Questions and Answers: 166
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NEW QUESTION: 1
In 1992, Anchor, Chain, and Hook created ACH Associates, a general partnership. The partners orally
agreed that they would work full time for the partnership and would distribute profits based on their capital
contributions. Anchor contributed $5,000; Chain $10,000; and Hook $15,000.
For the year ended December 31, 1993, ACH Associates had profits of $60,000 that were distributed to
the partners. During 1994, ACH Associates was operating at a loss. In September 1994, the partnership
dissolved.
In October 1994, Hook contracted in writing with Ace Automobile Co. to purchase a car for the partnership.
Hook had previously purchased cars from Ace Automobile Co. for use by ACH Associates partners. ACH
Associates did not honor the contract with Ace Automobile Co. and Ace Automobile Co. sued the
partnership and the individual partners.
A. Anchor's capital account would be reduced by 1/3 of any 1994 losses.
B. Hook's capital account would be reduced by 1/2 of any 1994 losses.
Answer: B
Explanation:
Choice "b" is correct. If the partnership agreement is silent on how losses will be shared, they are shared
in the same manner as profits. Here, the partners agreed to share profits on the basis of their
contributions, which were in a ratio of 1:2:3 respectively for Anchor, Chain, and Hook. Thus, Anchor is
liable for one-sixth of the loss, Chain is liable for 1/3 of the loss, and Hook is liable for 1/2 of the loss.
NEW QUESTION: 2
Section B (2 Mark)
Jaipur Golden Railroad reported net income of Rs770 million in 1993, after interest expenses of Rs. 320 million. (The corporate tax rate was 36%.) It reported depreciation of Rs.960 million in that year, and capital spending was Rs1.2 billion. The firm also had Rs. 4 billion in debt outstanding on the books, rated AA (carrying a yield to maturity of 8%), trading at par (up from Rs3.8 billion at the end of 1992). The beta of the stock is 1.05, and there were 200 million shares outstanding (trading at Rs 60 per share), with a book value of Rs5 billion. Jaipur Golden paid 40% of its earnings as dividends and working capital requirements are negligible. (The treasury Bill rate is 7%.) Estimate the free cash flow to the firm in 1993.
A. Rs 680.90 million
B. Rs 734.80 million
C. Rs 890.45 million
D. Rs 540.80 million
Answer: B
NEW QUESTION: 3
An enterprise PKI system is required to deploy SSL Forward Proxy decryption capabilities.
A. False
B. True
Answer: A