Originally published in Carroll Capital, the print publication of the Carroll School of Management at Boston College. .听
A year ago, Carroll Capital put its readers to the test. We served up a dozen questions culled from a much longer assessment given every three years to Carroll School of Management seniors in their final semester. Judging from the messages in our inbox, many readers were up for the challenge. They whipped out their financial calculators, mustered their critical thinking skills, and braved the questions.
Alumni, parents, students, and others let us know how they did. Some suggested that we make the test less arduous for those long out of school, while others touted their results. Mary Anne (Keane) McAuliffe, MBA 鈥�78, was pleased to report that she answered 10 out of the 12 correctly. 鈥淭his, after 47 years since graduating and 30 years since actively working in the business world,鈥� she emailed us. 鈥淭his is a tribute to the BC education and the quality of your student body and alumni.鈥�
That exam took a broad cut at the Carroll School curriculum and spanned the functional areas of management. This year, we drill down into two foundational courses with overlapping content鈥擣inancial Accounting and Fundamentals of Finance. The accounting course serves as a gateway to management education at Boston College, a prerequisite for most core courses taken by the nearly 2,500 Carroll School students and more than 2,000 management minors from other Boston College schools. The finance class is required of all those majoring or minoring in finance, which pulls in more students than any other discipline at the University.
The following questions are selected from the accounting听and finance portions of the most recent 100-question senior assessment, which is ungraded and represents 鈥渨hat every student should know when they graduate, and hopefully for a long time afterward,鈥� says Ethan Sullivan, senior associate dean for the undergraduate program.
1. Which of the following businesses would be most likely to use the specific identification method of inventory valuation?听
听听听听A. A home supplies store
听听听听B. A grocery store
听听听听C. An auto parts store听听
听听听听D. An art dealer听
听 听 E. All of the above are equally likely to use the specific identification method
2. If markets are efficient, when new information about a stock becomes available, the price will:
听听听听A. Accurately and rapidly adjust to include this new information
听听听听B. Remain unchanged because it already reflects this information
听听听听C. Adjust to accurately reflect this new information over the course of the next few days听
听听听听D. Likely increase because all new information has a positive effect on stock prices
3. Which of the following direct effects on the balance sheet equation is NOT possible as a result of a single business transaction that impacts only two accounts?
听听听听A. An increase in an asset and a decrease in another asset
听听听听B. An increase in an asset an an increase in stockholders' equity听
听听听听C. A decrease in stockholders' equity and an increase in an asset
听听听听D. An increase in a liability and an increase in an asset
听听听听E. None of the above
4. On January 1, Woodstock, Inc. purchased a machine costing $41,000. The expected useful life of the machine is six years and the residual value is $5,000. How much is the annual depreciation expense, assuming use of the straight-line depreciation method?
听听听听A. $6,100
听听听听B. $6,000
听听听听C. $5,950
听听听听D. $5,750
听听听听E.听 None of the above听听听
5. What is the maximum amount a firm should pay for a project that will return $15,000 annually for five years if the opportunity cost is 10%?听
听听听听A. $56,861.80
听听听听B. $24,157.65
听听听听C. $62,540.10
听听听听D. $48,021.19
6. What is the present value of a five-period annuity of $3,000 if the interest rate per period is 12% and the first payment is made one year from today?听听听听
听听听听A. $9,655.65听听听听
听听听听B. $12,112.05听听
听听听听C. $13,200.00
听听听听D. $10,814.33
7. Certified public accountants (CPAs) who serve as external auditors for their client firms must maintain independence from those clients. Impairments of independence can occur when:
听听听听A. A CPA owns a direct financial interest in a client
听听听听B. A CPA owns a material indirect financial interest in a client
听听听听C. Immediate family members of the CPA are in violation of the independence rules
听听听听D. All of the above听
听听听听E. None of the above
8. Which one of these changes indicates an improvement in a firm's asset management efficiency?听
听听听听A.听 An increase in the amount of assets per dollar of sales
听听听听B. A decrease in the receivables turnover rate
听听听听C. An increase in the inventory turnover rate
听听听听D. An increase in the average days in inventory
9.听At the beginning of 2022, a corporation has assets of $270,000 and liabilities of $160,000. During 2022, assets increased $25,000 and liabilities increased $5,000. What was stockholders' equity on December 31, 2022?
听听听听A. $140,000
听听听听B. $130,000
听听听听C. $190,000
听听听听D. $80,000
听听听听E. None of the above
10. Suppose the bond market, in reacting to macroeconomic data, increases the yields to maturity on corporate bonds. As a result, prices will:听
听听听听A. Fall
听听听听B. Rise
听听听听C. Stay the same
听 听 D. Can't tell from the information provided
Answer Key
1.听顿听听听听听2.听A 听听听听3.听C 听听听听4.听B 听听听听5.听础听 听
听6.听D听 听7.听D听听听听听8.听C听 听 听9.听B听听听听听10.听础听
