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5/22/13

Corporate Finance 10th Ross SOLUTIONS MANUAL and test bank


Corporate Finance 10th Ross SOLUTIONS MANUAL and test bank


the sample of the test bank




http://www.mediafire.com/view/067xwixd1di8r7d/Ross_-_Corporate_Finance_-_10e%2C_Test_bank_0078034779ch2.docx






Corporate Finance, 10/e



Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Jeffrey Jaffe, University of Pennsylvania



ISBN: 0078034779







Solutions Manual



Corporate Finance



Ross, Westerfield, and Jaffe

10th edition







01/30/2013



Prepared by:

Joe Smolira

Belmont University















Book Description


September 27, 2012 0078034779 978-0078034770 10



Corporate Finance, by Ross, Westerfield, and Jaffe emphasizes the modern fundamentals of the theory of finance, while providing contemporary examples to make the theory come to life. The authors aim to present corporate finance as the working of a small number of integrated and powerful intuitions, rather than a collection of unrelated topics. They develop the central concepts of modern finance: arbitrage, net present value, efficient markets, agency theory, options, and the trade-off between risk and return, and use them to explain corporate finance with a balance of theory and application. The Tenth Edition includes many exciting new research findings as well as an enhanced Connect Finance, now with even more student learning resources.


























CHAPTER 1

INTRODUCTION TO CORPORATE FINANCE


Answers to Concept Questions




1. In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm's management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act in its own or someone else's best interests, rather than those of the shareholders. If such events occur, they may contradict the goal of maximizing the share price of the equity of the firm.



2. Such organizations frequently pursue social or political missions, so many different goals are conceivable. One goal that is often cited is revenue minimization; i.e., provide whatever goods and services are offered at the lowest possible cost to society. A better approach might be to observe that even a not-for-profit business has equity. Thus, one answer is that the appropriate goal is to maximize the value of the equity.



3. Presumably, the current stock value reflects the risk, timing, and magnitude of all future cash flows, both short-term and long-term. If this is correct, then the statement is false.



4. An argument can be made either way. At the one extreme, we could argue that in a market economy, all of these things are priced. There is thus an optimal level of, for example, ethical and/or illegal behavior, and the framework of stock valuation explicitly includes these. At the other extreme, we could argue that these are non-economic phenomena and are best handled through the political process. A classic (and highly relevant) thought question that illustrates this debate goes something like this: "A firm has estimated that the cost of improving the safety of one of its products is $30 million. However, the firm believes that improving the safety of the product will only save $20 million in product liability claims. What should the firm do?"



5. The goal will be the same, but the best course of action toward that goal may be different because of differing social, political, and economic institutions.



6. The goal of management should be to maximize the share price for the current shareholders. If management believes that it can improve the profitability of the firm so that the share price will exceed $35, then they should fight the offer from the outside company. If management believes that this bidder or other unidentified bidders will actually pay more than $35 per share to acquire the company, then they should still fight the offer. However, if the current management cannot increase the value of the firm beyond the bid price, and no other higher bids come in, then management is not acting in the interests of the shareholders by fighting the offer. Since cur






the solutions manual include the case solutions





Case Solutions


Corporate Finance


Ross, Westerfield, and Jaffe


10th edition








11/13/2012




Prepared by:


Joe Smolira


Belmont University













CHAPTER 2

CASH FLOWS AT WARF COMPUTERS






The operating cash flow for the company is: (NOTE: All numbers are in thousands of dollars)




OCF = EBIT + Depreciation - Current taxes


OCF = $1,598 + 191 - 467


OCF = $1,322




To calculate the cash flow from assets, we need to find the capital spending and change in net working capital. The capital spending for the year was:




































Capital spending








Ending net fixed assets


$2,770





- Beginning net fixed assets


2,151





+ Depreciation


191





Net capital spending


$ 810




And the change in net working capital was:






























Change in net working capital





Ending NWC


$874





- Beginning NWC


704





Change in NWC


$170




So, the cash flow from assets was:




































Cash flow from assets








Operating cash flow


$1,322





- Net capital spending


810





- Change in NWC


170





Cash flow from assets


$342




The cash flow to creditors was:































Cash flow to creditors








Interest paid


$105





- Net New Borrowing


24





Cash flow to Creditors


$81
































Introduction to Managerial Accounting 6e Brewer Garrison SOLUTIONS MANUAL and test bank

Introduction to Managerial Accounting 6e Brewer Garrison SOLUTIONS MANUAL and test bank

the download link of the sample  of the solutions manual and test bank  

http://www.mediafire.com/view/awia1liiqsja9rt/Introduction_to_Managerial_Accounting_6e_Brewer_Garrison_SOLUTIONS_MANUALBGN_CH02_SM.doc

http://www.mediafire.com/view/h07fr2orr29bf8h/Brewer_-_Introduction_to_Managerial_Accounting_-_6e%2C_Test_bank_0078025419ch2.docx

Sample of solutions manual  and thest bank

Chapter 2
Job-Order Costing
Solutions to Questions


2-1 By definition, manufacturing overhead consists of costs that cannot be practically traced to jobs. Therefore, if these costs are to be assigned to jobs, they must be allocated rather than traced.
2-2 The first step is to estimate the total amount of the allocation base (the denominator) that will be required for next period’s estimated level of production. The second step is to estimate the total fixed manufacturing overhead cost for the coming period and the variable manufacturing overhead cost per unit of the allocation base. The third step is to use the cost formula Y = a + bX to estimate the total manufacturing overhead cost (the numerator) for the coming period. The fourth step is to compute the predetermined overhead rate.
2-3 The job cost sheet is used to record all costs that are assigned to a particular job. These costs include direct materials costs traced to the job, direct labor costs traced to the job, and manufacturing overhead costs applied to the job. When a job is completed, the job cost sheet is used to compute the unit product cost.
2-4 Some production costs such as a factory manager’s salary cannot be traced to a particular product or job, but rather are incurred as a result of overall production activities. In addition, some production costs such as indirect materials cannot be easily traced to jobs. If these costs are to be assigned to products, they must be allocated to the products.
2-5 If actual manufacturing overhead cost is applied to jobs, the company must wait until the end of the accounting period to apply overhead and to cost jobs. If the company computes actual overhead rates more frequently to get around this problem, the rates may fluctuate widely due to seasonal factors or variations in output. For this reason, most companies use predetermined overhead rates to apply manufacturing overhead costs to jobs.
2-6 The measure of activity used as the allocation base should drive the overhead cost; that is, the allocation base should cause the overhead cost. If the allocation base does not really cause the overhead, then costs will be incorrectly attributed to products and jobs and product costs will be distorted.
2-7 Assigning manufacturing overhead costs to jobs does not ensure a profit. The units produced may not be sold and if they are sold, they may not be sold at prices sufficient to cover all costs. It is a myth that assigning costs to products or jobs ensures that those costs will be recovered. Costs are recovered only by selling to customers—not by allocating costs.
2-8 The Manufacturing Overhead account is credited when overhead cost is applied to Work in Process. Generally, the amount of overhead applied will not be the same as the amount of actual cost incurred because the predetermined overhead rate is based on estimates.
2-9 Underapplied overhead occurs when the actual overhead cost exceeds the amount of overhead cost applied to Work in Process inventory during the period. Overapplied overhead occurs when the actual overhead cost is less than the amount of overhead cost applied to Work in Process inventory during the period. Underapplied or overapplied overhead is disposed of by closing out the amount to Cost of Goods Sold. The adjustment for underapplied overhead increases Cost of Goods Sold whereas the adjustment for overapplied overhead decreases Cost of Goods Sold.
2-10 Manufacturing overhead may be underapplied for several reasons. Control over overhead spending may be poor. Or, some of the overhead may be fixed and the actual amount of the allocation base may be less than estimated at the beginning of the period. In this situation, the amount of overhead applied to inventory will be less than the actual overhead cost incurred.
2-11 Underapplied overhead implies that not enough overhead was assigned to jobs during the period and therefore cost of goods sold was understated. Therefore, underapplied overhead is added to cost of goods sold. On the other hand, overapplied overhead is deducted from cost of goods sold.








* Given
Problem 2-23A (45 minutes)
1. The cost of raw materials put into production was:
Raw materials inventory, 1/1.................... $ 30,000
Debits (purchases of materials)................ 420,000
Materials available for use........................ 450,000
Raw materials inventory, 12/31................    60,000
Materials requisitioned for production........ $390,000

2. Of the $390,000 in materials requisitioned for production, $320,000 was debited to Work in Process as direct materials. Therefore, the difference of $70,000 ($390,000 – $320,000 = $70,000) would have been debited to Manufacturing Overhead as indirect materials.
3. Total factory wages accrued during the year (credits to the Factory Wages Payable account) $175,000
Less direct labor cost (from Work in Process)...... 110,000
Indirect labor cost........................................... $ 65,000

4. The cost of goods manufactured for the year was $810,000—the credits to Work in Process.
5. The Cost of Goods Sold for the year was:
Finished goods inventory, 1/1...................................... $ 40,000
Add: Cost of goods manufactured (from Work in Process) 810,000
Cost of goods available for sale.................................... 850,000
Deduct: Finished goods inventory, 12/31....................... 130,000
Cost of goods sold...................................................... $720,000




Prologue
Managerial Accounting: An Overview
Solutions to Questions
P-1      Financial accounting is concerned with reporting financial information to external parties, such as stockholders, creditors, and regulators. Managerial accounting is concerned with providing information to managers for use within the organization. Financial accounting emphasizes the financial consequences of past transactions, objectivity and verifiability, precision, and companywide performance, whereas managerial accounting emphasizes decisions affecting the future, relevance, timeliness, and segment performance. Financial accounting is mandatory for external reports and it needs to comply with rules, such as generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS), whereas managerial accounting is not mandatory and it does not need to comply with externally imposed rules.
P-2      Five examples of planning activities include (1) estimating the advertising revenues for a future period, (2) estimating the total expenses for a future period, including the salaries of all actors, news reporters, and sportscasters, (3) planning how many new television shows to introduce to the market, (4) planning each television show’s designated broadcast time slot, and (5) planning the network’s advertising activities and expenditures.
            Five examples of controlling activities include (1) comparing the actual number of viewers for each show to its viewership projections, (2) comparing the actual costs of producing a made-for-television movie to its budget, (3) comparing the revenues earned from broadcasting a sporting event to the costs incurred to broadcast that event, (4) comparing the actual costs of running a production studio to the budget, and (5) comparing the actual cost of providing global, on-location news coverage to the budget.
P-3      The quantitative analysis would focus on determining the potential cost savings from buying the part rather than making it. The qualitative analysis would focus on broader issues such as strategy, risks, and corporate social responsibility. For example, if the part is critical to the organization’s strategy, it may continue making the part regardless of any potential cost savings from outsourcing. If the overseas supplier might create quality control problems that could threaten the end consumers’ welfare, then the risks of outsourcing may swamp any cost savings. Finally, from a social responsibility standpoint, a company may decide against outsourcing if it would result in layoffs at its domestic manufacturing facility.
P-4      Companies use budgets to translate plans into formal quantitative terms. Budgets are used for various purposes, such as forcing managers to plan ahead, allocating resources across departments, coordinating activities across departments, establishing goals that motivate people, and evaluating and rewarding employees. These various purposes often conflict with one another, which makes budgeting one of management’s most challenging activities.
P-5      Managerial accounting is relevant to all business students because all managers engage in planning, controlling, and decision making activities. If managers wish to influence co-workers across the organization, they must be able to speak in financial terms to justify their proposed courses of action.
P-6      The Institute of Management Accountants estimates that 80% of accountants work in non-public accounting environments. Accountants that work in corporate, non-profit, and governmental organizations are expected to use their planning, controlling, and decision-making skills to help improve performance.
P-7      Deere & Company is an example of a company that competes in terms of product leadership. The company’s slogan “nothing runs like a Deere” emphasizes its product leadership customer value proposition.
            Amazon.com competes in terms of operational excellence. The company focuses on delivering products faster, more conveniently, and at a lower price than competitors.
            Charles Schwab competes in terms of customer intimacy. It focuses on building personal relationships with clients so that it can tailor investment strategies to individual needs.
P-8      Planning, controlling, and decision making must be performed within the context of a company’s strategy. For example, if a company that competes as a product leader plans to grow too quickly, it may diminish quality and threaten the company’s customer value proposition. A company that competes in terms of operational excellence would select control measures that focus on time-based performance, convenience, and cost. A company that competes in terms of customer intimacy may decide against outsourcing employee training to cut costs because it might diminish the quality of customer service.
P-9      This answer is based on Nike, which has suppliers in over 40 countries. One risk that Nike faces is that its suppliers will fail to manage their employees in a socially responsible manner. Nike conducts Management Audit Verifications at its overseas plants to minimize this risk.
            Nike faces the risk that unsatisfactory environmental performance will diminish its brand image. The company is investing substantial resources to develop products that minimize adverse impacts on the environment.
            Nike faces the risk that customers will not like its new products. The company uses focus group research to proactively assess the customers’ reaction to its new products.
P-10    Airlines face the risk that large spikes in fuel prices will lower their profitability. Therefore, they may reduce this risk by spending money on hedging contracts that enable them to lock-in future fuel prices that will not change even if the market price increases.
            Steel manufacturers face major risks related to employee safety, so they create and monitor control measures related to occupational safety compliance and performance.
            Restaurants face the risk that an economic downturn will reduce customer traffic and lower sales. They reduce this risk by choosing to create menus during economic downturns that offer more low-priced entrees.
P-11    Barnes & Noble could segment its companywide performance by individual store, by sales channel (i.e., bricks-and-mortar versus on-line), and by product line (e.g., non-fiction books, fiction books, music CDs, toys, etc.).
            Procter & Gamble could segment its performance by product category (e.g., beauty and grooming, household care, and health and well-being), product line (e.g., Crest, Tide, and Bounty), and stock keeping units (e.g., Crest Cavity Protection toothpaste, Crest Extra Whitening toothpaste, and Crest Sensitivity toothpaste).
P-12    Timberland publishes quarterly corporate social responsibility (CSR) metrics (see www.earthkeeper.com/CSR/csrdownloads. Three of those metrics include metric tons of carbon emissions, the percentage of total cotton sourced that is organic, and renewable energy use as a percent of total energy usage.
            Timberland’s corporate slogan of “doing well by doing good” suggests that the company publishes  CSR reports because it believes that its financial success (i.e., doing well) is positively influenced by its social and environmental performance (i.e., doing good).
P-13    Companies that use lean production only make units in response to customer orders. They produce units just in time to satisfy customer demand, which results in minimal inventories.
P-14    Organizations are managed by people that have their own personal interests, insecurities, beliefs, and data-supported conclusions that ensure unanimous support for a given course of action is the exception rather than the rule. Therefore, managers must possess strong leadership skills if they wish to channel their co-workers’ efforts towards achieving organizational goals.

P-15    Ethical behavior is the lubricant that keeps the economy running. Without that lubricant, the economy would operate much less efficiently—less would be available to consumers, quality would be lower, and prices would be higher.


Test bank for ch2 Key
 
1.
The use of predetermined overhead rates in a job-order cost system makes it possible to estimate the total cost of a given job as soon as production is completed. 
 
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Brewer - Chapter 02 #1
Difficulty: 1 Easy
Learning Objective: 02-01 Compute a predetermined overhead rate.
Topic: Job-Order Costing
 

2.
A job cost sheet is used to accumulate costs charged to a job. 
 
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Brewer - Chapter 02 #2
Difficulty: 1 Easy
Learning Objective: 02-03 Compute the total cost and average cost per unit of a job.
Topic: Job-Order Costing
 

3.
The following journal entry would be made to apply overhead cost to jobs in a job-order costing system:

   
 
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Brewer - Chapter 02 #3
Difficulty: 2 Medium
Learning Objective: 02-02 Apply overhead cost to jobs using a predetermined overhead rate.
Learning Objective: 02-04 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.
Topic: Job-Order Costing
Topic: Job-Order Costing—The Flow of Costs
 

4.
Under a job-order cost system the Work in Process account is debited with the cost of materials purchased. 
 
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Brewer - Chapter 02 #4
Difficulty: 2 Medium
Learning Objective: 02-04 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.
Topic: Job-Order Costing—The Flow of Costs
 


 

14.
In computing its predetermined overhead rate, Marple Company inadvertently left its indirect labor costs out of the computation. This oversight will cause: 
 

A. 
Manufacturing Overhead to be overapplied.

B. 
the Cost of Goods Manufactured to be understated.

C. 
the debits to the Manufacturing Overhead account to be understated.

D. 
the ending balance in Work in Process to be overstated.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Brewer - Chapter 02 #14
Difficulty: 3 Hard
Learning Objective: 02-01 Compute a predetermined overhead rate.
Learning Objective: 02-05 Use T-accounts to show the flow of costs in a job-order costing system.
Topic: Job-Order Costing
Topic: Job-Order Costing—The Flow of Costs
 

15.
Which of the following is the correct formula to compute the predetermined overhead rate? 
 

A. 
Estimated total units in the allocation base divided by estimated total manufacturing overhead costs.

B. 
Estimated total manufacturing overhead costs divided by estimated total units in the allocation base.

C. 
Actual total manufacturing overhead costs divided by estimated total units in the allocation base.

D. 
Estimated total manufacturing overhead costs divided by actual total units in the allocation base.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Brewer - Chapter 02 #15
Difficulty: 1 Easy
Learning Objective: 02-01 Compute a predetermined overhead rate.
Topic: Job-Order Costing
 

16.
Which of the following would probably be the least appropriate allocation base for allocating overhead in a highly automated manufacturer of specialty valves? 
 

A. 
machine-hours

B. 
power consumption

C. 
direct labor-hours

D. 
machine setups

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Brewer - Chapter 02 #16
Difficulty: 3 Hard
Learning Objective: 02-01 Compute a predetermined overhead rate.
Topic: Job-Order Costing
 

17.
What document is used to determine the actual amount of direct labor to record on a job cost sheet? 
 

A. 
time ticket

B. 
payroll register

C. 
production order

D. 
wages payable account

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