SAMPLE Exit Exam 2016

1) Samuel and Darci are partners. The partnership capital for Samuel is
$50,000 and for Darci is $60,000.
• Josh is admitted as a new partner by investing $50,000 cash. Josh is
given a 20% interest in return for his investment.
• The amount of the bonus to the old partners is
• A. $0
• B. $18,000
• C. $8,000
• D. $10,000
2) Tomas and Sara are partners who share income in the ratio of 3:1.
Their capital balances are $80,000 and $120,000 respectively.
• net come is $30,000.
• What is Sara’s capital balance after closing Income Summary to Capital?
• A. $102,500
• B. $120,000
• C. $112,500
• D. $127,500
3) X and Y have original investments of $50,000 and $100,000 respectively
in a partnership.
• The articles of partnership include the following provisions regarding the
division of net income: interest on original investment at 15%, salary
allowances of $22,000 and $20,000 respectively, and the remainder
equally.
• How much of the net income of $90,000 is allocated to X?
• A. $30,250
• B. $47,750
• C. $45,000
• D. $42,250
4) The contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require
the unanimous consent of the parties sharing control.
A. significant influence
B. control
C. joint control
D. contractual control
5) According to IFRS 11, it is an entity that participates in a joint arrangement,
regardless of whether that entity has joint control of the arrangement.
A. joint arranger
B. minority interest
C. party to a joint arrangement
D. participating
6) According to IFRS 11, it is a separately identifiable financial
structure, including separate legal entities or entities
recognized by statute, regardless of whether those entities
have a legal personality.
A. separate vehicle
B. special purpose vehicle
C. special purpose entity
D. public utility vehicle
• 7) A Corporation had net income of $50,000 in 2019 and $60,000 in 2020, excluding any
income from its investment in B Company. B Company had net income of $30,000 in
2019 and $40,000 in 2020. On January 1, 2020, A Corporation acquired all of the
outstanding common shares of B Company for a cash payment of $300,000. Assume
that there was no acquisition differential on this business combination.
• What net income would A Corporation report for 2020 in its comparative consolidated
financial statements at the end of 2020?

• A. $80,000
• B. $100,000
• C. $40,000
• D. $60,000
8) If an accounting change has no material effect on the financial statements
in the current year, but the change is reasonably certain to have a material
effect in later years, the change should be:

A. Disclosed in the notes to the financial statements of the current year.

B. Disclosed in the notes to the financial statements and referred to in the
auditor's report for the current year.
C. Referred to in the auditor's report for the current year.
D. Treated as a subsequent event.
9) After considering an entity's negative trends and financial
difficulties, an auditor has substantial doubt about the entity's
ability to continue as a going concern. The auditor's considerations
relating to management's plans for dealing with the adverse effects
of these conditions most likely would include management's plans
to:

A. Purchase assets formerly leased.

B. Increase current dividend distributions.
C. Reduce existing lines of credit.
D. Increase ownership equity.
10) Which of the following will result in emphasis of matter as to
consistency in the auditor's report, regardless of whether the item is fully
disclosed in the financial statements?
A. A change in accounting estimate.
B. A change from an unacceptable accounting principle to a generally
accepted one.
C. A change in classification.
D. Correction of an error not involving a change in accounting principle.
11) Internal control is used in a business to enhance the
accuracy and reliability of its accounting records and to:
• A. safeguard its assets.
• B. prevent fraud.
• C. produce correct financial statements.
• D. deter employee dishonesty.
12) The use of prenumbered checks in disbursing cash is an
application of the principle of:
• A. establishment of responsibility.
• B. segregation of duties.
• C. physical controls.
• D. documentation procedures.
13) The reconciling item in a bank reconciliation that will result in an
adjusting entry by the depositor is:
• A. outstanding checks.
• B. deposit in transit.
• C. a bank error.
• D. bank service charges.
14) The standard cost card contains quantities and costs for

• A. direct material only.

• B. direct labor only.

• C. direct material and direct labor only.

• D. direct material, direct labor, and overhead.

15) Which of the following statements regarding standard cost systems is
true?

A. Favorable variances are not necessarily good variances.

B. Managers will investigate all variances from standard.

C. The production supervisor is generally responsible for material price

variances.

D. Standard costs cannot be used for planning purposes since costs

normally change in the future.
16) A standard cost system may be used in

A. job order costing, but not process costing.

B. process costing, but not job order costing.

C. either job order costing or process costing.

D. neither job order costing nor process costing

17) Which one of the following is not An investment banker performs three
basic functions:
A. underwriting,
B. distributing,
C. advising.
D. Lending
18) Employment of funds on assets to earn a return is known as?
A. Loan
B. Investment
C. Liability
D. Assets
19) If an oil drilling company were to purchase one of the companies
listed below, which purchase would be called a vertical takeover?
• A. An oil refinery company
• B. A rival oil drilling company
• C. A travel company
• D. A finance company
20) The tax rate increases as the tax base income increase
under
A. Regressive tax system
B. Proportional tax system
C. Progressive tax system
D. Digressive tax system
21) Public finance has to do with all of the following activities of the
government except
A. Stabilization activities
B. Allocation activities
C. Competition with private sector
D. Distribution activities
22) Which of the following is not true about VAT in Ethiopia?
• A. VAT is collected on business transactions and imports.

• B. VAT is a tax on consumer expenditure.

• C. Educational services provided by educational institutions are not

exempted from VAT

• D. Rendering of religious organizations or church services are exempted

from VAT
23) Which of the following is a benefit of budgeting in the public sector?

• A. Ensures equity and fairness

• B. Promotes law and order in the country

• C. Increases government revenues

• D. Motives the public bureaucrats

• E. Ensures profitability and liquidity of government

24) Which of the following is NOT a qualitative characteristic of general
purpose financial statements?
• A. Faithful representation

• B. Materiality

• C. Comparability

• D. Verifiability

• E. Relevance
25) International Public Sector Accounting Standard 17 (IPSAS 17) deals
with

• A. Presentation of general purpose financial statement

• B. Accounting policies, changes in accounting estimates and errors

• C. Property, plant and equipment

• D. Cash generation assets

• E. Revenues from non-exchange transactions

26) A government may impose tax on its citizens for all the following
reasons, EXCEPT to
• A. Raise revenue for development
• B. Engender economic stability
• C. Redistribute wealth
• D. Punish rich people in the community
• E. Discourage consumption of certain harmful goods
27) Which of the following is NOT a responsibility of the Minister of
Finance?
• A. Managing public funds
• B. Preparing and submitting national budget for Parliamentary approval
• C. Receiving, disbursing and ensuring the custody of the Consolidated
Fund
• D. Supervising the finances of the country
• E. Making policies on fiscal and strategic issues towards the management
of public funds
28) Alt Corp. issues 5,000 shares of $10 par value common stock at $14 per
share. When the transaction is recorded, credits are made to:

• a. Common Stock $50,000 and Paid-in Capital in Excess of Stated Value

$20,000.

• b. Common Stock $70,000.

• c. Common Stock $50,000 and Paid-in Capital in Excess of Par Value

$20,000.

• d. Common Stock $50,000 and Retained Earnings $20,000.

29) The board of directors of Yancey Company declared a cash dividend of
$1.50 per share on 42,000 shares of common stock on July 15, 20X1. The
dividend is to be paid on August 15, 20X1, to stockholders of record on July
31, 20X1. The correct entry to be recorded on August 15, 20X1, would be
• a. Dividends Payable 63,000
Cash 63,000
• b. Cash Dividends 63,000
• Cash 63,000
• c. Cash 63,000
Paid-in Capital 63,000
• d. Dividends Payable 63,000
• Paid-in Capital 63,000
30) Outstanding stock of the Bush Corporation included 40,000 shares of $5 par
common stock and 20,000 shares of 5%, $10 par cumulative preferred stock.

In 20X1, Bush did not declare or pay any dividends. In 20X2, Bush declared and
paid dividends of $24,000. How much of the 20X2 dividend was distributed to
preferred shareholders?

• a. $14,000.

• b. $18,000.

• c. $10,000.

• d. $20,000
31) During an audit of an entity's stockholders' equity accounts, the auditor
determines whether there are restrictions on retained earnings resulting
from loans, agreements or state law.
• This audit procedure more likely is intended to verify management's
assertion of

• A) existence or occurrence
• B) completeness
• C) valuation or allocation
• D) presentation and disclosure
32) What type of evidence would provide the highest level of assurance in
an attestation engagement?

A) Evidence secured solely from within the entity

B) Evidence obtained from independent sources
C) Evidence obtained indirectly
D) Evidence obtained from multiple internal inquiries
33) Which of the following would be considered an assurance engagement?
a.) Giving an opinion on a prize promoter's claims about the amount of
sweepstakes prizes awarded in the past.
b.) giving an opinion on the conformity of the financial statements of a
university with generally accepted accounting principles.
c.) giving an opinion on the fair presentation of a newspaper's circulation data.
d.) giving assurance about the average drive length achieved by golfers with a
client's gold balls.
e.) all of the above.
34) It is always a good idea for auditors to begin an audit with the
professional skepticism characterized by the assumption that....
a.) A potential conflict of interest always exists between the auditor and the
management of the enterprise under audit.
b.) In audits of financial statements, the auditor acts exclusively in the
capacity of an auditor.
c.) The professional status of the independent auditor imposes
commensurate professional obligations.
d.) Financial statements and financial data are verifiable.
35) The primary difference between operation auditing and financial auditing
is that in operational auditing....
• a.) The operational auditor is not concerned with whether the audited
activity is generating information in compliance with financial accounting
standards
• b.) The operational auditor is seeking to help management use resources in
the most effective manner possible.
• c.) The operational auditor starts with the financial statements of an activity
being audited and works backward to the basic processes involved in
producing them.
• d.) The operation auditor can use analytical skills and tools that are not
necessary in financial auditing.
36) the primary characteristic that distinguishes governments from
businesses is
• a) the need to generate revenues equal to or an excess of expenditures /
expenses
• b) the importance of the budget in the governing process
• c) the need to provide goods or services.
• d. the correlation between revenues generated and demand for goods or
services.
37) which of the following characteristics distinguishes a government or
not-for-profit entity from a business?
• a. there is always a direct link between revenues generated and
expenditures / expenses incurred.

• b. Capital assets are used to produce revenues and save costs.

• c. Revenues are always indicative of demand for goods and services.

• d. The mission of the entity will determine the goods or services

provided.
38) which of the following characteristics is unique to governments?

• A. The ability to have activities financed with tax exempt debt.

• B. the power to impose fees

• C. the ability to issue tax exempt debt

• D. the ability to have activities financed by federal grants

39) when preparing a production budget, the required production equals:
A: Budgeted sales + beginning inv. + desired ending inv.
B: Budgeted sales - beginning inv. + desired ending inv.
C: Budgeted sales - beginning inv. - desired ending inv.
D: Budgeted sales + beginning inv. - desired ending inv.
40) In a sell or process further decision, which of the following costs are
relevant?

• I. A variable production cost incurred after split-off

• II. A fixed production cost incurred prior to split-off

• A. Only I
• B. Only II
• C. Both I and II
• D. Neither I or II
41) Two or more products produced from a common input are called:

A. Common cost
B. Joint Product
C. Joint Cost
D. Sunk Cost
42) Hoppy Corp compares monthly operating results to a static budget
prepared at the beginning of the month. When the actual level of activity
is less than budgeted, which of the following would be true?

A. Variable costs would show favorable variance

B. Variable costs would show unfavorable variance
C. Fixed costs would show favorable variance
D. Fixed costs would show unfavorable variance
43) The direct labor budget is based on:

A. The desired ending inventory of finished goods

B. The beginning inventory of finished goods
C. The required production for the period
D. The required material purchases for the period.
44) Paulson Company has only 25,000 hours of machine time each month to
manufacture its two products. Product X has a contribution margin of $50, and
Product Y has a contribution margin of $64. Product X requires 5 hours of
machine time, and Product Y requires 8 hours of machine time.
• If Paulson Company wants to dedicate 80 percent of its machine time to the
product that will provide the most income, the company will have a total
contribution margin of
• a. $250,000.
• b. $240,000.
• c. $210,000.
• d. $200,000.
45) Browning Company has 15,000 units in inventory that had a production
cost of $3 per unit. These units cannot be sold through normal channels due
to a significant technology change. These units could be reworked ata total
cost of $23,000 and sold for $28,000. Another alternative is to sell the units
to a junk dealer for $8,500. The relevant cost for Browning to consider in
making its decision is
• a. $45,000 of original product costs.
• b. $23,000 for reworking the units.
• c. $68,000 for reworking the units.
• d. $28,000 for selling the units to the junk dealer.
46) Collateral is not required for most short-term financing.
A. Ture
B. False
47) Selling a firm's unneeded assets is a reasonable last resort when
neither equity capital nor debt capital can be found to meet a firm's
need for capital.
A. True
B. False
48) Aster is an employee in one of the government organization in Ethiopia. Her
monthly salary is Birr 6,000. During Tir 2015 she worked on Weekends for 10
hours. She has a position allowance of Birr 2000.
Aster is a member of the saving and credit association of the organization in which
she works and decided to save 15% of her salary. She is expected to work 160
hours per month and she worked accordingly.
What is the amount of overtime related to Aster's payment?
Over time = Bs/Nwh * Rate * Hour
A. Birr 750 = 6000/160 * 2 * 10 = 750
GE= 6000+2000+750 = 8750
B. Birr 450 Tax = 8750* 0.3 – 955 = 1670
Pc= 6000*0.07= 420
C. Birr 420 Other Deduction = 6000*0.15= 900
Total deduction = 1670+420+900= 2990
D. Birr 2990
Net pay = 8750- 2990 = 5760
49) Abebu is an employee in one of the factory owned by the
government in Ethiopia. Her monthly salary is Birr 4,600.
She has taxable allowance of Birr 800 and a non-taxable
allowance of Birr 300. She earned an overtime of Birr 1000
What is the amount of tax deducted from Abebu's earning?

A. Birr 3070 GE = 4600+800+300+1000 = 6700

B. Birr 1060 Taxable income = GE – non taxable income
= 6700- 300 = 6500

C. Birr 6700 (6500*0.25) – 565 = 1060

D. Birr 300
50) Mr.Alemu earns a basic salary of Birr 10,500, transportation allowance of
500, position allowance of 2,000. What will be the employment tax and net
pay for Mr.Alemu (No pension contribution )
• A.
• B. GE = 4500+500+1000 = 6000
EIT = 5500*0.25 -565= 810
• C. NET PAY = 6000-810 = 5190

• D.
• E. All
• F. None
51) Good are purchased at VAT inclusive price of Birr 200,150. The
amount of input VAT on this transaction
• A. Birr 26107
• B. Birr 17043
• C. Birr 20170 200150= X + (X*0.15)
• D. Birr 2617 200150 = 1.15X
200150 = 1.15X
• E. All 1.15 1.15

X = 200150
1.15
= 174,043

Vat = 200150-174043
= 26107
52) If the auditor believes that the financial statements are not fairly stated or
is unable to reach a conclusion because of insufficient evidence, the auditor:

• A) should withdraw from the engagement.

• B) should request an increase in audit fees so that more resources can be

used to conduct the audit.

• C) has the responsibility of notifying financial statement users through the

auditor's report.

• D) should notify regulators of the circumstances.

53) The responsibility for adopting sound accounting policies and
maintaining adequate internal control rests with the:

• A) board of directors.

• B) company management.

• C) financial statement auditor.

• D) company's internal audit department.

54) In order to provide reasonable assurance the audit must be performed
with an attitude of professional skepticism. Which of the following is most
correct regarding the "attitude" of professional skepticism?
• A) auditors should assume that management is dishonest
• B) auditors should assume that management is neither dishonest nor
honest
• C) auditors should assume that management is honest and mistakes are
unintentional
• D) auditors should assume that management is incumbent in preparing
financial statements
55) When an auditor believes that an illegal act may have occurred, the
auditor should first:

• A) inquire of management at a level above those likely to be involved.

• B) consult with legal counsel of others knowledgeable about the illegal

acts.

• C) accumulate additional evidence.

• D) withdraw from the engagement.

56) A company purchased land for its natural resources at a cost of $1,640,000. It
expects to mine 2,350,000 tons of ore from this land. The residual value of the land
is estimated to be $460,000.

• What is the amount of depletion per ton of ore?

• a. $1.119

• b. $0.894

• c. $0.502

• d. $0.698
57) Every financial market performs the following function:

• A) It determines the level of interest rates.

• B) It allows common stock to be traded.

• C) It allows loans to be made.

• D) It channels funds from lenders-savers to borrowers-spenders.

58) Intermediaries who are agents of investors and match buyers with
sellers of securities are called

• A) investment bankers.

• B) traders.

• C) brokers.

• D) dealers.

• E) none of the above.

59) An important financial institution that assists in the initial sale of
securities in the primary market is the
• A) investment bank.

• B) commercial bank.

• C) stock exchange.

• D) brokerage house.
60) Red Bird Manufacturing would like to avoid issuing new stock because new stock has a higher cost than
retained earnings, but the company forecasts that if all of its existing financial policies are followed, its
proposed capital budget would be so large that it would have to issue new common stock. Which of the
following actions would REDUCE its need to issue new common stock?

A. Increase the dividend payout ratio for the upcoming year.

B. Reduce the amount of short-term bank debt in order to increase the current ratio.

C. Reduce the percentage of debt in the target capital structure.

D. Increase the proposed capital budget.

E. Increase the percentage of debt in the target capital structure.

61) In capital budgeting, the cost of capital should reflect the average cost of
the various sources of investor-supplied funds a firm uses to acquire assets.
A. Ture

B. False
62) ABC Company granted 10,000 share options to each of its five directors on
January 1,2015. The options vest on January 1,2019. The fair value of each option on
January 1, 2015 is Birr50 and it is anticipated that all of the share options will vest
on January 1,2019.
• What amount should be reported as increase in expense and equity for the year
ended December 31, 2015?
A. 750,000
B. 500,000
C. 625,000
D. 125,000
63) On January 1, 2015, Morey Company granted Dean, the president,
20,000 appreciation rights for past services. These rights are exercisable
immediately and expire on January 1, 2017. On exercise, Dean is entitled
to receive cash for the excess of the share market price on the exercise
date over the market price on the grant date. Dean did not exercise any of
the rights during 2015.
• The market price on Morey’s share was P30 on January 1, 2015 ad P45 on
December 31, 2015.
• As a result of the share appreciation rights, what amount should be
recognized as compensation expense for 2015?
• a. 0
• b. 100,000
• c. 300,000
• d. 600,000
64) Wolf Company granted 30,000 share appreciation rights which entitled
key employees to receive cash equal to the difference between P20 and the
market price of the share on the date each right is exercised. The service
period is 2015 through 2017, and the rights are exercisable in 2018. The
market price of the share was P25 and P28 on December 31, 2015 and 2016,
respectively.
• What amount should be reported as liability under the share appreciation
rights on December 31, 2016?
• a. 0
• b. 130,000
• c. 160,000
• d. 240,000
65) Financial markets have the basic function of
A) getting people with funds to lend together with people who want to borrow
funds.
B) assuring that the swings in the business cycle are less pronounced.
C) assuring that governments need never resort to printing money.
D) providing a risk-free repository of spending power.
66) You can borrow $5000 to finance a new business venture. This new
venture will generate annual earnings of $251. The maximum interest rate
that you would pay on the borrowed funds and still increase your income is
A) 25%.
B) 12.5%.
C) 10%.
D) 5%.
67) Which of the following can be described as involving direct finance?
A) A corporation issues new shares of stock.
B) People buy shares in a mutual fund.
C) A pension fund manager buys a short-term corporate security in the
secondary market.
D) An insurance company buys shares of common stock in the over-the-
counter markets.
68) The city of Hannah has established a trust to provide resources to offset the
cost of maintenance of the city-owned cemetery. The majority of the resources
of this trust will be cemetery plot sales and donations from families of those
buried in the cemetery. the trust corpus is nonexpendable in nature.
Transactions associated with this trust activity would most likely be accounted
for in

• A. a Permanent Fund
B. an Investment Trust Fund
C. an Agency Fund
D. a Private-Purpose Trust Fund
69) The proceeds of a federal grant made to assist in financing the future
construction of an adult training center should be recorded in

• A. a Special Revenue Fund

B. a Capital Projects fund
C. a Permanent Fund
D. an Internal Service Fund
70) Kaniper Company has the following items at year-end: Cash in bank
$35,000 Petty cash 300 Short-term paper with maturity of 2 months 5,500
Postdated checks 1,400 Kaniper should report cash and cash equivalents of

• a. $35,000.

• b. $35,300.

• c. $40,800.

• d. $42,200.
71) Lawrence Company has cash in bank of $25,000, restricted cash in a
separate account of $4,000, and a bank overdraft in an account at another
bank of $2,000. Lawrence should report cash of

• a. $23,000.

• b. $25,000.

• c. $28,000.

• d. $29,000.
72) Which of the following statements is false regarding inventory
management?

A. Extremely high levels for inventory turnover ratio and low levels for days'
sales in inventory ratio may actually be a sign of bad firm or production
management.
B. A high inventory turnover ratio or a low days' sales in inventory is
generally a sign of good management.
C. In general, a firm wants to produce a high level of sales per dollar of
inventory.
D. In general, a firm wants to produce a low level of sales per dollar of
inventory.

•
73) A firm's inventory turnover (IT) is 5 times on a cost of goods sold
(COGS) of $800,000. If the IT is improved to 8 times while the COGS
remains the same, a substantial amount of funds is released from or
additionally invested in inventory. In fact,
A. $160,000 is released.

B. $100,000 is additionally invested.

C. $60,000 is additionally invested.

D. $60,000 is released.
74) If EOQ = 360 units, order costs are $5 per order, and carrying costs are
$.20 per unit, what is the usage in units?
A. 129,600 units

B. 2,592 units

C. 25,920 units

D. 18,720 units
75) Risk of material misstatement at the assertion level

• A) is only relevant to account balances.

• B) determines the nature, timing, and extent of further audit

procedures.

• C) refers to risks that are pervasive to the financial statements as a

whole.

• D) consists of business risk and inherent risk.

76) Which of the following will generally be considered a significant risk?

• A) a sale to a customer

• B) the determination of the amount of bad debt expense

• C) the purchase of inventory

• D) obtaining a loan from the bank

77) When dealing with audit risk,
• A) auditors cannot accept any level of risk in performing the audit
function.

• B) most risks that auditors encounter are relatively easy to measure.

• C) the audit risk model is only used for classes of transactions.

• D) the audit risk model helps the auditor to decide how much and what
types of evidence to accumulate.
78) The measurement of the auditor's assessment of the susceptibility of an
assertion to material

• misstatement, before considering the effectiveness of related internal

controls is defined as

• A) audit risk.

• B) inherent risk.

• C) sampling risk.

• D) detection risk.
79) Planned detection risk

• I. determines the amount of substantive evidence the auditor plans to

accumulate.

• II. is dependent on inherent risk and business risk.

• A) I only

• B) II only

• C) I and II

• D) neither I nor II
80) Giaconda, Inc. acquires an asset for which it will measure the fair
value by discounting future cash flows of the asset. Which of the following
terms best describes this fair value measurement approach?

• A. Market.

• B. Income.

• C. Cost.

• D. Observable inputs.
81) Which one of the following can be measured at fair value at the option
of the reporting entity?

• A. A liability under a lease contract.

• B. An investment classified as held-for-trading.

• C. An investment classified as held-to-maturity.

• D. A liability under a pension plan.

82) Which of the following statements concerning the determination of
fair value at the date an asset is acquired or a liability is assumed is/are
correct?

• I. The exit price is conceptually different than the entry price.

• II. The entry price and the exit price may be different amounts at the
date an asset or liability is initially recognized.

• A. I only.
• B. II only.
• C. Both I and II.
• D. Neither I nor II.
83) Which is a characteristic of a joint arrangement?

• a. The parties are bound by a contractual arrangement

• b. The contractual arrangement gives two or more parties joint control

over the arrangement

• c. The parties are bound by a contractual arrangement which gives two or

more parties absolute control over the arrangement

• d. The parties are bound by a contractual arrangement which gives two or

more parties joint control over the arrangement
84) Join control is defined as
• a. The power to govern the financial and operating policies of another
entity so as to obtain benefits from its activities
• b. The power to participate in the financial and operating policy
decisions of another entity.
• c. The contractually agree sharing of control of an arrangement which
exists only when decisions about relevant activities require majority
consent of the parties sharing control
• d. The contractually agree sharing of control of an arrangement which
exists only when decisions about relevant activities require unanimous
consent of the parties sharing control.
85) What is the method of accounting for investment in joint venture?

• a. Cost method

• b. Equity method

• c. Consolidation method

• d. Fair value method

86) Which of the following ethical principles imposes an obligation on all
professional accountants not to compromise their professional or business
judgment because of bias, conflict of interest or the undue influence of
others.

A. Integrity

B. Professional behavior

C. Professional competence and due care

D. Objectivity
87) Quest Co. is a print shop that produces jobs to customer specifications.
During January 20X6, Job #3051was worked on and the following information is
available:
• Direct material used $2,500
• Direct labor hours worked 15
• Machine time used 6H
• Direct labor rate per hour $7
• Overhead application rate per hour of machine time $18
• What was the total cost of Job #3051 for January?
• a. $2,713
• b. $2,770
• c. $2,812
• d. $3,052
88) In 2021, Cupid Construction Co. (CCC) began work on a two-year fixed price
contract project. CCC recognizes revenue over time according to percentage of
completion for this contract, and provides the following information (dollars in
millions):
• Accounts receivable, 12/31/2021
• (from construction progress billings) $ 37.5
• Actual construction costs incurred in 2021 $ 135
• Cash collected on project during 2021 $ 105
• Construction in progress, 12/31/2021 $ 207
• Estimated percentage of completion during 2021 60%
• What is the amount of gross profit on the project recognized by CCC during
2021?
• A) $160 million.
• B) $72 million.
• C) $48 million.
• D) Cannot be determined from the given information
89) Which of the following methods of amortization is normally used for
intangible assets?
A. Sum-of-the-years'-digits

B. Straight-line.

C. Units of production.

D. Double-declining-balance
90) Companies should evaluate indefinite life intangible assets at least
annually for:

• a. recoverability.

• b. amortization.

• c. impairment.

• d. estimated useful life.

91) N Company is preparing a cash budget for June. The company has $12,000 cash
at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in
cash disbursements during June. Northern Company has an agreement with its bank
to maintain a cash balance of at least $10,000. To maintain the $10,000 required
balance, during June the company must:

• a) Borrow $4,500

• b) Borrow $2,500

• c) Borrow $10,000

• d) Borrow $7,500
92) F Company has forecast purchases on account to be $210,000 in March,
$270,000 in April, $320,000 in May, and $390,000 in June. Seventy percent
of purchases are paid for in the month of purchase, the remaining thirty
percent are paid in the following month. What are budgeted cash payments
for April?

• a) $252,000

• b) $285,000

• c) $159,000

• d) $126,000
93) B Company has forecast production for the next three months as
follows: July 5,000 units, August 6,600 units, September 7,500 units.
Monthly manufacturing overhead is budgeted to be $17,000 plus $5 per
unit produced. What is budgeted manufacturing overhead for July?

• a) $24,500

• b) $41,500

• c) $42,000

• d) $47,000
94) If the adjusting entry for depreciation is not made,

• a. assets will be understated.

• b. owner's equity will be understated.

• c. net income will be understated.

• d. expenses will be understated.

95) Which of the following financial statements is concerned with the
company at a point in time?

• a. Balance sheet

• b. Income statement

• c. Retained earnings statement

• d. Statement of cash flows

96) What is the concept that supports the issuance of interim reports?

• a. Relevance.

• b. Materiality.

• c. Consistency.

• d. Faithful representation
97) What is the underlying concept that supports estimating a fixed asset
impairment charge?

• a. Substance over form.

• b. Consistency.

• c. Matching.

• d. Faithful representation
98) According to the installment method of accounting, gross profit on an
installment sale is recognized in income
a. On the date of sale.
b. On the date the final cash collection is received.
c. In proportion to the cash collection.
d. After cash collections equal to the cost of sales have
been received.
99) An auditor traces a sample of purchase orders and the related receiving
reports to the purchases journal. The purpose of this substantive audit
procedure most likely was to

• a) verify that cash disbursements were for goods actually received.

• b) determine that purchases were properly recorded.

• c) test whether payments were for goods actually ordered.

• d) identify usually large purchases that should be investigated further.

100) What evidence is appropriate to determine whether recorded
purchase transactions are valid and the vendors charged the correct
prices?

• a) Purchase requisitions and purchases orders.

• b) Receiving reports and purchase orders.

• c) Purchase orders and bid quotes.

• d) Purchase requisitions and accounts payable entries.

101) Which of the following procedures would an auditor least likely
perform before the balance sheet date?

• a) Confirmation of accounts payable.

• b) Observation of merchandise inventory.

• c) Assessment of the risk of material misstatement.

• d) Identification of related parties.

102) When preparing financial statements, which one shows how much
money came in and went out of a company during a given time period?
A. Balance sheet

B. Statement of cash flow

C. Income statement

D. Statement of retained earnings

103) The objective of the ordinary examination by the independent auditor
is the expression of an opinion on

• a. The accuracy of the financial statements.

• b. The balance sheet and income statement.

• c. The fairness of the financial statements.

• d. The annual report

104) Simpson Inc. purchased inventory as follows:
• Jan. 5 500 units at $10.00
• Jan. 15 1,000 units at $15.00
• Jan. 25 200 units at $20.00
• What is the average unit cost of inventory?
• a. $14.12
• b. $15.00
• c. $13.00
• d. $15.83
105) Hardaway Inc. purchased inventory as follows:
• Jan. 10 200 units at $5.00
• Jan. 20 500 units at $10.00
• Jan. 30 800 units at $15.00
• Hardaway Inc. had no beginning inventory and has 500 units on hand as of
January 31. Assuming the specific identification method is used and ending
inventory consists of 100 units from the Jan. 10 purchase, 300 units from
the Jan. 20 purchase, and 100 units from the Jan. 30 purchase, cost of
goods sold would be
• a. $13,000
• b. $4,000
• c. $7,500
• d. $5,000
106) Reeves Company is taking a physical inventory on March 31, the last
day of its fiscal year.
Which of the following must be included in this inventory count?
• a. Goods in transit to Reeves, FOB destination
• b. Goods that Reeves is holding on consignment for Parker Company
• c. Goods in transit that Reeves has sold to Smith Company, FOB shipping
point
• d. Goods that Reeves is holding in inventory on March 31 for which the
related Accounts Payable is 15 days past due
107) The appropriate journal entry (explanation omitted) for the home
office to recognize the branch’s expenditure of $1,000 for equipment to be
carried in the home office accounting records is:
• a. Equipment 1,000
• Investment in Branch 1,000
• b. Investment in Branch 1,000
• Cash 1,000
• c. Home Office 1,000
• Equipment: Branch 1,000
• D. Equipment 1,000
• Investment in Branch 1,000
108) The appropriate journal entry (explanation omitted) in the accounting
records of the home office to record a $10,000 cash remittance in transit
from the branch at the end of an accounting period is:
• a. Cash 10,000
• Cash in Transit 10,000
• b. Cash 10,000
• Home Office 10,000
• c. Cash in Transit 10,000
• Investment in Branch 10,000
• d. Cash in Transit 10,000
• Cash 10,000
109) If the home office maintains accounts in its general ledger for a branch’s
plant assets, the branch debits its acquisition of office equipment the credit is

• a. Home Office

• b. Office Equipment

• c. Payable to Home Office

• d. Office Equipment Carried by Home Office

110) Clayton Industries is planning its operations for next year. Ronnie Clayton, the CEO,
wants you to forecast the firm's additional funds needed (AFN). Data for use in your
forecast are shown below. Based on the AFN equation, what is the AFN for the coming
year?
Last year's sales = $350
• Last yr's accounts payable $40
• Sales growth rate = g 30%
• Last yr's notes payable $50
• Last year's total assets = $360
• Last yr's accruals $30
• Last year's prof margin = PM 5%
• Target payout ratio 60%.
• a. $67.0
• b. $78.7
• c. $63.9
• d. $77.9
111) Clayton Industries is planning its operations for next year. Malik Clayton,
the CEO, wants you to forecast the firm's additional funds needed (AFN). Data
for use in your forecast are shown below. Based on the AFN equation, what is
the AFN for the coming year? Dollars are in millions
• Last year's sales = $420 Last yr's accounts payable $70
• Sales growth rate = g 30% Last yr's notes payable $55
• Last year's total assets = $430 Last yr's accruals $55
• Last year's prof margin = PM 15% Target payout ratio 55%
112) IFRS and U.S. GAAP differ with regard to accounting for impairment on
property, plant and equipment in all of the following ways except
• a. U.S. GAAP requires the recoverability test to determine whether
impairment has occurred but IFRS does not.
• b. Under IFRS, impairment testing is performed at each reporting
date. Under U.S.GAAP impairment testing is done only when
management has reason to believe that the asset may be impaired.
• c. IFRS but not U.S. GAAP, allows for recovery of impairment in assets held
for use.
• d. U.S. GAAP requires assets held for sale or disposal to be reported at the
lower-of-cost or net realizable value. IFRS requires that these assets be
reported at the higher of fair value less cost to sell and value-in-use.
113) Holcomb Corporation owns machinery with a book value of $190,000. The
machinery’s fair value less costs to sell is $175,000, and its value-in-use is
$200,000. Holcomb should recognize a loss on impairment of
• a. $ -0-.
• b. $10,000.
• c. $15,000.
• d. $25,000.
114) On January 2, 2015, Q. Tong Inc. purchased equipment with a cost of
HK$10,440,000, a useful life of 10 years and no salvage value. The company uses
straight-line depreciation. At December 31, 2015 and December 31, 2016, the
company determines that impairment indicators are present. The following
information is available for impairment testing at each year end:
12/31/2015 12/31/2016
• Fair value less costs to sell HK$9,315,000 Hk$8,850,000
• Value-in-use HK$9,350,000 HK$8,915,000
• There is no change in the asset’s useful life or salvage value. The 2016 income
statement will report
• a. no Impairment Loss or Recovery of Impairment Loss.
• b. Impairment Loss of HK$435,000.
• c. Recovery of Impairment Loss of HK$40,889.
• d. Recovery of Impairment Loss of HK$603,889.
115) On January 1, 2015, W. Poon Inc. purchased equipment with a cost of HK$4,668,000 a useful
life of 12 years and no salvage value. The company uses straight-line depreciation. At December 31,
2015, the company determines that impairment indicators are present. The fair value less cost to
sell the asset is estimated to be Hk$4,620,000. The asset's value-in-use is estimated to be
HK$4,305,000. There is no change in the asset’s useful life or salvage value. The 2015 income
statement will report Loss on Impairment of

• a. HK$0.

• b. HK$26,000.

• c. HK$48,000.

• d. HK$341,000
116) For 2015, Hoyle Company reports beginning of the year total assets of
$900,000, end of the year total assets of $1,100,000, net sales of $1,250,000, and
net income of $250,000.124.
• Hoyle’s 2015 asset turnover is
• a. .23 times.
• b. .25 times.
• c. 1.14 times.
• d. 1.25 times
117)The rate of return on assets for Hoyle in 2015 is
• a. 20.0%.
• b. 22.7%.
• c. 25.0%.
• d. 27.8%.
118) Gains and losses resulting from changes in the fair value of trading
securities are reported on in the equity section of the balance sheet.
A. Ture
B. false
119) Debt securities may be classified as:

• A. held-to-maturity.

• B. trading.

• C. available-for-sale.

• D. All of the above.

120) An ownership interest of 15% in another company's voting stock
should be accounted for using the:

• A. consolidation method.

• B. equity method.

• C. cost method.

• D. fair value method.

121) Which one of the following is a payment of either cash or shares of
stock that is paid out of earnings to a firm's shareholders?

• A. Interest
• B. Distribution
• C. Retained earnings
• D. Dividend
• E. Stock repurchase
122) Which one of the following increases the number of shares outstanding
but does not increase the value of owner's equity?

• A. Stock repurchase
• B. Reverse stock split
• C. Stock split
• D. Cash distribution
• E. Liquidating dividend
123) Which one of the following factors favors a high dividend payout?

• A. Low transaction costs on stock trades

• B. Lower taxes on capital gains than on dividends
• C. Tax deferment on capital gains, but not on dividend income
• D. Flotation costs
• E. Corporate shareholders
124) Assume that clienteles exist. Given this assumption, which one of
the following statements is correct?

• A. A firm can increase its share price by increasing its dividend

payout.
• B. Dividend policy is irrelevant as long as each clientele group is
currently satisfied.
• C. All firms will adopt a high dividend payout policy.
• D. All dividends become irrelevant.
• E. All firms should adopt a low dividend payout policy.
125) Which one of the following will result from a stock repurchase?

• A. Increase in the number of shares outstanding

• B. Decrease in the earnings per share
• C. Decrease in the market price per share
• D. Increase in the market value of equity per share
• E. Decrease in the P/E ratio
126) Which one of the following is basically equivalent to a 2-for-1 stock
split?

• A. 20 percent stock dividend

• B. 25 percent stock dividend
• C. 50 percent stock dividend
• D. 100 percent stock dividend
• E. 200 percent stock dividend
127) In a job-order costing system, indirect labor cost is usually recorded as
a debit to:

A. Manufacturing Overhead

B. Work in process Inventory

C. completed during the period

D. in process during the period.

129) Emigh Corporation's cost of goods manufactured for the just-completed
month was $146,000 and its overhead was overapplied by $5,000. The
beginning finished goods inventory was $35,000 and the ending finished
goods inventory was $37,000. The company closes out any underapplied or
overapplied manufacturing overhead to the cost of goods sold.
• How much was the adjusted cost of goods sold on the Schedule of Cost of
Goods Sold?
A. 139000
B. 129000
C. 149000
D. 159000
130) In a job-order costing system, manufacturing overhead applied is
recorded as a debit to:

A. Manufacturing Overhead

B. Work in process Inventory

C. completed during the period

D. in process during the period.

131) Which of the following items is NOT an assumption of CVP analysis?

• A) Total costs can be divided into a fixed component and a component

that is variable with respect to the level of output.

• B) When graphed, total costs curve upward.

• C) The unit-selling price is known and constant.

• D) All revenues and costs can be added and compared without taking
into account the time value of money.
132) Which of the following is true about the assumptions underlying basic
CVP analysis?

• A) Only selling price is known and constant.

• B) Only selling price and variable cost per unit are known and constant.

• C) Only selling price, variable cost per unit, and total fixed costs are known
and constant.

• D) Selling price, variable cost per unit, fixed cost per unit, and total fixed
costs are known and constant.
133) Sherry's Custom Jewelry sells a single product. 700 units were sold
resulting in $7,000 of sales revenue, $2,800 of variable costs, and $1,200 of
fixed costs.

• Contribution margin per unit is:

• A) $4.00

• B) $4.29

• C) $6.00

• D) None of these answers are correct

134) To determine the effect of income tax on a decision, managers should
evaluate:

• A) target operating income

• B) contribution margin

• C) target net income

• D) selling price
135) An inventory method which is designed to approximate inventory
valuation at the lower of cost or market is

• a. last-in, first-out.

• b. first-in, first-out.

• c. conventional retail method.

• d. specific identification.
136) Which statement is true about the retail inventory method?

• a. It may not be used to estimate inventories for interim statements.

• b. It may not be used to estimate inventories for annual statements.

• c. It may not be used by auditors.

• d. None of these.
137) Which statement is describe how the​ dual-rate method is useful to
division managers in decision making.
• A. The​ dual-rate method is helpful to managers because it does not
distinguish between fixed and variable​ costs, therefore, the allocation of
costs are simplified and reporting is made easier.
• B. The​ dual-rate method provides information to division managers
about cost behavior. Knowing how fixed costs and variable costs behave
differently is useful in decision making.
• C. The​ dual-rate method is useful because it has a low cost to implement
it and makes the decision making much easier for the managers.
• D. The​ dual-rate method is not useful to managers.
138) A contingency can be accrued when

• a. it is certain that funds are available to settle the disputed amount.

• b. an asset may have been impaired.

• c. the amount of the loss can be reasonably estimated and it is probable

that an asset has been impaired or a liability incurred.

• d. it is probable that an asset has been impaired or a liability incurred

even though the amount of the loss cannot be reasonably estimated.
139) Espinosa Co. has a loss contingency to accrue. The loss amount can only be
reasonably estimated within a range of outcomes. No single amount within the
range is a better estimate than any other amount. The amount of loss accrual
should be

• a. zero.

• b. the minimum of the range.

• c. the mean of the range.

• d. the maximum of the range.

140) An auditor normally obtains an understanding of transaction-level
controls by:

A. - performing a system walkthrough.

B. - conducting an interview with senior management.

C. - reading the prior year's management letter.

D. - testing the entity's risk assessment process.

141) When an auditor identifies internal control deficiencies, what levels of

internal control deficiencies must be reported to those charged with

governance of the entity?

A. - Material weaknesses only.

B. - Significant deficiencies only.

C. - Significant deficiencies and material weaknesses in internal control.

D. - Deficiencies and significant deficiencies in internal control.

142) Which of the following audit techniques most likely would provide an
auditor with the most assurance about the effectiveness of the operation of
an internal control procedure?

A. - Precomputation of account balance amounts.

B. - Confirmation with outside parties.

C. - Observation of client personnel.

D. - Inquiry of client personnel.

143) When job-order costing is used, the primary focal point of cost
accumulation is the

• a. department.

• b. supervisor.

• c. item.

• d. job.
144) The source document that records the amount of raw material that
has been requested by production is the

• a. job-order cost sheet.

• b. bill of lading.

• c. interoffice memo.

• d. material requisition.
145) A credit to Work in Process Inventory represents

• a. work still in process.

• b. raw material put into production.

• c. the application of overhead to production.

• d. the transfer of completed items to Finished Goods Inventory.

146) What are the characteristics of a term bond?

• A.) Term bonds may not exceed 15 years.

• B.) Principal and interest on the entire principal are paid throughout the
life of the issue.

• C.) No interest is paid during the life of the issue.

• D.) Principal is paid at the end of the bond issue term.

147) The General Fund transferred $700,000 to a Debt Service Fund. The Debt
Service Fund would report this transaction as

• A.) an other financing source.

• B.) a revenue.

• C.) a deferred inflow of resources.

• D.) contributed capital.

148) Time preference refers to the fact that:
A: corporations match current assets with current liabilities to minimize the
chance of bankruptcy.
B: corporations match both current and long-term assets with current and
long-term liabilities to minimize the change of bankruptcy.
C: investors prefer current cash flows to future cash flows.
D: investors seek to time cash flows to minimize tax liabilities
149) Agency costs refer to:
A: the total dividends paid to stockholders over the lifetime of a firm.
B: the costs that result from default and bankruptcy of a firm.
C: corporate income subject to double taxation.
D: the costs of any conflicts of interest between stockholders and
management.
E: the total interest paid to creditors over the lifetime of the firm.
150) What is the primary goal of the corporation?
A: Maximize the pay and compensation of employees and managers of the
firm.
B: Maximize the value of the stockholders as they are the owners of the
corporation.
C:Minimize the wealth of the shareholders and maximize the wealth of
managers.
D: Maximize the societal value to minimize governmental interference.
151) Which of the following is not a necessary characteristic for an item to
be classified as property, plant and equipment?

• a. Have a useful life beyond one year

• b. Subject to depreciation

• c. Not intended for sale in the ordinary course of business

• d. Used in the conduct of business

152) An improvement made to a machine increased its fair value and its
production capacity by 25% without extending the machine's useful life.
The cost of the improvement should be

• a. Allocated between accumulated depreciation and the machine account.

• b. Expensed.

• c. Capitalized in the machine account.

• d. Debited to accumulated depreciation.

153) Which of the following statements is incorrect per PAS16 Property,
plant and equipment?
• a. Land and buildings are accounted for separately, even when acquired
together
• b. Assets are depreciated even if their fair value exceeds their carrying
amount
• c. A non-current asset acquired as the result of an exchange of assets is
recognized
• d. A gain on disposal of a non-current asset is classified as revenue
154) The net initial investment for a piece of construction equipment is​
$3,000,000. Annual cash inflows are expected to increase by​ $500,000 per
year. The equipment has an 8minus Year useful life. What is the payback​
period?

• A. 5 years

• B. 8 years

• C. 6.5 years

• D. 6 years
155) Werney Company is considering investing in a new project. The project
will need an initial investment of $1,200,000 and will generate $600,000
(after-tax) cash flows for three years.

• Calculate the NPV for the project if the cost of capital is 15%.

• A) $169,935

• B) $292,110

• C) $600,000

• D) $258,460
156) If a corporation begins to suffer large losses, then

A. the default risk on the corporate bond will increase and the bond's return will
become more uncertain, meaning the expected return on the corporate bond will
fall.

B. the default risk on the corporate bond will increase and the bond's return will
become less uncertain, meaning the expected return on the corporate bond will fall.

C. the default risk on the corporate bond will decrease and the bond's return will
become less uncertain, meaning the expected return on the corporate bond will fall.

D. the default risk on the corporate bond will decrease and the bond's return will
become less uncertain, meaning the expected return on the corporate bond will
rise.
157) According to the segmented markets theory of the term structure

• A) bonds of one maturity are close substitutes for bonds of other maturities,
therefore, interest rates on bonds of different maturities move together over
time.

• B) the interest rate for each maturity bond is determined by supply and demand
for that maturity bond.

• C) investors' strong preferences for short-term relative to long-term bonds

explains why yield curves typically slope downward.

• D) all of the above.

158) Which one of the following statements matches M&M Proposition I?
A. The cost of equity capital has a positive linear relationship with a firm's
capital structure.
B. The dividends paid by a firm determine the firm's value.
C. The cost of equity capital varies in response to changes in a firm's capital
structure.
D. The value of a firm is independent of the firm's capital structure.
E. The value of a firm is dependent on the firm's capital structure.
159) Which one of the following is the equity risk arising from the daily
operations of a firm?

• A. Strategic risk

• B. Financial risk

• C. Liquidity risk

• D. Industry risk

• E. Business risk
160) Which one of the following is minimized when the value of a firm is
maximized?
A. Return on equity
B. WACC
C. Debt
D. Taxes
E. Bankruptcy costs
161) Which one of the following statements is the core principle of M&M
Proposition I, without taxes? A. A firm's cost of equity is directly related to
the firm's debt-equity ratio.

• B. A firm's WACC is directly related to the firm's debt-equity ratio.

• C. The interest tax shield increases the value of a firm.

• D. The capital structure of a firm is totally irrelevant.

• E. Levered firms have greater value than unlevered firms.

162) When is a firm insolvent from an accounting perspective?

A. When the firm is unable to meet its financial obligations in a timely

manner B. When the firm's debt exceeds the value of the firm's equity

C. When the firm has a negative net worth

D. When the firm's revenues cease

E. When the market value of the firm's equity equals zero

163) Mr. X takes a loan of Rs 50,000 from HDFC Bank. The rate of interest is
10% per annum. The first installment will be paid at the end of year 5.
Determine the amount of equal annual installments if Mr. X wishes to repay
the amount in five installments.

• a) Rs 19500

• b) Rs 19400

• c) Rs 19310

• d) None of the above

164) Suppose an investor wants to have $10 million to retire 45 years from
now. How much would she have to invest today with an annual rate of
return equal to 15 percent?

• A. $18,561

• B. $17,844

• C. $20,003

• D. $21,345
165) Maggie deposits $10,000 today and is promised a return of $17,000
in eight years. What is the implied annual rate of return?

• A. 6.86 percent

• B. 7.06 percent

• C. 5.99 percent

• D. 6.07 percent
166) To triple $1 million, Mika invested today at an annual rate of return of
9 percent. How longwill it take Mika to achieve his goal?

• A. 15.5 years

• B. 13.9 years

• C. 12.7 years

• D. 10 years
167) Baker Bakery Company just began business and made the following four
inventory purchases in June:
• June 1 150 units $ 1,040
• June 10 200 units 1,560
• June 15 200 units 1,680
• June 28 150 units 1,320
$5.600
• A physical count of merchandise inventory on June 30 reveals that there are 210
units on hand. Using the
• FIFO periodic inventory method, the amount allocated to ending inventory for
June is
• a. $1,456
• b. $1,508
• c. $1,824
• d. $1,848
168) Inventories, Where there is a long ageing or maturation process after
harvest, the accounting for such products shall be dealt with by
A. IAS 41, Agriculture
B. IAS 2, Inventories
C. IAS 40, Investment property

D. IAS 16, Property, plant and equipment

169) Biological assets

• A. Must be measured at cost.

• B. Are found only in Biotech entities.

• C. Do not generally have future economic benefits.

• D. Are living animals or living plants and must be disclosed as a separate

line item in the statement of financial position

170) A gain or loss arising on the initial recognition of a biological asset and
from a change in the fair value less cost of disposal of a biological asset shall
be included in

• A. A capital reserve within equity

• B. A separate revaluation reserve

• C. Other comprehensive income

• D. The profit or loss for the period

171) Which of the following would be classified as a product that is the
result of processing after harvest?

• A. Bananas

• B. Cheese

• C. Cotton

• D. Wool
172) Company A has made an offer to purchase all of the outstanding shares of
Company B for $10 per share (the current market value of the shares). In response
to Company A's offer, the shareholders of Company B were given rights to
purchase additional shares at $8 per share. Which of the following tactics were
employed by Company B to prevent Company A from acquiring control of
Company B?

• A. Pac-man defence.

• B. Selling the crown jewels.

• C. Poison Pill.

• D. Reverse-takeover
173) IOU Inc. purchased all of the outstanding common shares of UNI Inc. for cash of
$800,000. On the date of acquisition, UNI's assets included $2,000,000 of inventory, and
land with a book value of $120,000. UNI also had $1,400,000 in liabilities on that date.
UNI's book values were equal to their fair market values, with the exception of the
company's land, which was estimated to have a fair market value which was $50,000
higher than its book value. How much goodwill would be created by IOU's acquisition of
UNI?
• A.$30,000
• B.$50,000
• C.$80,000
• D.Nil
174) The IASB standard(IFRS 3BusinessCombinations) issued with respect
to the treatment of negative goodwill requires that:

• A.it must be recognized in income immediately as an extraordinary item.

• B.it must be recognized in income immediately.

• C.it can be deferred and amortized over a maximum of 40 years.

• D.it must be reflected as an increase in Liabilities and a Reduction in

Capital for the Parent Company.
175) S Company reported net profit for 2022 in the amount of $400,000. The
company's financial statements also included the following:
• Increase in accounts receivable $80,000
• Decrease in inventory 60,000
• Increase in accounts payable 200,000
Depreciation expense 104,000
• Gain on sale of land 148,000
• What is net cash provided by operating activities under the indirect method?
• A. $432,000
• B. $536,000

• C. $580,000

• D. $832,000
176) Using the percentage-of-receivables method for recording bad debt
expense, estimated uncollectible accounts are $45,000. If the balance of
the Allowance for Doubtful Accounts is $6,000 debit before adjustment,
what is the balance after adjustment?

• a. $45,000

• b. $51,000

• c. $39,000

• d. $6,000
177) Using the percentage-of-receivables method for recording bad debt
expense, estimated uncollectible accounts are $45,000. If the balance of
the Allowance for Doubtful Accounts is $6,000 credit before adjustment,
what is the amount of bad debt expense for that period?

a. $45,000

• b. $39,000

• c. $51,000

• d. $6,000
178) Dale Inc., a U.S. company, bought machine parts from a German company on March
1, 20X1, for €30,000, when the spot rate for euros was $0.4895. Dale's year-end was
March 31, when the spot rate was $0.4845. On April 20, 20X1, Dale paid the liability with
€30,000 acquired at a rate of $0.4945. Dale's income statements should report a foreign
exchange gain or loss for the years ended March 31, 20X1 and 20X2 of

• a.) $0 $0

• b.) $0 $150 Loss

• c.) $150 Loss $0

• d.) $150 Gain $300 Loss

179) If 1 Canadian dollar can be exchanged for 90 cents of U.S. currency, what
fraction should be used to compute the indirect quotation of the exchange rate
expressed in Canadian dollars?

a.) 1/.90

b.) 1.10/1

c.) 1/1.10

d.) 0.90/1
180) The document that generates recording of a sale is the:

• A) customer order.

• B) shipping order.

• C) invoice.

• D) purchase order.
181) Scanning sales invoices for missing numbers in the sequence would be
an activity intended to satisfy what assertion?
• A) Completeness.
• B) Accuracy.
• C) Occurrence.
• D) Classification.
182) Confirmations of accounts receivable provide the most evidence for
which of the following assertions?

• A) Existence.

• B) Valuation or allocation.

• C) Rights and obligations.

• D) Completeness.
183) The auditor selects a sample of recorded sales invoices and vouches
them to shipping documents. This procedure is related to which of the
following assertions?

• A) Occurrence.

• B) Completeness.

• C) Accuracy.

• D) Cutoff.
184) On January 1, 20x1, ENTREAT Co. acquired all of the identifiable assets
and assumed all of the liabilities of BEG, Inc. by paying cash of ₱4,000,000.
On this date, the identifiable assets acquired and liabilities assumed have fair
values of ₱6,400,000 and ₱3,600,000, respectively. ENTREAT Co. has
estimated restructuring provisions of ₱800,000 representing costs of exiting
the activity of BEG, costs of terminating employees of BEG, and
costs of relocating the terminated employees.
• How much is the goodwill (gain on bargain purchase)?
• a. 1,080,000
• b. 1,280,000
• c. 1,120,000
• d. 1,200,000
185) Which of the following is an expression of costs as an equation for a
straight line?
A. Total Cost = Total Fixed Cost + (Variable rate × Units of Output)
B. Total Cost = Total Fixed Cost - (Variable rate ×Units of Output)
C. Total Cost = Fixed cost × Variable rate × Units of Output
D. Total Cost = Fixed cost ÷ (Variable rate × Rate of Output)
185) Which of the following is NOT true about accounting information
systems (AISs)?

a) All AIS are computerized

b) AIS may report both financial and non-financial information

c) AIS, in addition to collecting and distributing large amounts of data and

information, also organize and store data for future uses

d) A student who has an interest in both accounting, and IT, will find many
job opportunities that combine these knowledge and skills areas
186) Which of the following is NOT true regarding assurance services?

a) auditors of public companies are no longer allowed to provide assurance

services to any public company as a result of the Sarbanes-Oxley Act of 2002

b) assurance services include online privacy evaluations

c) activity-based costing is not a type of assurance service

d) only CPAs can provide assurance services to clients

187) Assigning overhead costs based on the resources, rather than only
direct labor, used in manufacturing is an example of:

a) Activity based costing (ABC)

b) budgeting

c) cost-plus accounting

d) financial, rather than managerial, accounting

188) When one entity controls the business operations of another entity,
the business combination results in the following type of relationship:

A. parent-subsidiary;

B. partnership;

C. a merger;

D. dual-listed.
189) For the purposes of consolidated financial reporting, a group is:

• A. an entity that has no subsidiaries;

• B. a parent entity and all its subsidiaries;

• C. an entity that has one or more subsidiaries;

• D. a subsidiary entity of another entity.

190) A single set of financial statements that combines the separate sets of
financial statements of a parent and its subsidiaries is known as:

• A. equity financial statements;

• B. condensed financial statements;

• C. consolidated financial statements;

• D. interim financial statements.

191) If the fair value less costs to sell cannot be determined

• A. The asset is not impaired

• B. The recoverable amount is the value-in use

• C. The net realizable value is used

• D. The carrying value of the asset remains the same

192) A portfolio is:
A. a group of assets, such as stocks and bonds, held as a collective unit by an
investor.
B. the expected return on a risky asset.
C. the expected return on a collection of risky assets.
D. the variance of returns for a risky asset.
E. the standard deviation of returns for a collection of risky assets.
193) If a stock portfolio is well diversified, then the portfolio variance:

A. will equal the variance of the most volatile stock in the portfolio.

B. may be less than the variance of the least risky stock in the portfolio.

C. must be equal to or greater than the variance of the least risky stock in

the portfolio.

D. will be a weighted average of the variances of the individual securities in

the portfolio.
194) Unsystematic risk:

• A. can be effectively reduced through portfolio diversification.

• B. is compensated for by the risk premium.
• C. is measured by beta.
• D. cannot be avoided if you wish to participate in the financial markets.
• E. is related to the overall economy.
195) According to the CAPM:

• A. the expected return on a security is negatively and non-linearly related

to the security's beta.
• B. the expected return on a security is negatively and linearly related to
the security's beta.
• C. the expected return on a security is positively and linearly related to
the security's variance.
• D. the expected return on a security is positively and non-linearly related
to the security's beta.
• E. the expected return on a security is positively related to the security's
beta
196) All of the following are objectives of internal control except

• a. ensuring the accuracy of business information.

• b. eliminating errors.

• c. safeguarding assets and ensuring their use for business purposes.

• d. ensuring compliance with laws and regulations by employees and

managers.
197) An NSF check appears on the bank statement as a

• a. debit memorandum that increases the account balance.

• b. credit memorandum that decreases the account balance.

• c. credit memorandum that increases the account balance.

• d. debit memorandum that decreases the account balance.

198) A bank service charge appears on the bank statement as a

• a. debit memorandum that increases the account balance.

• b. credit memorandum that decreases the account balance.

• c. credit memorandum that increases the account balance.

• d. debit memorandum that decreases the account balance.

199) Equipment with a cost of $450,000 has an estimated salvage value of
$30,000 and an estimated life of 4 years or 10,000 hours. It is to be
depreciated by the straight-line method. What is the amount of
depreciation for the first full year, during which the equipment was used
2,700 hours?
• a. $112,500.
• b. $105,000.
• c. $113,400.
• d. $108,750.
200) Grant Company has decided to change the estimate of the useful life
of an asset that has been in service for 2 years.
Which of the following statements describes the proper way to revise a
useful life
• estimate?
• a. Revisions in useful life are permitted if approved by the IRS.
• b. Retroactive changes must be made to correct previously recorded
depreciation.
• c. Only future years will be affected by the revision.
• d. Both current and future years will be affected by the revision.
201) Jack's Copy Shop bought equipment for $240,000 on January 1, 2018.
Jack estimated the useful life to be 3 years with no salvage value, and the
straight-line method of depreciation will be used. On January1, 2019, Jack
decides that the business will use the equipment for a total of 5 years.
• What is the revised depreciation expense for 2019?
• a. $80,000.
• b. $32,000.
• c. $40,000.
• d. $60,000.
202) All of the following are potential benefits of stock repurchases
except:

A. a means for providing an internal investment opportunity

B. an approach for maintaining the existing capital structure while still

making a distribution to shareholders

C. a favorable impact on earnings per share

D. the elimination of a minority ownership group of stockholders

203) The correct order of dividend process dates is:

A. date of record, declaration date, ex-dividend date, payment date

B. declaration date, date of record, ex-dividend date, payment date

C. ex-dividend date, date of record, declaration date, payment date

D. declaration date, ex-dividend date, date of record, payment date

204) A direct cost is one which:

• a) Is not worth the effort of tracing to a specific cost object

• b) Remains constant no matter the activity level

• c) Can be easily and conveniently traced to a specific cost object

• d) Do not physically become part of the finished product

205) Major functions of investment banks include the
following except:
• A. advising and providing underwriting arrangement for
clients by issuing financial securities.
• B. serving as dealers or market makers in capital markets.
• C. providing advice on risk management and hedging.
• D. attracting deposits and providing investment loans.