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# Profficiency exams

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Senior Manager
Joined: 29 Jun 2005
Posts: 398

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01 Apr 2007, 14:02
Hi Everybody,

My school requires me to take basic HBS on-line accounting course and pass the proff. exams by July 1. 2 final exams are waiting to be taken.
Just wondering, what if I fail to pass one of them? it is not the gmat which can be taken many times. One can take the test only once. At least I couldn't re-take the pre-test. they didn't even give me an opportunity to review my mistakes.

So, does anybody have any information on what to do if failed? Can the school change its decision from admitted to "dinged"?

P.S.: I've already looked thru all the material, however I'm not sure yet whether I'll nail it from the 1st attempt.

Thanks,
Senior Manager
Joined: 29 Jun 2005
Posts: 398

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02 Apr 2007, 10:02
Please, can anybody explain how to solve this question?
It is from the HBS exam which is required by my school.

On March 31, 2005, Cars Inc. owes Preston Devices, one of its suppliers, 25000usd for previous purchases. During April 2005, Preston sells Cars devices with a sales price of 10000usd and a cost to Preston of 8000usd. During April Cars pays Preston 12000usd against the amount owed to Preston. What is the effect of these April transactions on Preston’s balance sheet?

A) Accounts receivable increased be 2000,inventory decreased by 8000, cash increased by 12000, retained earnings increased by 12000
B) Cash increased by 12000, retained earnings decreased by 2000, inventory decreased by 10000, accounts receivable decreased by 12000
C) Cash increased by 2000, accounts receivable decreased by 2000, inventory decreased by 8000, retained earnings decreased by 12000
D) Cash increased by 12000, accounts receivable decreased by 2000, inventory decreased by 8000, retained earnings increased by 2000.

I was thinking about D, but "retained earnings bla bla...." is killing me. How could this transaction affect retained earnings?

P.S.: Gosh, accounting is soooo boring and convoluted. hate it
Manager
Joined: 08 Oct 2004
Posts: 122

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02 Apr 2007, 11:20
Retained Earnings increase thru the net income. Preston sold for 10,000 and incured costs in the amount of 8000. Their net income is 2000 which goes to balance sheet as retained earnings.
Senior Manager
Joined: 29 Jun 2005
Posts: 398

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02 Apr 2007, 11:45
Tajik4GMAT wrote:
Retained Earnings increase thru the net income. Preston sold for 10,000 and incured costs in the amount of 8000. Their net income is 2000 which goes to balance sheet as retained earnings.

Thanks,

RE=net income - dividends. We don't know, whether Preston had to pay dividends? so we can't presuppose that he doesn't have to. GMAT DS.

Is net income = sales - the cost of goods sold?
Manager
Joined: 08 Oct 2004
Posts: 122

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02 Apr 2007, 12:42
Dilshod wrote:
Tajik4GMAT wrote:
Retained Earnings increase thru the net income. Preston sold for 10,000 and incured costs in the amount of 8000. Their net income is 2000 which goes to balance sheet as retained earnings.

Thanks,

RE=net income - dividends. We don't know, whether Preston had to pay dividends? so we can't presuppose that he doesn't have to. GMAT DS.

Is net income = sales - the cost of goods sold?

When you are in accounting class, forget about GMAT If they paid dividends, they would indicate it. Otherwise, assume that they did not.
Sales
- Cost of Goods Sold
=EBITDA
-Interest
=EBTDA
-Depr and Amort
=EBT
-Taxes
=Net Income available to shareholders
Senior Manager
Joined: 29 Jun 2005
Posts: 398

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03 Apr 2007, 01:38
Hi Tajik4GMAT,

Ok, thanks. I guess, you have taken accounting lessons and have made your homeworks on time:).
Can you help me with other question:

During 2005, Parnode had a cash outflow of 15000 from investing activities and a 7000 cash inflow from financing activities. its 2005 cash flow from operations was:

(the picture of the balance sheet)

How can we calculate operations cash flow from balance sheet? I have assets entries on the left, and liabilites on the right.

Thanks.
Manager
Joined: 08 Oct 2004
Posts: 122

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03 Apr 2007, 08:55
Do not see the picture
Senior Manager
Joined: 29 Jun 2005
Posts: 398

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03 Apr 2007, 08:59
I couldn't paste the picture. Asume its just a theoretical balance sheet.
Manager
Joined: 08 Oct 2004
Posts: 122

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03 Apr 2007, 09:30
Senior Manager
Joined: 29 Jun 2005
Posts: 398

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03 Apr 2007, 12:34
hi,

thanks. it helped me to answer to the previous question.

sorry for asking you again and again, but can you give me a hand of help with my final exam?
(I thought I would be able to use the hbs material while taking the test, but once i started, I may no longer access the educational portion )
Attachments

Doc1.doc [154 KiB]

Manager
Joined: 08 Oct 2004
Posts: 122

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04 Apr 2007, 10:41
They had sales of 17,000\$. If the AR increased by 3000\$ that means the 14,000\$ was sold in cash. Corrct me if I am wrong.
Senior Manager
Joined: 29 Jun 2005
Posts: 398

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04 Apr 2007, 12:56
Tajik4GMAT wrote:
They had sales of 17,000\$. If the AR increased by 3000\$ that means the 14,000\$ was sold in cash. Corrct me if I am wrong.

Sorry, 'm not the one to correct you.
So, the 3000 increase in AR = goods sold on credit from dec 31'04 to dec31'05, right? but why can't we use the same logic in using directly the change in Cash?
_________________________

Dec 31 2004
Cash 34000

Dec 31 2005
Cash 41000

Are these figures accumulated or independent for each year?
Manager
Joined: 08 Oct 2004
Posts: 122

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04 Apr 2007, 13:03
Becase they might have used cash to pay their payables or use it somewhere else. That's why the change in cash is only 7000\$.
GMAT Club Legend
Affiliations: HHonors Diamond, BGS Honor Society
Joined: 05 Apr 2006
Posts: 5917
Schools: Chicago (Booth) - Class of 2009
GMAT 1: 730 Q45 V45

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04 Apr 2007, 13:09
If this thread is any indication, I'm going to HATE accounting.
Manager
Joined: 08 Oct 2004
Posts: 122

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04 Apr 2007, 13:10
rhyme wrote:
If this thread is any indication, I'm going to HATE accounting.

This is accounting 101 man Wait until you get to the upper level of the HELL
Senior Manager
Joined: 29 Jun 2005
Posts: 398

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04 Apr 2007, 23:23
Tajik4GMAT wrote:
Becase they might have used cash to pay their payables or use it somewhere else. That's why the change in cash is only 7000\$.

Can't we say the same for AR? May it be that AR was affected by some other than sales reasons? For example, some '05 suppliers were urged to pay penalty for not delivering materials on time. And the suppliers we forced to pay the penalty next year. Doesn't this obligation also land to AR account?
Manager
Joined: 08 Oct 2004
Posts: 122

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05 Apr 2007, 07:13
Dilshod wrote:
Tajik4GMAT wrote:
Becase they might have used cash to pay their payables or use it somewhere else. That's why the change in cash is only 7000\$.

Can't we say the same for AR? May it be that AR was affected by some other than sales reasons? For example, some '05 suppliers were urged to pay penalty for not delivering materials on time. And the suppliers we forced to pay the penalty next year. Doesn't this obligation also land to AR account?

Ur logic is right too. However, we do not have enough info to make any conlusions. Let's just say that AR changed by 3000 and cash obtained was 14000. No need for assumtions here. Or another solution would be that we do not have enough info hence we can not determine the answer. This question is either very tricky or very simple
VP
Joined: 24 Sep 2006
Posts: 1359

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05 Apr 2007, 13:54
rhyme wrote:
If this thread is any indication, I'm going to HATE accounting.

These are the basics / fundamentals. It gets interesting later on. For eg, you start applying differential calculus to the A+L=K equation and then figure out the optimum leverage point and things like that. It's also very connected with economics and finance. Valuating companies, figuring out what the homo economicus will do and stuff like that.
05 Apr 2007, 13:54
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# Profficiency exams

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