CPA BOARD ON MAS d.

Statements 1, 3 and 4 only

8. Which of the following statements is true?
PART I. Basic Consideration in MAS and Consulting Practice a. Adequate training and experience in both the analytical approach and process in the particular
1. Which of the following statement is True? undertaking are requisites for the CPA to be involved in a management service engagement.
a. Adequate training and experience in both the analytical approach and process in the particular b. A CPA with MBA Ph D degrees is automatically qualified to render management services.
undertaking are requisites for the CPA to be involved in a management service engagement. c. Competence as a standard in the rendition of management services by a CPA may be equated to having
b. A CPA with MBA and Ph D Degrees is automatically qualified to render management services. excellent scholarly preparation to include the usual baccalaureate degree, and MBA and other post
c. Competence as a standard in the rendition of management services by a CPA may be equated to having graduate studies.
excellent scholarly preparation to include the usual baccalaureate degree, an MBA and other post d. A Certified Public Accountant by virtue of having the necessary academic preparation and by hurdling
graduate studies. the licensure examinations required to have a CPA license can readily render management services to the
d. A CPA by virtue of having the necessary academic preparation and by hurdling the licensure public.
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?
2. Which of the following statement is False? a. The CPA performs decision-making services for his client.
a. CPAs provide management services to go around the ethical constraints as mandated by the accountancy b. The CPA perform services wherein he is in effect, acting as an employee of the client.
act. c. The CPA loses his objectivity and acts in a manner as if he is advocating fir the interest of his client.
b. Businesses hire management consultants to help define specific problems and develop solutions. d. The CPA does not extend his services beyond the presentation of recommendation or giving of advice.
c. Included in the practice of consulting is the provision of confidential service in which the identity of the
client is concealed. PART II. ACCOUNTING INFORMATION SYSTEM
d. CPAs performing management services may be considered to be in the practice of management 10. An activity that is not considered part of the systems design phase is
consulting. a. File record layout
3. Mr. Rey Carlos, a CPA firm’s partner in-charge of quality assurance and review is arguing with Mr. Rueben b. Document flowcharting
Fortuna, the consulting partner regarding the question on independence as Mr. Fortuna is presently c. Specification of format and content of report
rendering consulting services to T. Ang & Nga Company, an audit client of the firm. Related to this d. Systems survey
issue of independence, all of the following statements are not valid except: 11. The main components of the Central Processing Unit (CPU) of a computer include only
a. Independence is not sacrifice for as long as the auditor/consultant is correct in his decisions for the client. a. Control, arithmetic and logic, and memory
b. A CPA who renders both audit and consulting services to a client, by virtue of his competence/expertise b. Input, processing and output
and extensive knowledge of the client’s business is in the best position to render decisions for the client c. Software, register and primary memory
and should do so. d. Memory, processing and register
c. The client is the ultimate decision maker and the auditor and/or consultant should not make decisions for 12. How is an Accounting Information System (AIS) distinguished from a management Information System (MIS)?
the client. a. An AIS maybe either manual or computer-based and MIS is computer-based.
d. It is up to professional judgment and discretion of the auditor/consultant to render decision for the client b. An AIS is a subsystem within an MIS.
for as long as his professional fees are commensurate to the benefits that the client will derive from the c. An AIS is controlled oriented and MIS is used exclusively for planning.
engagement. d. An AIS deals with financial information and MIS handles all other information.
4. A Certified Public Accountant’s scope of management services is broad and covers all of the following except: 13. Feedback, feed forward and preventive are important types of control systems and procedures for accounting
a. Change management engagement information systems. Which of the following is in the correct order of feedback, feed forward and
b. Computerization engagements preventive control systems?
c. Audit engagements a. Inventory control, capital budgeting and cash budgeting.
d. Re-engineering jobs b. Cost accounting variances, separation of duties and cash planning.
5. Which of the following statements is not acceptable? c. Cash budgeting, capital budgeting and hiring qualified employees.
a. A CPA represents 3 major players in the industry in rationalizing the industry’s incentives before the d. Cost accounting variances, cash budgeting and organizational independence.
government public hearings. 14. Bench Corp. operates in several regions, with each region performing its data processing in a region data center.
b. A CPA shares with a new and substantial client information regarding another client belonging to the The corporate Management Information System staff has developed a database management system to
same industry. handle customer service and billing. The Director of MIS recommended that the new system be
c. A CPA provides consulting services to an existing audit client. implemented in the Region 4 to ascertain if the system operates in a satisfactory manner. This type of
d. A CPA offers and provides consulting services to 2 major competing clients. conversion is called a
6. The following characterize management advisory services except a. Crash conversion
a. Involve decision for the future b. Parallel conversion
b. Broader in scope and varied in nature c. Pilot conversion
c. Utilize more junior staff than senior member of the firm d. Direct conversion
d. Relate to specific problems expert help is required 15. A floppy disk (e.g., VERBATIM, MAXELL).
7. These statements relate to MAS practice standards: a. Diskette
1. A practitioner is to notify the client of any reservation he has regarding anticipated benefits. b. Cassette tape
2. Throughout the engagement, there ought to be a systematic critical review of accomplishments and work c. Disk
should be done within the framework of the code of ethics and other professional standards. d. Hard disk
3. During the engagement, should there be significant changes between cost and anticipated benefits, the 16. Important types of control systems and procedures for accounting information systems are feedback, feed
client should be informed. forward and preventive. Which one of the following is in the correct order of feedback, feed forward and preventive
4. Before the engagements, the practitioner must make arrangements with, and inform the client on control systems?
significant matters related to the engagement, in writing. a. Cost accounting variances, separation of duties and cash planning.
Of these statements, which pertains to the practice standard on client benefit? b. Cost accounting variances, cash budgeting and organizational independence.
a. Statements 1 and 3 only c. Cash budgeting, cost accounting variances and separation of duties.
b. All statements d. Inventory control, capital budgeting and cash budgeting.
c. Statement 1 only 17. Which one of the following represents a lack of internal control in a computer-based information systems?
 a. The design and implementation is performed in accordance with management’s specific authorization.
b. Any and all changes in application programs have been authorization and approval of management. IV. FINANCIAL STATEMENT ANALYSIS
c. Provisions exist to ensure the accuracy and integrity of computer processing of all files and reports. 24. If, just prior to a period of rising prices, a company changed its inventory measurement method from FIFO to
d. Both computer operators and programmers have unlimited access to the programs and data files. LIFO, the effect in the next period would be to
18. An Executive Information System (EIS) focuses on long-range objectives and gives immediate information about a. Increase both the current ratio and inventory turn-over
an organization’s critical success factors. It can be used on computers of all sizes. It is commonly used by all b. Decrease both the current ratio and inventory turn-over
executives at the highest levels within the organization. All of the following statements apply to EIS except: c. Increase the current ratio and decrease inventory turn-over
a. It is likely to be one of the most widely used and the largest of the information subsystems in a business d. Decrease the current ratio and increase inventory turn-over
organization. 25. When a balance sheet amount is related to an income statement amount in computing a ratio,
b. It provides top executives with immediate and easy access to information in ahighly interactive format. a. The balance sheet amount should be converted to an average for the year.
c. It provides information in a highly aggregated form. b. The income statement amount should be converted to an average for the year.
d. It helps executives monitor business conditions in general and assist in strategic planning to control and c. Both amounts should be converted to market value.
operate the entity. d. Comparisons with industry ratios are not meaningful.
19. The concept of timeliness of data availability is most relevant to 26. On December 31, 19x0 the Balance Sheet of Belle Co. disclosed total assets of P8, 000,000, current liabilities of P1,
a. Computerized system 500,000 and long-term debt of P2, 400, 000. Common stock outstanding amounted to 500,000 shares, while 100,000
b. Packaged software shares of P10 par value preferred stock were outstanding. The retained earnings account indicated a deficit balance
c. On-line systems of P2, 000, 000. Belle’s book value per share of common stock as of December 31, 19x0 is
d. Microsystems a. P16.00
20. To control purchasing and accounts payable, an information system must include certain source documents. For b. P6.20
a manufacturing concern like fruit processors, Inc., these documents should include c. P12.20
a. Purchase requisitions, purchase orders, receiving reports and suppliers invoices. d. P8.20
b. Purchase orders, receiving reports and inventory reports of goods needed. 27. How are dividends per share for common stock used in the calculation of the following?
c. Purchase requisitions, purchase orders, inventory reports of goods needed and supplier’s invoices. Dividend per-share Earnings
d. Purchase orders, receiving reports and supplier’s invoices. Payout ratio per share
a. Denominator denominator
III. MANAGEMENT ACCOUNTING CONCEPTS AND RESPONSIBILITY ACCOUNTING b. Denominator Not used
21. Controllership has attained special recognition in corporate management as business expand in complexity and c. Numerator Not used
reach and as the controller exerts influence for to take organization’s goals. Controllership and treasurership d. Numerator Numerator
constitute corporate finance. These are among corporate finance’s traditional functions. 28. During 19x5, Reuel Company purchased P1, 920, 000 of inventory. The cost of goods sold for 19x5 was P1, 800,
1. Tax management 000 and the ending invenotyr at December 31, 19x5 was P360, 000. What was the inventory turn-over for 19x5?
2. Finance reporting and interpretation a. 5.0
3. Credit management b. b. 5.3
4. Sourcing and investing funds c. c. 6.0
5. Reporting to government regulatory agencies d. d. 6.4
6. Risk management
7. Economic appraisal V. COST-VOLUME-PROFIT ANALYSIS
8. Planning for control The following data apply to items 29-33
Which of the following are the functions of the controller? Lara Company produces a single product. It sold 25, 000 units last year with the following results:
a. All eight items Sales P625, 000
b. Items 1, 2, 5, 7 and 8 only Variable Costs P375, 000
c. Items 1, 2, 3, 4, 5, 7 and 8 only Fixed Costs 150, 000 525, 000
d. Items 2, 3, 5, 7 and 8 only Net Income before taxes 100, 000
22. To distinguish between management accounting and financial accounting, the following statements are correct Income Taxes (45%) 45, 000
except: Net Income P 55, 000
a. Management accounting in view of its various integrated recipients should have a separate data recording
and retrieval system from financial accounting. In an attempt to improve its product, Lara is considering replacing a component part in its product that has a cost of
b. Financial accounting is bound by Generally Accepted Accounting Principles (GAAP), and management 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
accounting need not be in conformity with GAAP. increase plant capacity. The machine would cost P18, 000 with a useful life of 6 years and no salvage value. The
c. Financial accounting can be regarded as the process while management accounting can be regarded as the company uses straight line depreciation on all plant assets.
product of that process. 29. What was Lara Company’s break-even point in number of units last year?
d. Management accounting output must be released on time so as not to erode its usefulness; Financial a. 6, 000
accounting output can still be useful even when delayed. b. b. 15, 000
23. The activities in a management system’s control can be grouped into four c. c. 21, 000
1. Measurement of actual performance d. d. 18, 000
2. Deciding and implementing corrective actions 30. How many units of product would Lara Company have had to sell in the last year to earn P77, 000 in net income
3. Determining standard of performance after taxes?
4. Comparing actual performance versus standards and analyzing results. a. 29, 000
The above steps must done in this sequence b. 23, 000
a. 4, 3, 2, 1 c. 22, 700
b. 3, 1, 4, 2 d. 29, 300
c. 1, 3, 4, 2 31. If Lara Company holds the sales price constant and makes the suggested changes, how many units of product
d. 3, 4, 1, 2 must be sold in the coming year to break-even?
a. 15, 300 b. 18, 750 c. 19, 125 d. 21, 000 Variable Factory Overhead 20
32. If Lara Company holds the sales price constant and makes the suggested changes, how many units of the product Bags Corporation offered to supply the assembled ice bag for P40 with a minimum order of 5, 000 units. If picnic
will the company have to sell to make the same net income after taxes as last year? accepts the offer it will be able to reduce variable labor and overhead costs by 50%. The direct materials for the
a. 31, 625 freezable ice bag will cost Picnic P20 if it will produce it. Considering Bags Corporation offer, Picnic should
b. 31, 250 a. Buy the freezable ice bag due to P150, 000 advantaged.
c. 33, 500 b. Produce the freezable ice bag due to P225, 000 advantaged.
d. 25, 300 c. Produce the freezable ice bag due to P25, 000 advantaged.
33. If Lara Company wishes to maintain the same contribution margin ratio, what selling price per unit of product d. Buy the freezable ice bag due to P50, 000 advantaged.
must it charge next year to cover the increased material costs?
a. P27.00 XI. QUANTITATIVE METHODS
b. P25.00 40. A small company makes only two products with the following two production constraints representing two
c. P32.50 machines and their maximum availability:
d. P28.33 2 X + 3 Y < 18
2 X + Y < 10
VI. COMPREHENSIVE BUDGETING
34. For May 19x1, Young Company has budgeted its cash receipts at P125, 000 and its cash disbursements at P138, Where: X = the units of the first product
000. The company’s cash balance on May 1 is P17, 000. If the desired May 31 cash balance is P20, 000, then Where: Y = the units of the second product
how much cash must the company borrow during the month (before considering any interest payments)? If the profit equation is Z = P4 X + P2 Y, the maximum possible profit is
a. P4, 000 a. P20
b. P8, 000 b. P21
c. P12, 000 c. P18
d. P16, 000 d. P24

VII. STANDARD COSTS AND PERFORMANCE EVALUATION XII. WORKING CAPITAL MANAGEMENT
35. Which of the following factors is not likely to be considered by management in determining whether a variance 41. Which of the following characteristics are generally associated with a “conservative” financial policy?
should be regarded as an exception? a. High current assets relative to sales and high current liabilities relative to total assets.
a. Consistency of occurrence over time. b. High current assets relative to sales and low current liabilities relative to total assets.
b. Ability to control the item related to the variance. c. Low current assets relative to sales and high current liabilities relative to total assets.
c. Nature of the item related to the variance. d. Low current assets relative to sales and low current liabilities relative to total assets.
d. Costing method used to calculate the variance. 42. The Manila Commercial Bank and Rap Corp. signed a loan agreement subject to the following terms.
a. Stated interest rate of 18% on a one-year discounted loan; and
VIII. Costing Approaches: Absorption Costing/Variable Costing b. 15% compensating non-interest bearing checking account balance to be maintained by Rap with Manila
36. The accountant for the Dover Company forgot to make an adjusting entry to record depreciation for the current Commercial Bank.
year. The effect of this error would be: The net proceeds of the loan was P1 million. The principal amount of the loan was
a. An overstatement of net income and an understatement of assets. a. P1, 176, 471
b. An overstatements of assets offset by an understatement of owner’s equity. b. P1, 000, 000
c. An overstatement of assets, net income and owner’s equity. c. P1, 492, 537
d. An overstatement of assets and of net income and an understatement of owner’s equity. d. P1, 219, 512
43. Three suppliers of East Corporation offer different credit terms. West Co. offers terms of 1 ½ / 15, net 30. North
IX. DECENTRALIZED OPERATIONS AND TRANSFER PRICING 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
37. Beta Market has 3 stores: P, Q and R. During 19x8, Store P had a contribution margin of P24, 000 and a bank at an annual rate of 12% in order to take any cash discounts. Which one of the following would be the most
contribution margin ratio of 30%. Store Q had variable costs of P48, 000 and a contribution margin ratio of attractive for Ma Corp.? (Assume 360 days a year).
40%. Store R had variable costs of P84, 000 which represented 70% of sales in the store. For 19x8, Star a. Purchase from West Co., pay in 15 days and borrow any money needed from the bank.
Market’s total sales were b. Purchase from West Co., pay in 30 days and borrow any money needed from the bank.
a. P320, 000 c. Purchase from South Inc., pay in 60 days and borrow any money needed from the bank.
b. P360, 000 d. Purchase from North Corp. and pay in 30 days.
c. P440, 000
d. P280, 000 XIII. CASH AND SHORT TERM INVESTMENT MANAGEMENT
38. Khi Company has two divisions J and K. During 19x2, the contribution margin in J was P30, 000. The contribution 44. Ken Lumber Company obtained short term bank loan for P1, 000, 000.00 at an annual interest rate of 12%. As a
margin ration in K during 19x2 was 40%, its sales were P125, 000 and its segment margin was P32, 000. The common condition of the loan Ken is required to maintain a compensating balance of P200, 000.00 in its checking account. The
fixed expenses in the company were P40, 000 and the company’s net income for the year was P18, 000. The segment checking account earns interest at an annual rate of 6%. Ken would otherwise maintain only P100, 000.00 in its
margin for Division J for 19x2 was checking account for transactional purposes. Ken’s effective interest cost of the loan is
a. P26, 000 a. 12%
b. P32, 000 b. 14%
c. P8, 000 c. 13.50%
d. P58, 000 d. 12.67%
45. Fabella Company budgeted sales on account of P120, 000 for July, P211, 000 for August and P198, 000 for
X. USING COST DATA FOR DECISION MAKING September. Collection experience indicates that 60% of the budgeted sales will be collected the amount after the sale,
39. Picnic Items, Inc. manufactures coolers that contain a freezable ice bag. For an annual volume of 10, 000 units, 36% the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be
fixed manufacturing costs of P500, 000 are incurred. Variable costs per unit amounts are: budgeted for September would be
Direct materials P80 a. P169, 800
Direct Labor 15 b. P147, 960
 c. P197, 880 c. Less than 16%, but more than 14%
d. P194, 760 d. More than 16%
e. 54. Under the time-adjusted rate of return capital budgeting technique, it is assumed that cash flows are reinvested at
XIV. RECEIVABLES MANAGEMENT the
46. Changing a firm’s credit terms from 2/20, net/60 to 2/10, net/30 will generally a. Cost of capital
a. Increase the average collection period and increase sales b. Hurdle rate of return
b. Increase the average collection period and reduce sales c. Rate earned by the investment
c. Reduce the average collection period and increase sales d. There is no assumption about reinvestment of cash flows
d. Reduce the average collection period and reduce sales. 55. Rano Co. has the opportunity to invest in a two-year project which is expected to produce cash flow from
47. If a firm purchases raw materials from its supplier on a 2/10, net/60 cash discount basis, the equivalent annual operation, net of income taxes, of P100, 000 in the first year and P200, 000 in the second year. Rano has a cost of
interest rate (using a 360-day year) of foregoing the cash discount and making payment on the 60 th day is capital of 20%. For this project, Rano should be willing to invest immediately a maximum of
a. 14.7% a. P283, 300
b. 73.5% b. P249, 900
c. 12.2% c. P222, 100
d. Some amount other than those given above d. P208, 200
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 56. The net present value capital budgeting technique can be used when cash flows from period to period are:
360-day year), the approximate cost/benefit of the trade credit terms is Uniform Uneven
a. 2% a. No Yes
b. 16% b. No No
c. 48% c. Yes No
d. 24% d. Yes Yes
49. When a company offers credit terms of 2/10, net/30, the annual interest cost, based on a 360-day year, is 57. It is assumed that cash flows are reinvested at the rate actually earned by the investment in which of the
a. 24.0% following capital budgeting techniques?
b. 24.5% Time-adjusted rate of return Net present value
c. 35.3% a. Yes Yes
d. 36.7% b. Yes No
c. No No
XV. INVENTORY MANAGEMENT d. No Yes
50. The size of safety stocks for inventory is important for most firms. Though several factors can be cited as 58. If income tax considerations are ignored, how is straight line depreciation expense used in the following capital
contributing to the determination of the size of safety stocks that a firm should carry, the issue can often be reduced budgeting techniques?
to a single factor. Which one of the following statements best summarizes the factor that affects the level of safety Time-adjusted rate of return Net present value
stock that a firm will carry? a. Excluded Excluded
a. The amount of idle cash management believes it has to invest in safety stock. b. Excluded Included
b. The rapidity with which the inventory position will turn over. c. Included Excluded
c. The level of production the firm’s bank is willing to finance. d. Included Included
d. The level of uncertainty with respect to an out-of-stock condition that management is willing to accept. 59. The payback capital budgeting technique considers:
51. The following information regarding inventory policy was assembled by the JRJ Corporation. The company uses Income over entire Time value
a 50-week year in all calculations. Life of project of money
Sales 10, 000 units per year a. No No
Order Quantity 2, 000 units b. No Yes
Safety Stocks 1, 300 units c. Yes Yes
Lead Time 4 weeks d. Yes No
The reorder point is Questions 60 and 61 are based on the following
a. 3, 300 units Consideration is being given to the possible purchase of a P30, 000 machine for Alo, which is expected to result in a
b. 2, 100 units decrease of P12, 000 per year in cash operating expenses. This machine, which has no residual value, has an
c. 100 units estimated useful life of five years and will be depreciated on a straight-line basis. (Ignore income taxes).
d. 1, 300 units 60. For the new machine, the simple rate of return based on initial investment would be
a. 12%
XVI. CAPITAL BUDGETING b. 20%
Questions 52 and 53 are based on the following data: c. 30%
Allo foundation, a tax exempt organization, invested P200, 000 in a five-year project at the beginning of 19x5. Allo d. 40%
estimates that the annual cash savings from this project will amount to P65, 000. The P200, 000 of assets will be 61. If income taxes are ignore, the payback period for the new machine would be
depreciated over their five-year life on the straight line basis. On investments of this type, Allo’s desired rate of a. 1.67 years
return is 12%. b. 2.50 years
52. The net present value of the project is c. 4.17 years
a. P34, 325 d. 5.00 years
b. P36, 400
c. P90, 000 XVII. FINANCING DECISIONS
d. P125, 000 62. For 19x9, Nelson Industries increased earnings before interest and taxes by 17%. During the same period, net
53. Allo’s time-adjusted rate of return on this project is income after tax increased by 42%. The degree of financial leverage that existed during 19x9 is
a. Less than 12% a. 1.70
b. Less than 14%, but more than 12% b. 4.20
 c. 2.47
1. A 44. D
d. 5.90
2. A 45. A
3. C 46. D
XVIII. PROJECT FEASIBILITY STUDY
4. C 47. A
63. Which of the following is not an activity covered by feasibility study?
5. B 48. D
a. Activity based accounting of the endeavor leading to a conclusion
6. C 49. D
b. Collection of data
7. A 50. D
c. Evaluation and analysis of data collected
8. A 51. B
d. Formulation of recommendation
9. D 52. A
64. Among the following major parts of a project feasibility study, which grouping is considered critical?
10. D 53. D
a. Management, financial and social returns
11. A 54. C
b. Technical. Financial and environmental aspects
12. B 55. C
c. Economic benefits, management, financial
13. D 56. D
d. Marketing, engineering or technical and financial
14. C 57. B
65. The statements below about project feasibility studies are the true except:
15. A 58. A
a. Any change which can materially alter the assumptions used in the preparation of the forecast will render
16. B 59. A
it useless
17. D 60. B
b. It is important for government agencies in order to determine entitlement to government incentives
18. A 61. B
c. It also covers the social desirability aspects of a proposed undertaking
19. C 62. C
d. Since data gathering is a basic step in its preparation, all the necessary and required information will
20. A 63. A
always be available.
21. B 64. D
66. In a project feasibility study, which of the following is true?
22. A 65. D
a. The study is not affected by any significant change in actual business conditions as compared to the
23. B 66. B
assumptions used in making the forecast
24. D
b. The study is based on available information and opinions of the party involved in the preparation of the
25. A
study.
26. B
c. (a) and (b)
27. C
d. None of the above
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
ANSWER KEY