Professional Documents
Culture Documents
PART I. Basic Consideration in MAS and Consulting Practice
PART I. Basic Consideration in MAS and Consulting Practice
a. Adequate training and experience in both the analytical approach and process in the
particular undertaking are requisites for the CPA to be involved in a management
service engagement.
d. A CPA by virtue of having the necessary academic preparation and by hurdling the
licensure examinations required to have a CPA license can readily render management
services to the public.
b. Businesses hire management consultants to help define specific problems and develop
solutions.
c. Included in the practice of consulting is the provision of confidential service in which the
identity of the client is concealed.
3. Mr. Rey Carlos, a CPA firm’s partner in-charge of quality assurance and review is arguing with Mr.
Rueben Fortuna, the consulting partner regarding the question on independence as Mr. Fortuna is
presently rendering consulting services to T. Ang & Nga Company, an audit client of the firm. Related
to this issue of independence, all of the following statements are not valid except:
a. Independence is not sacrifice for as long as the auditor/consultant is correct in his decisions for
the client.
b. A CPA who renders both audit and consulting services to a client, by virtue of his
competence/expertise and extensive knowledge of the client’s business is in the best position
to render decisions for the client and should do so.
c. The client is the ultimate decision maker and the auditor and/or consultant should not
make decisions for the client.
d. It is up to professional judgment and discretion of the auditor/consultant to render decision for
the client for as long as his professional fees are commensurate to the benefits that the client
will derive from the engagement.
4. A Certified Public Accountant’s scope of management services is broad and covers all of the
following except:
b. Computerization engagements
c. Audit engagements
d. Re-engineering jobs
a. A CPA represents 3 major players in the industry in rationalizing the industry’s incentives
before the government public hearings.
b. A CPA shares with a new and substantial client information regarding another client
belonging to the same industry.
1. A practitioner is to notify the client of any reservation he has regarding anticipated benefits.
3. During the engagement, should there be significant changes between cost and anticipated
benefits, the client should be informed.
4. Before the engagements, the practitioner must make arrangements with, and inform the client
on significant matters related to the engagement, in writing.
b. All statements
c. Statement 1 only
a. Adequate training and experience in both the analytical approach and process in the
particular undertaking are requisites for the CPA to be involved in a management
service engagement.
d. A Certified Public Accountant by virtue of having the necessary academic preparation and by
hurdling the licensure examinations required to have a CPA license can readily render
management services to the public.
9. Which of the following will not impair the independence of a CPA in the rendition of Management
Services?
b. The CPA perform services wherein he is in effect, acting as an employee of the client.
c. The CPA loses his objectivity and acts in a manner as if he is advocating fir the interest of his
client.
d. The CPA does not extend his services beyond the presentation of recommendation or
giving of advice.
10. An activity that is not considered part of the systems design phase is
b. Document flowcharting
d. Systems survey
11. The main components of the Central Processing Unit (CPU) of a computer include only
12. How is an Accounting Information System (AIS) distinguished from a management Information
System (MIS)?
d. An AIS deals with financial information and MIS handles all other information.
13. Feedback, feed forward and preventive are important types of control systems and procedures for
accounting information systems. Which of the following is in the correct order of feedback, feed
forward and preventive control systems?
14. Bench Corp. operates in several regions, with each region performing its data processing in a
region data center. The corporate Management Information System staff has developed a database
management system to handle customer service and billing. The Director of MIS recommended that
the new system be implemented in the Region 4 to ascertain if the system operates in a satisfactory
manner. This type of conversion is called a (May 2009 RPCPA)
a. Crash conversion
b. Parallel conversion
c. Pilot conversion
d. Direct conversion
a. Diskette
b. Cassette tape
c. Disk
d. Hard disk
16. Important types of control systems and procedures for accounting information systems are
feedback, feed forward and preventive. Which one of the following is in the correct order of feedback,
feed forward and preventive control systems?
17. Which one of the following represents a lack of internal control in a computer-based information
systems?
b. Any and all changes in application programs have been authorization and approval of
management.
c. Provisions exist to ensure the accuracy and integrity of computer processing of all files and
reports.
d. Both computer operators and programmers have unlimited access to the programs and
data files.
18. An Executive Information System (EIS) focuses on long-range objectives and gives immediate
information about an organization’s critical success factors. It can be used on computers of all sizes.
It is commonly used by all executives at the highest levels within the organization. All of the following
statements apply to EIS except:
a. It is likely to be one of the most widely used and the largest of the information
subsystems in a business organization.
b. It provides top executives with immediate and easy access to information in a highly
interactive format.
d. It helps executives monitor business conditions in general and assist in strategic planning to
control and operate the entity.
a. Computerized system
b. Packaged software
c. On-line systems
d. Microsystems
20. To control purchasing and accounts payable, an information system must include certain source
documents. For a manufacturing concern like fruit processors, Inc., these documents should include
c. Purchase requisitions, purchase orders, inventory reports of goods needed and supplier’s
invoices.
21. Controllership has attained special recognition in corporate management as business expand in
complexity and reach and as the controller exerts influence for to take organization’s goals.
Controllership and treasurership constitute corporate finance. These are among corporate finance’s
traditional functions.
1. Tax management
3. Credit management
6. Risk management
7. Economic appraisal
22. To distinguish between management accounting and financial accounting, the following
statements are correct except:
d. Management accounting output must be released on time so as not to erode its usefulness;
Financial accounting output can still be useful even when delayed.
23. The activities in a management system’s control can be grouped into four
a. 4, 3, 2, 1
b. 3, 1, 4, 2
c. 1, 3, 4, 2
d. 3, 4, 1, 2
24. If, just prior to a period of rising prices, a company changed its inventory measurement method
from FIFO to LIFO, the effect in the next period would be to
25. When a balance sheet amount is related to an income statement amount in computing a ratio,
a. The balance sheet amount should be converted to an average for the year.
b. The income statement amount should be converted to an average for the year.
26. On December 31, 19x0 the Balance Sheet of Belle Co. disclosed total assets of P8, 000,000,
current liabilities of P1, 500,000 and long-term debt of P2, 400, 000. Common stock outstanding
amounted to 500,000 shares, while 100,000 shares of P10 par value preferred stock were
outstanding. The retained earnings account indicated a deficit balance of P2, 000, 000. Belle’s book
value per share of common stock as of December 31, 19x0 is
a. P16.00
b. P6.20
c. P12.20
d. P8.20
27. How are dividends per share for common stock used in the calculation of the following?
In an attempt to improve its product, Lara is considering replacing a component part in its
product that has a cost of P2.50 with a new and better part costing P4.50 per unit in the coming year.
A new machine would also be needed to increase plant capacity. The machine would cost P18, 000
with a useful life of 6 years and no salvage value. The company uses straight line depreciation on all
plant assets.
29. What was Lara Company’s break-even point in number of units last year?
a. 6, 000 b. 15, 000 c. 21, 000 d. 18, 000
30. How many units of product would Lara Company have had to sell in the last year to earn P77, 000
in net income after taxes?
31. If Lara Company holds the sales price constant and makes the suggested changes, how many
units of product must be sold in the coming year to break-even?
32. If Lara Company holds the sales price constant and makes the suggested changes, how many
units of the product will the company have to sell to make the same net income after taxes as last
year?
33. If Lara Company wishes to maintain the same contribution margin ratio, what selling price per unit
of product must it charge next year to cover the increased material costs?
34. For May 19x1, Young Company has budgeted its cash receipts at P125, 000 and its cash
disbursements at P138, 000. The company’s cash balance on May 1 is P17, 000. If the desired May
31 cash balance is P20, 000, then how much cash must the company borrow during the month
(before considering any interest payments)?
35. Which of the following factors is not likely to be considered by management in determining
whether a variance should be regarded as an exception?
36. The accountant for the Dover Company forgot to make an adjusting entry to record depreciation
for the current year. The effect of this error would be:
37. Star Market has 3 stores: P, Q and R. During 19x8, Store P had a contribution margin of P24, 000
and a contribution margin ratio of 30%. Store Q had variable costs of P48, 000 and a contribution
margin ratio of 40%. Store R had variable costs of P84, 000 which represented 70% of sales in the
store. For 19x8, Star Market’s total sales were
a. P320, 000
b. P360, 000
c. P440, 000
d. P280, 000
38. Khi Company has two divisions J and K. During 19x2, the contribution margin in J was P30, 000.
The contribution margin ratio in K during 19x2 was 40%, its sales were P125, 000 and its segment
margin was P32, 000. The common fixed expenses in the company were P40, 000 and the
company’s net income for the year was P18, 000. The segment margin for Division J for 19x2 was
a. P26, 000
b. P32, 000
c. P8, 000
d. P58, 000
39. Picnic Items, Inc. manufactures coolers that contain a freezable ice bag. For an annual volume of
10, 000 units, fixed manufacturing costs of P500, 000 are incurred. Variable costs per unit amounts
are:
Direct Labor 15
Bags Corporation offered to supply the assembled ice bag for P40 with a minimum order of 5, 000
units. If picnic accepts the offer it will be able to reduce variable labor and overhead costs by 50%.
The direct materials for the freezable ice bag will cost Picnic P20 if it will produce it. Considering Bags
Corporation offer, Picnic should
40. A small company makes only two products with the following two production constraints
representing two machines and their maximum availability:
2 X + 3 Y < 18
2X+ Y < 10
a. P20
b. P21
c. P18
d. P24
41. Which of the following characteristics are generally associated with a “conservative” financial
policy?
a. High current assets relative to sales and high current liabilities relative to total assets.
b. High current assets relative to sales and low current liabilities relative to total assets.
c. Low current assets relative to sales and high current liabilities relative to total assets.
d. Low current assets relative to sales and low current liabilities relative to total assets.
42. The Manila Commercial Bank and Rap Corp. signed a loan agreement subject to the following
terms.
b. 15% compensating non-interest bearing checking account balance to be maintained by Rap with
Manila Commercial Bank.
The net proceeds of the loan was P1 million. The principal amount of the loan was (RPCPA 2009)
a. P1, 176, 471
43. Three suppliers of East Corporation offer different credit terms. West Co. offers terms of 1 ½ / 15,
net 30. North Corp. offers terms of 1/10, net 30. South Inc. offers terms of 2/10, net 60. East Corp.
would have to borrow from a bank at an annual rate of 12% in order to take any cash discounts.
Which one of the following would be the most attractive for Ma Corp.? (Assume 360 days a year).
a. Purchase from West Co., pay in 15 days and borrow any money needed from the bank.
b. Purchase from West Co., pay in 30 days and borrow any money needed from the bank.
c. Purchase from South Inc., pay in 60 days and borrow any money needed from the bank.
44. Ken Lumber Company obtained short term bank loan for P1, 000, 000.00 at an annual interest
rate of 12%. As a condition of the loan Ken is required to maintain a compensating balance of P200,
000.00 in its checking account. The checking account earns interest at an annual rate of 6%. Ken
would otherwise maintain only P100, 000.00 in its checking account for transactional purposes. Ken’s
effective interest cost of the loan is (RPCPA 2009)
a. 12%
b. 14%
c. 13.50%
d. 12.67%
45. Fabella Company budgeted sales on account of P120, 000 for July, P211, 000 for August and
P198, 000 for September. Collection experience indicates that 60% of the budgeted sales will be
collected the month after the sale, 36% the second month, and 4% will be uncollectible. The cash
receipts from accounts receivable that should be budgeted for September would be
a. P169, 800
b. P147, 960
c. P197, 880
d. P194, 760
46. Changing a firm’s credit terms from 2/20, net/60 to 2/10, net/30 will generally
a. Increase the average collection period and increase sales
47. If a firm purchases raw materials from its supplier on a 2/10, net/60 cash discount basis, the
equivalent annual interest rate (using a 360-day year) of foregoing the cash discount and making
payment on the 60th day is
a. 14.7%
b. 73.5%
c. 12.2%
48. If a firm’s credit terms require payment within 45 days but allow a discount of 2% if paid within 15
days (using a 360-day year), the approximate cost/benefit of the trade credit terms is
a. 2%
b. 16%
c. 48%
d. 24%
49. When a company offers credit terms of 2/10, net/30, the annual interest cost, based on a 360-day
year, is
a. 24.0%
b. 24.5%
c. 35.3%
d. 36.7%
50. The size of safety stocks for inventory is important for most firms. Though several factors can be
cited as contributing to the determination of the size of safety stocks that a firm should carry, the issue
can often be reduced to a single factor. Which one of the following statements best summarizes the
factor that affects the level of safety stock that a firm will carry?
a. The amount of idle cash management believes it has to invest in safety stock.
b. The rapidity with which the inventory position will turn over.
51. The following information regarding inventory policy was assembled by the JRJ Corporation. The
company uses a 50-week year in all calculations.
Allo foundation, a tax exempt organization, invested P200, 000 in a five-year project at the beginning
of 19x5. Allo estimates that the annual cash savings from this project will amount to P65, 000. The
P200, 000 of assets will be depreciated over their five-year life on the straight line basis. On
investments of this type, Allo’s desired rate of return is 12%. (May 2009 RPCPA)
54. Under the time-adjusted rate of return capital budgeting technique, it is assumed that cash flows
are reinvested at the
a. Cost of capital
b. Hurdle rate of return
c. Rate earned by the investment
d. There is no assumption about reinvestment of cash flows
55. Rano Co. has the opportunity to invest in a two-year project which is expected to produce cash
flow from operation, net of income taxes, of P100, 000 in the first year and P200, 000 in the second
year. Rano has a cost of capital of 20%. For this project, Rano should be willing to invest immediately
a maximum of (May 2009 RPCPA)
a. P283, 300
b. P249, 900
c. P222, 100
d. P208, 200
56. The net present value capital budgeting technique can be used when cash flows from period to
period are:
Uniform Uneven
a. No Yes
b. No No
c. Yes No
d. Yes Yes
57. It is assumed that cash flows are reinvested at the rate actually earned by the investment in which
of the following capital budgeting techniques?
a. Yes Yes
b. Yes No
c. No No
d. No Yes
58. If income tax considerations are ignored, how is straight line depreciation expense used in the
following capital budgeting techniques?
a. Excluded Excluded
b. Excluded Included
c. Included Excluded
d. Included Included
Consideration is being given to the possible purchase of a P30, 000 machine for Alo, which is
expected to result in a decrease of P12, 000 per year in cash operating expenses. This machine,
which has no residual value, has an estimated useful life of five years and will be depreciated on a
straight-line basis. (Ignore income taxes). (May 2009 RPCPA)
60. For the new machine, the simple rate of return based on initial investment would be
a. 12%
b. 20%
c. 30%
d. 40%
61. If income taxes are ignore, the payback period for the new machine would be
a. 1.67 years
b. 2.50 years
c. 4.17 years
d. 5.00 years
62. For 19x9, Nelson Industries increased earnings before interest and taxes by 17%. During the
same period, net income after tax increased by 42%. The degree of financial leverage that existed
during 19x9 is
a. 1.70
b. 4.20
c. 2.47
d. 5.90
64. Among the following major parts of a project feasibility study, which grouping is considered
critical?
a. Management, financial and social returns
b. Technical. Financial and environmental aspects
c. Economic benefits, management, financial
d. Marketing, engineering or technical and financial
65. The statements below about project feasibility studies are the true except:
a. Any change which can materially alter the assumptions used in the preparation of the forecast
will render it useless
b. It is important for government agencies in order to determine entitlement to government
incentives
c. It also covers the social desirability aspects of a proposed undertaking
d. Since data gathering is a basic step in its preparation, all the necessary and required
information will always be available.
ANSWER KEY
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