BUS 302L

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California State University, Northridge *

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302L

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Business

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Feb 20, 2024

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docx

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BUSINESS LAW 1. Derek and Abyan were discussing business over lunch when they agreed on the sale of a five-acre parcel of land. Since neither of them had any paper with them, Derek wrote the following on a napkin: “Abyan agrees to purchase from Derek a 5-acre parcel located at the local address of 123 105 th Street, St. Joseph, Minnesota, U.S.A. for the price of $4,500 per acre. Transfer of title, payment, and possession to take place on May 1, 2011.” Abyan signed the napkin. On May 1, 20111, Derek was ready to close the deal and transfer title but Abyan refused to pay the purchase price. If Derek sues Abyan for the price of the land, the most likely result will be: Derek will win because the writing is sufficient under the Statute of Frauds 2. Civil law regulates: Rights and duties between person in our society 3. All of the following are true statements concerning breach of contract except: A breaching party will usually have to pay punitive damages 4. All of the following are true statements concerning the statute of limitations except: For all court cases, the statute of limitations is three years 5. A statute of limitations for an alleged breach of contract: Generally, commences on the date of the breach 6. Catherine, a new property owner, was told by the previous owner that the home she purchased had no termites and no termite damage. One month after taking possession of the property, Catherine knew that her home was infested with termites because she saw evidence of their presence. In addition, an exterminator told her that the pests had caused damage to the wood structure. However, Catherine loved her home and lived in the home for ten more years. When Catherine decided to relocate, she filed a lawsuit against the previous owner based on fraud. As a result, Catherine will: Lose her lawsuit 7. Bob purchased a loaf of Weber's bread, which he later uses to make sandwiches for a church luncheon. Unfortunately, Bob and several church members became ill after eating the sandwiches. Later, they discovered that the bread had been exposed to or contained insecticide. As a result, Bob and the church members can recover under strict product liability and may sue all of those in the “stream of commerce,” including the grocery store where Bob purchased the bread. 8. Colleen sold a house to Ben for $300,000. Before selling the House. Colleen forgot to tell Ben about a leaky faucet in a little-used sink in the basement, which would cost

about $30 to fix. Ben inspected the house, but didn’t notice the faucet. Later, Ben wanted to rescind the deal on the basis of fraud or misrepresentation because of the leaky faucet. Which of the following is the best reason why Ben cannot rescind? Because the condition of the faucet is not material to the contract 9. Betsy owned a speedboat that was not operating correctly. She hired Gail, a mechanic, to determine what needed to be repaired or replaced on the boat. Gail concluded that the boat needed over $5,000 of work to run safely. Upset by the news, Betsy decided to get a second opinion from Kathy, another mechanic. Kathy advised Betsy that the boat only needed a new fuel pump, which cost considerably less than $5,000. Betsy decides to sell her boat instead of repairing it. When a prospective buyer asks Betsy whether the boat has been inspected by a mechanic, she will: Be required to disclose both reports 10. Cathleen, a bank robber, walked into a bank and aimed her gun at Jennifer, telling Jennifer to empty the cash drawer into a bag. Cathleen has committed the tort of Assault 11. Ani had her brakes fixed by Independent Car Repair. Ani paid $400 for the repair, but immediately noticed that the brakes were not functioning. She continued to drive the car without complaining to the Independent Car Repair. The next day, Ani collided into a concrete wall when the brakes failed. Ani was uninjured. However, her $12,000 car was completely destroyed. Under these circumstances: Independent Car Repair breached the contract by failing to correctly fix the brakes. It owes Ani a refund of $400 for that breach. A court would probably find that it did not owe Ani the $12,000 since Ani had a duty to mitigate her contractual damages by reducing the risk of future damage; i.e. returning the car for repair 12. Armin received a letter from a company that he had never done business with in the past. The unsolicited letter that read, “No need to respond -We have a great offer for you. If we don’t hear from you in two days you will receive 10 DVD’s for only $10.00. Call us at 818-345-1234 if you wish to reject.” Armin did not respond to the letter. Ten days later, Armin received 10 DVDs and an invoice requesting that he pay $10.00. Assume that the letter was an offer. ????? 13. Darren signs an employment contract before starting work at Larry’s advertising agency. Included in the contract is a clause that states that if the parties have a dispute, a neutral, nonjudicial third party will decide the matter. Determine what will happen when Darren and Larry have a dispute when Larry refuses to make Darren a partner in the agency. Concept #3

14. A homeowner tells a prospective buyer of his home that the downstairs bedroom is 10x9 feet because he measured it himself. However, his measurements were incorrect and the bedroom is actually 9 15/16 feet x 9 feet. The homeowner’s statement: Concept #6 (misrepresentation innocent or fraudulent) 15. All of the following situations could give rise to a strict products liability action except: Having your taxes done by a CPA 16. Farmer Elvis is holding 200 pounds of potatoes in storage for Chef Noble but Chef Noble has breached the contract by failing to pay for the potatoes. The potatoes are beginning to rot. If Farmer Elvin sells the potatoes to a local diner to make potato soup and salad, then this action would be considered: A reasonable mitigation of damages FINANCIAL ACCOUNTING 1. An income statement shows

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Revenues or sales, expenses, and net income or losses 2. Net income results when Revenues > Expenses 3. In order for accounting information to be relevant, it must Help predict future events or confirm prior expectations 4. Two of the major characteristics that make accounting information useful are Relevance and Faithful representation 5. Which of the following is a constraint in accounting? Materiality (types of constraints: objectivity, costs and benefits, materiality, consistency, industry practices, timeliness, and conservatism) 6. Based on the following balance sheet accounts for Larking Corporation, what is retained earnings? Inventory $8,000 Accounts Receivable $5,000 Cash 10,000 Copyright 6,000 Auto 4,000 Capital Stock 15,000 Machinery 7,000 Accounts payable 9,000 Taxes payable 3,000 Mortgage Payable 10,000 Retained earnings is 9,000 7.

$35,000 8. If a resource has been consumed but a bill has not been received at the end of the accounting period, then; An adjusting entry should be made recognizing the expense. 9. The consistent application of an inventory costing method enhances Comparability 10. Perez Company deposits $10,000 in a fund at the end of each year for 5 years. The fund pays interest of 4% compounded annually. The balance in the fund at the end of 5 years is compounded by multiplying Review top ten concept #7 ($54,163.23) 11. Norton Company has just purchased equipment that requires annual payments of $30,000 to be paid at the end of each of the next 4 years. The appropriate discount rate is 15% What is the present value of the payments? Review Top Ten concept #7 ($85,649.35) 12. Evan corporation borrowed $180,000 on March 1, 2001, signing a one year, 10% note payable to State Bank. The adjusting entry required on December 31, 2001, by Evan Corporation includes a Debit to Interest Expense of $15,000 13. The receivables turnover and inventory turnover ratios are used to analyze Review top ten concept #9 (how quickly a company sells its goods and how quickly it collects its money) 14. Long-term creditors are usually most interested in evaluating Solvency 15. Carpino Company purchased equipment and these costs were incurred: Cash price $90,000 Sales taxes 4,500 Insurance during transit 750 Installation and testing 1,500 Total cost $96,750.

What amount should be recorded as the cost of the equipment? Review top ten concept #11 ($96,750) 16. A company sold a plant asset that originally cost $300,000 for $100,000 on December 31, 2012. The accumulated depreciation account had a balance of $120,000 after the current year’s depreciation of $30,000 has been recorded. The company should recognize a Review top ten concept #11 (loss of 80,000) MANAGEMENT ACCOUNTING 1. Managerial Accounting reports are prepared To meet the needs of decision makers within the firm (Internal users) 2. Management accounting places more emphasis on which of the following? Future activities 3. Which of the following is never included in product cost? Variable selling expense 4. Knowing how cost change as output changes is essential to

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Planning, controlling and decision making 5. Costing systems: Review top ten concept #3 (is a framework used by firms to estimate the cost of their products for profitability analysis, inventory valuation and cost control. There are two main cost accounting systems: the job order costing and the process costing) 6. Cost information: Is used by Managers across an organization 7. Total contribution margin divided by total sales is the Contributing margin ratio 8. The Global Moving Company specializes in hauling goods over long distances. Revenues and variable expenses depend on the number of Revenue Miles that are driven. Budget data for the next year are based on predicted total Revenue Miles of 800,000 Average Revenue (price) per Mile $1.50 Average Variable Expense per Mile 1.30 Fixed Expenses for the Period 110,000 Budgeted Net Income before Taxes is: A gain of $50,000 9. Which of the following pairs most accurately represents costs used in Cost-Volume- Profit analysis? Variable Costs and Fixed Costs 10. Expected future costs that differ between decision alternatives at hand are known as? Review top ten concept #6 Relevant costs 11. Which of the following costs equates most closely to the economics concept of marginal cost? Review top ten concept #8 Sunk cost 12. The following is data for a manufacturing company: Begin Direct Materials $2,000

Direct labor 5,000 End direct materials 3,000 Begin Work-in-process 4,000 End work-in-process 6,000 Manufacturing overhead 12,000 Direct materials purchased 10,000 Cost of Goods Manufactured 24,000 Cost of Goods Sold ? End Finished Goods 9,000 Gross Margin (Profit) ? Operating expenses 6,000 Beginning Finished Goods 5,000 Sales Revenue 50,000 What is the amount of Gross Margin (Profit)? $30,000 (Sales – {Cost of goods Manufac + Beginning FG – Ending FG}) 13. The following is data for a manufacturing company: Begin Direct Materials $2,000 Direct labor 5,000 End direct materials 3,000 Begin Work-in-process 4,000 End Work-in-process 6,000 Manufacturing Overhead 12,000

Direct Materials purchased 10,000 Cost of Goods Manufactured 24,000 Cost of Goods Sold ? End Finished Goods 9,000 Gros Margin (Profit) ? Net income ? Operating Expenses 6,000 What is the amount of Direct Materials used in production? 9,000 (Begin DM 2,000 + Direct MP 10,000 – End DM 3,000) 14. Production cost Are costs that are included in the determining the value of the inventory Include direct materials, direct labor, and overhead Are manufacturing costs 15. The break-even point is when Total revenue equals total cost 16. In setting the price of a particular product or service for the long run, which of the following should represent the best cost basis? Product, Marketing and Administrative costs

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BUS 302L

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