1. A company use some of its stockholder’s equity to pay its bills for a time.

True

False

2. Lubuck Corporation's income statement shows a provision for income taxes of $55 million in 2015. At the end of 2015, Lubuck's balance sheet reported income taxes payable of $18 million and deferred taxes of $20 million. At the end of 2016 their balance sheet shows income taxes payable of $19 million and deferred taxes of $14 million. What were Lubuck’s taxes paid in 2016?

a. $50 million

b. $54 million

c. $60 million

d. $56 million

e. None of the above.

3. Suppose Playdough Products LLC pays $220 million to acquire Lele Design Company and the Lele Design’s assets have a book value of $165 million and an estimated replacement value of $190 million. What amount would be allocated to the acquiring firm's goodwill account?

a. $165 million

b. $190 million

c. $30 million

d. $55 million

e. $15 million

4. JM Case Inc. has a market value of $5 million with 500,000 shares outstanding. The book value of its equity is $1,750,000. If the company repurchases 35 percent of its shares in the stock market and there are no taxes or transactions costs and all else remains the same, what should the market value of the firm be after the repurchase?

a. $1,000,000

b. $1,750,000

c. $3,250,000

d. $4,000,000

e. $5,000,000