same assets as Nodett and Somdett but a debtto-equity ratio of 1.0 and...

Mordett is a company with the same assets as Nodett and Somdett but a debtto-equity ratio of 1.0 and an interest rate of 9%. What would its net profit and ROE be in a bad year, a normal year, and a good year?

What were GI’s ROE, P/E, and P/B ratios in the year 2007? How do they compare to the industry average ratios, which were:

ROE = 8.64% P/E = 8 P/B = .69

How does GI’s earnings yield in 2007 compare to the industry average?

Using the Gordon growth formula, if D1 is $1.00, ke is 10% or 0.10, and g is 5% or 0.05, then the...

1) Using the Gordon growth formula, if D1 is $1.00, ke is 10% or 0.10, and g is 5% or 0.05, then the current stock price is

A) $10.

B) $20.

C) $30.

D) $40.

2) One of the assumptions of the Gordon Growth Model is that dividends will continue growing at ________ rate.

A) an increasing

B) a fast

C) a constant

D) an escalating

3) In the Gordon Growth Model, the growth rate is assumed to be ________ the required return on equity.

A) greater than

B) equal to

C) less than

D) proportional to

An increase in the riskiness of corporate bonds will ________ the yield on corporate bonds and...

1) An increase in the riskiness of corporate bonds will ________ the price of corporate bonds and ________ the price of Treasury bonds, everything else held constant.

A) increase; increase

B) reduce; reduce

C) reduce; increase

D) increase; reduce

2) An increase in the riskiness of corporate bonds will ________ the yield on corporate bonds and ________ the yield on Treasury securities, everything else held constant.

A) increase; increase

B) reduce; reduce

C) increase; reduce

D) reduce; increase

In addition to having a direct effect on increasing adverse selection problems, increases in...

1) Factors that lead to worsening conditions in financial markets include:

A) declining interest rates.

B) unanticipated increases in the price level.

C) the deterioration in banks\" balance sheets.

D) increases in bond prices.

2) In a bank panic, the source of contagion is the

A) free-rider problem.

B) too-big-to-fail problem.

C) transactions cost problem.

D) asymmetric information problem.

3) A bank panic can lead to a severe contraction in economic activity due to

A) a decline in international trade.

B) the losses of bank shareholders.

C) the losses of bank depositors.

D) a decline in lending for productive investment.

4) In addition to having a direct effect on increasing adverse selection problems, increases in interest rates also promote financial crises by ________ firms\" and households\" interest payments, thereby ________ their cash flow.

A) increasing; increasing

B) increasing; decreasing

C) decreasing; decreasing

D) decreasing; increasing

An example of the ________ problem would be if Brian borrowed money from Sean in order to purchase a...

1) If bad credit risks are the ones who most actively seek loans then financial intermediaries face the problem of

A) moral hazard.

B) adverse selection.

C) free-riding.

D) costly state verification.

2) An example of the ________ problem would be if Brian borrowed money from Sean in order to purchase a used car and instead took a trip to Atlantic City using those funds.

A) moral hazard

B) adverse selection

C) costly state verification

D) agency

3) The analysis of how asymmetric information problems affect economic behavior is called ________ theory.

A) uneven

B) parallel

C) principal

D) agency

The Federal Home Loan Bank Board and the FSLIC, both of which failed in their regulatory tasks, were...

1) The Federal Home Loan Bank Board and the FSLIC, both of which failed in their regulatory tasks, were abolished by the

A) Competitive Equality Banking Act of 1987.

B) Financial Institutions Reform, Recovery and Enforcement Act of 1989.

C) Office of Thrift Supervision.

D) Office of the Comptroller of the Currency.

2) The Resolution Trust Corporation was created by the FIRREA in order to

A) manage and resolve insolvent S&Ls.

B) build up trust in government regulation.

C) regulate the S&L industry.

D) purchase large amounts of government debt.

3) FIRREA increased the core-capital leverage requirement for thrift institutions from 3% to

A) 8%.

B) 5%

C) 10%

D) 25%

4) The Federal Deposit Insurance Corporation Improvement Act of 1991

A) increased the FDIC\"s ability to borrow from the Treasury to deal with failed banks.

B) increased the FDIC\"s ability to use the too-big-to-fail doctrine.

C) eliminated governmentally-administered deposit insurance.

D) eliminated restrictions on nationwide banking.

Your best friend calls and gives you the latest stock market \"hot tip\" that he heard at...

1) If a corporation announces that it expects quarterly earnings to increase by 25% and it actually sees an increase of 22%, what should happen to the price of the corporation\"s stock if the efficient markets hypothesis holds, everything else held constant?

2) Your best friend calls and gives you the latest stock market \"hot tip\" that he heard at the health club. Should you act on this information? Why or why not?

If a corporation begins to suffer large losses, then the default risk on the corporate bond will A)...

If a corporation begins to suffer large losses, then the default risk on the corporate bond will

A) increase and the bond\"s return will become more uncertain, meaning the expected return on the corporate bond will fall.

B) increase and the bond\"s return will become less uncertain, meaning the expected return on the corporate bond will fall.

C) decrease and the bond\"s return will become less uncertain, meaning the expected return on the corporate bond will fall.

D) decrease and the bond\"s return will become less uncertain, meaning the expected return on the corporate bond will rise.

If bonds with different maturities are perfect substitutes, then the ________ on these bonds must be...

1) According to the expectations theory of the term structure, the interest rate on a long-term bond will equal the ________ of the short-term interest rates that people expect to occur over the life of the long-term bond.

A) average

B) sum

C) difference

D) multiple

2) If bonds with different maturities are perfect substitutes, then the ________ on these bonds must be equal.

A) expected return

B) surprise return

C) surplus return

D) excess return

Why politicians aided the efforts of thrift regulators, raising regulatory appropriations and...

1) An analysis of the political economy of the savings and loan crisis helps one to understand

A) why politicians aided the efforts of thrift regulators, raising regulatory appropriations and encouraging closing of insolvent thrifts.

B) why thrift regulators were so quick to inform Congress of the problems that existed in the thrift industry.

C) why thrift regulators willingly acceded to pressures placed upon them by members of Congress.

D) why politicians listened so closely to the taxpayers they represented.

2) Taxpayers were served poorly by thrift regulators in the 1980s. This poor performance cannot be explained by

A) regulators\" desire to escape blame for poor performance, leading to a perverse strategy of \"bureaucratic gambling.\"

B) regulators\" incentives to accede to pressures imposed by politicians, who sought to keep regulators from imposing tough regulations on institutions that were major campaign contributors.

C) Congress\"s dogged determination to protect taxpayers from the unsound banking practices of managers at many of the nations savings and loans.

D) politicians strong incentives to act in their own interests rather than the interests of the taxpayers.