PastCPABoardonMAS

PARTI.BasicConsiderationinMASandConsultingPractice
1.WhichofthefollowingstatementisTrue?
a. Adequate training and experience in both the analytical approach and process in the particular
undertakingarerequisitesfortheCPAtobeinvolvedinamanagementserviceengagement.
b. ACPAwithMBAandPhDDegreesisautomaticallyqualifiedtorendermanagementservices.
c. CompetenceasastandardintherenditionofmanagementservicesbyaCPAmaybeequatedtohaving
excellent scholarly preparation to include the usual baccalaureate degree, an MBA and other post
graduatestudies.
d. A CPA by virtue of having the necessary academic preparation and by hurdling the licensure
examinationsrequiredtohaveaCPAlicensecanreadilyrendermanagementservicestothepublic.
2.WhichofthefollowingstatementisFalse?
a. CPAsprovidemanagementservicestogoaroundtheethicalconstraintsasmandatedbytheaccountancy
act.
b. Businesseshiremanagementconsultantstohelpdefinespecificproblemsanddevelopsolutions.
c. Includedinthepracticeofconsultingistheprovisionofconfidentialserviceinwhichtheidentityofthe
clientisconcealed.
d. CPAs performing management services may be considered to be in the practice of management
consulting.
3.Mr.ReyCarlos,aCPAfirmspartnerinchargeofqualityassuranceandreviewisarguingwithMr.Rueben
Fortuna,theconsultingpartnerregardingthequestiononindependenceasMr.Fortunaispresentlyrendering
consulting services to T. Ang & Nga Company, an audit client of the firm. Related to this issue of
independence,allofthefollowingstatementsarenotvalidexcept:
a. Independenceisnotsacrificeforaslongastheauditor/consultantiscorrectinhisdecisionsforthe
client.
b. ACPAwhorendersbothauditandconsultingservicestoaclient,byvirtueofhiscompetence/expertise
andextensiveknowledgeoftheclientsbusinessisinthebestpositiontorenderdecisionsfortheclient
andshoulddoso.
c. Theclientistheultimatedecisionmakerandtheauditorand/orconsultantshouldnotmakedecisionsfor
theclient.
d. Itisuptoprofessionaljudgmentanddiscretionoftheauditor/consultanttorenderdecisionfortheclient
foraslongashisprofessionalfeesarecommensuratetothebenefitsthattheclientwillderivefromthe
engagement.
4.ACertifiedPublicAccountantsscopeofmanagementservicesisbroadandcoversallofthefollowing
except:
a. Changemanagementengagement
b. Computerizationengagements
c. Auditengagements
d. Reengineeringjobs
5.Whichofthefollowingstatementsisnotacceptable?
a. ACPArepresents3majorplayersintheindustryinrationalizingtheindustrysincentivesbeforethe
governmentpublichearings.
b. ACPAshareswithanewandsubstantialclientinformationregardinganotherclientbelongingtothe
sameindustry.
c. ACPAprovidesconsultingservicestoanexistingauditclient.
d. ACPAoffersandprovidesconsultingservicesto2majorcompetingclients.
6.Thefollowingcharacterizemanagementadvisoryservicesexcept
a. Involvedecisionforthefuture
b. Broaderinscopeandvariedinnature
 c. Utilizemorejuniorstaffthanseniormemberofthefirm
d. Relatetospecificproblemsexperthelpisrequired
7.ThesestatementsrelatetoMASpracticestandards:
1. Apractitioneristonotifytheclientofanyreservationhehasregardinganticipatedbenefits.
2. Throughouttheengagement,thereoughttobeasystematiccriticalreviewofaccomplishmentsandwork
shouldbedonewithintheframeworkofthecodeofethicsandotherprofessionalstandards.
3. Duringtheengagement,shouldtherebesignificantchangesbetweencostandanticipatedbenefits,the
clientshouldbeinformed.
4. Before the engagements, the practitioner must make arrangements with, and inform the client on
significantmattersrelatedtotheengagement,inwriting.
Ofthesestatements,whichpertainstothepracticestandardonclientbenefit?
a. Statements1and3only
b. Allstatements
c. Statement1only
d. Statements1,3and4only
8.Whichofthefollowingstatementsistrue?
a. Adequate training and experience in both the analytical approach and process in the particular
undertakingarerequisitesfortheCPAtobeinvolvedinamanagementserviceengagement.
b. ACPAwithMBAPhDdegreesisautomaticallyqualifiedtorendermanagementservices.
c. CompetenceasastandardintherenditionofmanagementservicesbyaCPAmaybeequatedtohaving
excellent scholarly preparation toinclude the usual baccalaureate degree,and MBA andother post
graduatestudies.
d. ACertifiedPublicAccountantbyvirtueofhavingthenecessaryacademicpreparationandbyhurdling
thelicensureexaminationsrequiredtohaveaCPAlicensecanreadilyrendermanagementservicesto
thepublic.
9.WhichofthefollowingwillnotimpairtheindependenceofaCPAintherenditionofManagementServices?
a. TheCPAperformsdecisionmakingservicesforhisclient.
b. TheCPAperformserviceswhereinheisineffect,actingasanemployeeoftheclient.
c. TheCPAloseshisobjectivityandactsinamannerasifheisadvocatingfirtheinterestofhisclient.
d. TheCPAdoesnotextendhisservicesbeyondthepresentationofrecommendationorgivingofadvice.
PARTII.AccountingInformationSystem
10.Anactivitythatisnotconsideredpartofthesystemsdesignphaseis
a. Filerecordlayout
b. Documentflowcharting
c. Specificationofformatandcontentofreport
d. Systemssurvey
11.ThemaincomponentsoftheCentralProcessingUnit(CPU)ofacomputerincludeonly
a. Control,arithmeticandlogic,andmemory
b. Input,processingandoutput
c. Software,registerandprimarymemory
d. Memory,processingandregister
12.HowisanAccountingInformationSystem(AIS)distinguishedfromamanagementInformationSystem
(MIS)?
a. AnAISmaybeeithermanualorcomputerbasedandMISiscomputerbased.
b. AnAISisasubsystemwithinanMIS.
c. AnAISiscontrolledorientedandMISisusedexclusivelyforplanning.
d. AnAISdealswithfinancialinformationandMIShandlesallotherinformation.
13. Feedback, feed forward and preventive are important types of control systems and procedures for
accountinginformationsystems.Whichofthefollowingisinthecorrectorderoffeedback,feedforwardand
preventivecontrolsystems?
a. Inventorycontrol,capitalbudgetingandcashbudgeting.
b. Costaccountingvariances,separationofdutiesandcashplanning.
c. Cashbudgeting,capitalbudgetingandhiringqualifiedemployees.
d. Costaccountingvariances,cashbudgetingandorganizationalindependence.

14.BenchCorp.operatesinseveralregions,witheachregionperformingitsdataprocessinginaregiondata
center.ThecorporateManagementInformationSystemstaffhasdevelopedadatabasemanagementsystemto
handlecustomerserviceandbilling.TheDirectorofMISrecommendedthatthenewsystembeimplementedin
theRegion4toascertainifthesystemoperatesinasatisfactorymanner.Thistypeofconversioniscalleda
a. Crashconversion
b. Parallelconversion
c. Pilotconversion
d. Directconversion
15.Afloppydisk(e.g.,VERBATIM,MAXELL).
a. Diskette
b. Cassettetape
c. Disk
d. Harddisk
16.Importanttypesofcontrolsystemsandproceduresforaccountinginformationsystemsarefeedback,feed
forwardandpreventive.Whichoneofthefollowingisinthecorrectorderoffeedback,feedforwardand
preventivecontrolsystems?
a. Costaccountingvariances,separationofdutiesandcashplanning.
b. Costaccountingvariances,cashbudgetingandorganizationalindependence.
c. Cashbudgeting,costaccountingvariancesandseparationofduties.
d. Inventorycontrol,capitalbudgetingandcashbudgeting.
17.Whichoneofthefollowingrepresentsalackofinternalcontrolinacomputerbasedinformationsystems?
a. Thedesignandimplementationisperformedinaccordancewithmanagementsspecificauthorization.
b. Anyandallchangesinapplicationprogramshavebeenauthorizationandapprovalofmanagement.
c. Provisionsexisttoensuretheaccuracyandintegrityofcomputerprocessingofallfilesandreports.
d. Bothcomputeroperatorsandprogrammershaveunlimitedaccesstotheprogramsanddatafiles.
18.AnExecutiveInformationSystem(EIS)focusesonlongrangeobjectivesandgivesimmediateinformation
aboutanorganizationscriticalsuccessfactors.Itcanbeusedoncomputersofallsizes.Itiscommonlyusedby
allexecutivesatthehighestlevelswithintheorganization.AllofthefollowingstatementsapplytoEISexcept:
a. Itislikelytobeoneofthemostwidelyusedandthelargestoftheinformationsubsystemsinabusiness
organization.
b. Itprovidestopexecutiveswithimmediateandeasyaccesstoinformationinahighlyinteractiveformat.
c. Itprovidesinformationinahighlyaggregatedform.
d. Ithelpsexecutivesmonitorbusinessconditionsingeneralandassistinstrategicplanningtocontroland
operatetheentity.
19.Theconceptoftimelinessofdataavailabilityismostrelevantto
a. Computerizedsystem
b. Packagedsoftware
c. Onlinesystems
d. Microsystems
20.Tocontrolpurchasingandaccountspayable,aninformationsystemmustincludecertainsourcedocuments.
Foramanufacturingconcernlikefruitprocessors,Inc.,thesedocumentsshouldinclude
 a. Purchaserequisitions,purchaseorders,receivingreportsandsuppliersinvoices.
b. Purchaseorders,receivingreportsandinventoryreportsofgoodsneeded.
c. Purchaserequisitions,purchaseorders,inventoryreportsofgoodsneededandsuppliersinvoices.
d. Purchaseorders,receivingreportsandsuppliersinvoices.
III.MANAGEMENTACCOUNTINGCONCEPTSANDRESPONSIBILITYACCOUNTING
21.Controllershiphasattainedspecialrecognitionincorporatemanagementasbusinessexpandincomplexity
andreachandasthecontrollerexertsinfluencefortotakeorganizationsgoals.Controllershipandtreasurership
constitutecorporatefinance.Theseareamongcorporatefinancestraditionalfunctions.
1. Taxmanagement
2. Financereportingandinterpretation
3. Creditmanagement
4. Sourcingandinvestingfunds
5. Reportingtogovernmentregulatoryagencies
6. Riskmanagement
7. Economicappraisal
8. Planningforcontrol
Whichofthefollowingarethefunctionsofthecontroller?
a. Alleightitems
b. Items1,2,5,7and8only
c. Items1,2,3,4,5,7and8only
d. Items2,3,5,7and8only
22.Todistinguishbetweenmanagementaccountingandfinancial accounting, thefollowingstatements are
correctexcept:
a. Management accounting in view of its various integrated recipients should have a separate data
recordingandretrievalsystemfromfinancialaccounting.
b. FinancialaccountingisboundbyGenerallyAcceptedAccountingPrinciples(GAAP),andmanagement
accountingneednotbeinconformitywithGAAP.
c. Financialaccountingcanberegardedastheprocesswhilemanagementaccountingcanberegardedas
theproductofthatprocess.
d. Managementaccountingoutputmustbereleasedontimesoasnottoerodeitsusefulness;Financial
accountingoutputcanstillbeusefulevenwhendelayed.
23.Theactivitiesinamanagementsystemscontrolcanbegroupedintofour
1. Measurementofactualperformance
2. Decidingandimplementingcorrectiveactions
3. Determiningstandardofperformance
4. Comparingactualperformanceversusstandardsandanalyzingresults.
Theabovestepsmustdoneinthissequence
a. 4,3,2,1
b. 3,1,4,2
c. 1,3,4,2
d. 3,4,1,2
IV.FINANCIALSTATEMENTANALYSIS
24.If,justpriortoaperiodofrisingprices,acompanychangeditsinventorymeasurementmethodfromFIFO
toLIFO,theeffectinthenextperiodwouldbeto
a. Increaseboththecurrentratioandinventoryturnover
b. Decreaseboththecurrentratioandinventoryturnover
c. Increasethecurrentratioanddecreaseinventoryturnover
d. Decreasethecurrentratioandincreaseinventoryturnover
25.Whenabalancesheetamountisrelatedtoanincomestatementamountincomputingaratio,
 a. Thebalancesheetamountshouldbeconvertedtoanaveragefortheyear.
b. Theincomestatementamountshouldbeconvertedtoanaveragefortheyear.
c. Bothamountsshouldbeconvertedtomarketvalue.
d. Comparisonswithindustryratiosarenotmeaningful.
26. On December 31, 19x0 the Balance Sheet of Belle Co. disclosed total assets of P8, 000,000, current
liabilitiesofP1,500,000andlongtermdebtofP2,400,000.Commonstockoutstandingamountedto500,000
shares,while100,000sharesofP10parvaluepreferredstockwereoutstanding.Theretainedearningsaccount
indicatedadeficitbalanceofP2,000,000.BellesbookvaluepershareofcommonstockasofDecember31,
19x0is
a. P16.00
b. P6.20
c. P12.20
d. P8.20
27.Howaredividendspershareforcommonstockusedinthecalculationofthefollowing?
DividendpershareEarnings
Payoutratiopershare
a. Denominatordenominator
b. DenominatorNotused
c. NumeratorNotused
d. NumeratorNumerator
28.During19x5,ReuelCompanypurchasedP1,920,000ofinventory.Thecostofgoodssoldfor19x5wasP1,
800,000andtheendinginvenotyratDecember31,19x5wasP360,000.Whatwastheinventoryturnoverfor
19x5?
a. 5.0b.5.3c.6.0d.6.4
V.COSTVOLUMEPROFITANALYSIS
Thefollowingdataapplytoitems2933
LaraCompanyproducesasingleproduct.Itsold25,000unitslastyearwiththefollowingresults:

SalesP625,000
VariableCostsP375,000
FixedCosts150,000525,000
NetIncomebeforetaxes100,000
IncomeTaxes(45%)45,000
NetIncomeP55,000

Inanattempttoimproveitsproduct,Laraisconsideringreplacingacomponentpartinitsproductthathasa
costofP2.50withanewandbetterpartcostingP4.50perunitinthecomingyear.Anewmachinewouldalso
beneededtoincreaseplantcapacity.ThemachinewouldcostP18,000withausefullifeof6yearsandno
salvagevalue.Thecompanyusesstraightlinedepreciationonallplantassets.
29.WhatwasLaraCompanysbreakevenpointinnumberofunitslastyear?
a. 6,000b.15,000c.21,000d.18,000
30.HowmanyunitsofproductwouldLaraCompanyhavehadtosellinthelastyeartoearnP77,000innet
incomeaftertaxes?
a.29,000b.23,000c.22,700d.29,300
31.IfLaraCompanyholdsthesalespriceconstantandmakesthesuggestedchanges,howmanyunitsof
productmustbesoldinthecomingyeartobreakeven?
a.15,300b.18,750c.19,125d.21,000
32.IfLaraCompanyholdsthesalespriceconstantandmakesthesuggestedchanges,howmanyunitsofthe
productwillthecompanyhavetoselltomakethesamenetincomeaftertaxesaslastyear?
a.31,625b.31,250c.33,500d.25,300
33.IfLaraCompanywishestomaintainthesamecontributionmarginratio,whatsellingpriceperunitof
productmustitchargenextyeartocovertheincreasedmaterialcosts?
a.P27.00b.P25.00c.P32.50d.P28.33
VI.COMPREHENSIVEBUDGETING
34.ForMay19x1,YoungCompanyhasbudgeteditscashreceiptsatP125,000anditscashdisbursementsat
P138,000.ThecompanyscashbalanceonMay1isP17,000.IfthedesiredMay31cashbalanceisP20,000,
thenhowmuchcashmustthecompanyborrowduringthemonth(beforeconsideringanyinterestpayments)?
a.P4,000b.P8,000c.P12,000d.P16,000
VII.STANDARDCOSTSANDPERFORMANCEEVALUATION
35.Whichofthefollowingfactorsisnotlikelytobeconsideredbymanagementindeterminingwhethera
varianceshouldberegardedasanexception?
a. Consistencyofoccurrenceovertime.
b. Abilitytocontroltheitemrelatedtothevariance.
c. Natureoftheitemrelatedtothevariance.
d. Costingmethodusedtocalculatethevariance.
VIII.CostingApproaches:AbsorptionCosting/VariableCosting
36.TheaccountantfortheDoverCompanyforgottomakeanadjustingentrytorecorddepreciationforthe
currentyear.Theeffectofthiserrorwouldbe:
a. Anoverstatementofnetincomeandanunderstatementofassets.
b. Anoverstatementsofassetsoffsetbyanunderstatementofownersequity.
c. Anoverstatementofassets,netincomeandownersequity.
d. Anoverstatementofassetsandofnetincomeandanunderstatementofownersequity.
IX.DECENTRALIZEDOPERATIONSANDTRANSFERPRICING
37.BetaMarkethas3stores:P,QandR.During19x8,StorePhadacontributionmarginofP24,000anda
contributionmarginratioof30%.StoreQhadvariablecostsofP48,000andacontributionmarginratioof
40%.StoreRhadvariablecostsofP84,000whichrepresented70%ofsalesinthestore.For19x8,Star
Marketstotalsaleswere
a. P320,000
b. P360,000
c. P440,000
d. P280,000
38.KhiCompanyhastwodivisionsJandK.During19x2,thecontributionmargininJwasP30,000.The
contributionmarginrationinKduring19x2was40%,itssaleswereP125,000anditssegmentmarginwas
P32,000.ThecommonfixedexpensesinthecompanywereP40,000andthecompanysnetincomeforthe
yearwasP18,000.ThesegmentmarginforDivisionJfor19x2was
a. P26,000
b. P32,000
c. P8,000
d. P58,000
X.USINGCOSTDATAFORDECISIONMAKING
39.PicnicItems,Inc.manufacturescoolersthatcontainafreezableicebag.Foranannualvolumeof10,000
units,fixedmanufacturingcostsofP500,000areincurred.Variablecostsperunitamountsare:
DirectmaterialsP80
DirectLabor15
VariableFactoryOverhead20
BagsCorporationofferedtosupplytheassembledicebagforP40withaminimumorderof5,000units.If
picnicacceptstheofferitwillbeabletoreducevariablelaborandoverheadcostsby50%.Thedirectmaterials
forthefreezableicebagwillcostPicnicP20ifitwillproduceit.ConsideringBagsCorporationoffer,Picnic
should
a. BuythefreezableicebagduetoP150,000advantaged.
b. ProducethefreezableicebagduetoP225,000advantaged.
c. ProducethefreezableicebagduetoP25,000advantaged.
d. BuythefreezableicebagduetoP50,000advantaged.

XI.QUANTITATIVEMETHODS
40.Asmallcompanymakesonlytwoproductswiththefollowingtwoproductionconstraintsrepresentingtwo
machinesandtheirmaximumavailability:
2X+3Y<18
2X+Y<10

Where:X=theunitsofthefirstproduct
Where:Y=theunitsofthesecondproduct
IftheprofitequationisZ=P4X+P2Y,themaximumpossibleprofitis
a. P20
b. P21
c. P18
d. P24
XII.WORKINGCAPITALMANAGEMENT
41.Whichofthefollowingcharacteristicsaregenerallyassociatedwithaconservativefinancialpolicy?
a. Highcurrentassetsrelativetosalesandhighcurrentliabilitiesrelativetototalassets.
b. Highcurrentassetsrelativetosalesandlowcurrentliabilitiesrelativetototalassets.
c. Lowcurrentassetsrelativetosalesandhighcurrentliabilitiesrelativetototalassets.
d. Lowcurrentassetsrelativetosalesandlowcurrentliabilitiesrelativetototalassets.
42.TheManilaCommercialBankandRapCorp.signedaloanagreementsubjecttothefollowingterms.
a.Statedinterestrateof18%onaoneyeardiscountedloan;and
b.15%compensatingnoninterestbearingcheckingaccountbalancetobemaintainedbyRapwithManila
CommercialBank.
ThenetproceedsoftheloanwasP1million.Theprincipalamountoftheloanwas
a. P1,176,471
b. P1,000,000
c. P1,492,537
d. P1,219,512
MAY2009CPABOARD
43.ThreesuppliersofEastCorporationofferdifferentcreditterms.WestCo.offerstermsof1/15,net30.
NorthCorp.offerstermsof1/10.Net30.SouthInc.offerstermsof2/10,net60.EastCorp.wouldhaveto
borrowfromabankatanannualrateof12%inordertotakeanycashdiscounts.Whichoneofthefollowing
wouldbethemostattractiveforMaCorp.?(Assume360daysayear).
a. PurchasefromWestCo.,payin15daysandborrowanymoneyneededfromthebank.
b. PurchasefromWestCo.,payin30daysandborrowanymoneyneededfromthebank.
c. PurchasefromSouthInc.,payin60daysandborrowanymoneyneededfromthebank.
d. PurchasefromNorthCorp.andpayin30days.
XIII.CASHANDSHORTTERMINVESTMENTMANAGEMENT
44.KenLumberCompanyobtainedshorttermbankloanforP1,000,000.00atanannualinterestrateof12%.
AsaconditionoftheloanKenisrequiredtomaintainacompensatingbalanceofP200,000.00initschecking
account.Thecheckingaccountearnsinterestatanannualrateof6%.KenwouldotherwisemaintainonlyP100,
000.00initscheckingaccountfortransactionalpurposes.Kenseffectiveinterestcostoftheloanis
 a. 12%
b. 14%
c. 13.50%
d. 12.67%
MAY2009CPABoardExam
45.FabellaCompanybudgetedsalesonaccountofP120,000forJuly,P211,000forAugustandP198,000for
September.Collectionexperienceindicatesthat60%ofthebudgetedsaleswillbecollectedtheamountafterthe
sale,36%thesecondmonth,and4%willbeuncollectible.Thecashreceiptsfromaccountsreceivablethat
shouldbebudgetedforSeptemberwouldbe
a. P169,800
b. P147,960
c. P197,880
d. P194,760
XIV.RECEIVABLESMANAGEMENT
46.Changingafirmscredittermsfrom2/20,net/60to2/10,net/30willgenerally
a. Increasetheaveragecollectionperiodandincreasesales
b. Increasetheaveragecollectionperiodandreducesales
c. Reducetheaveragecollectionperiodandincreasesales
d. Reducetheaveragecollectionperiodandreducesales.
47.Ifafirmpurchasesrawmaterialsfromitssupplierona2/10,net/60cashdiscountbasis,theequivalent
annualinterestrate(usinga360dayyear)offoregoingthecashdiscountandmakingpaymentonthe60thdayis
a. 14.7%
b. 73.5%
c. 12.2%
d. Someamountotherthanthosegivenabove
48.Ifafirmscredittermsrequirepaymentwithin45daysbutallowadiscountof2%ifpaidwithin15days
(usinga360dayyear),theapproximatecost/benefitofthetradecredittermsis
a. 2%
b. 16%
c. 48%
d. 24%
49.Whenacompanyofferscredittermsof2/10,net/30,theannualinterestcost,basedona360dayyear,is
a. 24.0%
b. 24.5%
c. 35.3%
d. 36.7%
XV.INVENTORYMANAGEMENT
50.Thesizeofsafetystocksforinventoryisimportantformostfirms.Thoughseveralfactorscanbecitedas
contributingtothedeterminationofthesizeofsafetystocksthatafirmshouldcarry,theissuecanoftenbe
reducedtoasinglefactor.Whichoneofthefollowingstatementsbestsummarizesthefactorthataffectsthe
levelofsafetystockthatafirmwillcarry?
a. Theamountofidlecashmanagementbelievesithastoinvestinsafetystock.
b. Therapiditywithwhichtheinventorypositionwillturnover.
c. Thelevelofproductionthefirmsbankiswillingtofinance.
d. Thelevelofuncertaintywithrespecttoanoutofstockconditionthatmanagementiswillingtoaccept.
51.ThefollowinginformationregardinginventorypolicywasassembledbytheJRJCorporation.Thecompany
usesa50weekyearinallcalculations.
Sales10,000unitsperyear
OrderQuantity2,000units
SafetyStocks1,300units
LeadTime4weeks

Thereorderpointis
a. 3,300units
b. 2,100units
c. 100units
d. 1,300units

XVI.CAPITALBUDGETING

Questions52and53arebasedonthefollowingdata:

Allofoundation,ataxexemptorganization,investedP200,000inafiveyearprojectatthebeginningof19x5.
AlloestimatesthattheannualcashsavingsfromthisprojectwillamounttoP65,000.TheP200,000ofassets
willbedepreciatedovertheirfiveyearlifeonthestraightlinebasis.Oninvestmentsofthistype,Allosdesired
rateofreturnis12%.

52.Thenetpresentvalueoftheprojectis
a. P34,325
b. P36,400
c. P90,000
d. P125,000
MAY2009CPABoardExam

53.Allostimeadjustedrateofreturnonthisprojectis
a. Lessthan12%
b. Lessthan14%,butmorethan12%
c. Lessthan16%,butmorethan14%
d. Morethan16%

54. Under the timeadjusted rate of return capital budgeting technique, it is assumed that cash flows are
reinvestedatthe
a. Costofcapital
b. Hurdlerateofreturn
c. Rateearnedbytheinvestment
d. Thereisnoassumptionaboutreinvestmentofcashflows

55.RanoCo.hastheopportunitytoinvestinatwoyearprojectwhichisexpectedtoproducecashflowfrom
operation,netofincometaxes,ofP100,000inthefirstyearandP200,000inthesecondyear.Ranohasacost
ofcapitalof20%.Forthisproject,Ranoshouldbewillingtoinvestimmediatelyamaximumof
a. P283,300
b. P249,900
c. P222,100
d. P208,200
MAY2009CPABoardExam
56.Thenetpresentvaluecapitalbudgetingtechniquecanbeusedwhencashflowsfromperiodtoperiodare:
UniformUneven
 a. NoYes
b. NoNo
c. YesNo
d. YesYes
57.Itisassumedthatcashflowsarereinvestedattherateactuallyearnedbytheinvestmentinwhichofthe
followingcapitalbudgetingtechniques?
TimeadjustedrateofreturnNetpresentvalue
a. YesYes
b. YesNo
c. NoNo
d. NoYes

58.Ifincometaxconsiderationsareignored,howisstraightlinedepreciationexpenseusedinthefollowing
capitalbudgetingtechniques?
TimeadjustedrateofreturnNetpresentvalue
a. ExcludedExcluded
b. ExcludedIncluded
c. IncludedExcluded
d. IncludedIncluded

59.Thepaybackcapitalbudgetingtechniqueconsiders:

IncomeoverentireTimevalue
Lifeofprojectofmoney
a. NoNo
b. NoYes
c. YesYes
d. YesNo

Questions60and61arebasedonthefollowing

ConsiderationisbeinggiventothepossiblepurchaseofaP30,000machineforAlo,whichisexpectedtoresult
inadecreaseofP12,000peryearincashoperatingexpenses.Thismachine,whichhasnoresidualvalue,has
anestimatedusefullifeoffiveyearsandwillbedepreciatedonastraightlinebasis.(Ignoreincometaxes).

60.Forthenewmachine,thesimplerateofreturnbasedoninitialinvestmentwouldbe
a. 12%
b. 20%
c. 30%
d. 40%
MAY2009CPABoardExam

61.Ifincometaxesareignore,thepaybackperiodforthenewmachinewouldbe
a. 1.67years
b. 2.50years
c. 4.17years
d. 5.00years
XVII.FINANCINGDECISIONS

62.For19x9,NelsonIndustriesincreasedearningsbeforeinterestandtaxesby17%.Duringthesameperiod,
netincomeaftertaxincreasedby42%.Thedegreeoffinancialleveragethatexistedduring19x9is

a. 1.70
b. 4.20
c. 2.47
d. 5.90

XVIII.PROJECTFEASIBILITYSTUDY
63.Whichofthefollowingisnotanactivitycoveredbyfeasibilitystudy?
a. Activitybasedaccountingoftheendeavorleadingtoaconclusion
b. Collectionofdata
c. Evaluationandanalysisofdatacollected
d. Formulationofrecommendation

64.Amongthefollowingmajorpartsofaprojectfeasibilitystudy,whichgroupingisconsideredcritical?
a. Management,financialandsocialreturns
b. Technical.Financialandenvironmentalaspects
c. Economicbenefits,management,financial
d. Marketing,engineeringortechnicalandfinancial

65.Thestatementsbelowaboutprojectfeasibilitystudiesarethetrueexcept:
a. Anychangewhichcanmateriallyaltertheassumptionsusedinthepreparationoftheforecastwill
renderituseless
b. Itisimportantforgovernmentagenciesinordertodetermineentitlementtogovernmentincentives
c. Italsocoversthesocialdesirabilityaspectsofaproposedundertaking
d. Sincedatagatheringisabasicstepinitspreparation,allthenecessaryandrequiredinformationwill
alwaysbeavailable.

66.Inaprojectfeasibilitystudy,whichofthefollowingistrue?
a. Thestudyisnotaffectedbyanysignificantchangeinactualbusinessconditionsascomparedtothe
assumptionsusedinmakingtheforecast
b. Thestudyisbasedonavailableinformationandopinionsofthepartyinvolvedinthepreparationofthe
study.
c. (a)and(b)
d. Noneoftheabove
ANSWERKEY
1. A 44. D
2. A 45. A
3. C 46. D
4. C 47. A
5. B 48. D
6. C 49. D
7. A 50. D
8. A 51. B
 9. D 52. A
10. D 53. D
11. A 54. C
12. B 55. C
13. D 56. D
14. C 57. B
15. A 58. A
16. B 59. A
17. D 60. B
18. A 61. B
19. C 62. C
20. A 63. A
21. B 64. D
22. A 65. D
23. B 66. B
24. D
25. A
26. B
27. C
28. C
29. B
30. A
31. C
32. A
33. D
34. D
35. D
36. C
37. D
38. A
39. C
40. A
41. B
42. C
43. A

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WhenweleftnothingbutGod,wewillrealizethatGodisenough.LotofpeoplesaymahirapmagingCPA
butalwaysbearinmindthatwalangmahirapkayGod.

KAYANATINYANIbelieve,meronglalabasulitsamgacompilationnaitosaOctoberBoardExamkase
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Kairus