Professional Documents
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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:
9. Which of the following will not impair the independence of a CPA in the
rendition of Management Services?
10. An activity that is not considered part of the systems design phase is
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?
a. Crash conversion
b. Parallel conversion
c. Pilot conversion
d. Direct conversion
a. Diskette
b. Cassette tape
c. Disk
d. Hard disk
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 ahighly interactive format.
c. It provides information in a highly aggregated form.
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
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
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?
Dividend per-share Earnings
a. Denominator denominator
b. Denominator Not used
c. Numerator Not used
d. Numerator Numerator
28. During 19x5, Reuel Company purchased P1, 920, 000 of inventory. The
cost of goods sold for 19x5 was P1, 800, 000 and the ending invenotyr at
December 31, 19x5 was P360, 000. What was the inventory turn-over for
19x5?
V. COST-VOLUME-PROFIT ANALYSIS
Lara Company produces a single product. It sold 25, 000 units last year
with the following results:
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)?
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. Beta 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 ration 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
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
2 X + Y < 10
a. P20
b. P21
c. P18
d. P24
XII. WORKING CAPITAL MANAGEMENT
42. The Manila Commercial Bank and Rap Corp. signed a loan agreement
subject to the following terms.
The net proceeds of the loan was P1 million. The principal amount of the
loan was
MAY 2009
CPA
BOARD
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.
d. Purchase from North Corp. and pay in 30 days.
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
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 amount 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. 14.7%
b. 73.5%
c. 12.2%
d. Some amount other than those given above
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. 3, 300 units
b. 2, 100 units
c. 100 units
d. 1, 300 units
a. P34, 325
b. P36, 400
c. P90, 000
d. P125, 000
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
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
a. Excluded Excluded
b. Excluded Included
c. Included Excluded
d. Included Included
a. No No
b. No Yes
c. Yes Yes
d. Yes No
Questions 60 and 61 are based on the following
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
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?
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
We must prepare for every fight that we’re going to face. When at times you
feel you wanted to give up, make a rest but never stop pursuing your
dreams. Every winning is worthy when we strive hard to achieve it.
When we left nothing but God, we will realize that God is enough. Lot of
people say “mahirap maging CPA”… but always bear in mind that “walang
mahirap kay God”….
Kairus