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Past CPA Board On MAS
Past CPA Board On MAS
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.
b. A CPA with MBA and Ph D Degrees is automatically qualified to render management services.
c. Competence as a standard in the rendition of management services by a CPA may be equated to having
excellent scholarly preparation to include the usual baccalaureate degree, an MBA and other post graduate
studies.
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.
a. CPAs provide management services to go around the ethical constraints as mandated by the accountancy act.
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.
d. CPAs performing management services may be considered to be in the practice of management consulting.
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:
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.
c. A CPA provides consulting services to an existing audit client.
d. A CPA offers and provides consulting services to 2 major competing clients.
1. A practitioner is to notify the client of any reservation he has regarding anticipated benefits.
2. Throughout the engagement, there ought to be a systematic critical review of accomplishments and work should
be done within the framework of the code of ethics and other professional standards.
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.
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.
b. A CPA with MBA Ph D degrees is automatically qualified to render management services.
c. Competence as a standard in the rendition of management services by a CPA may be equated to having
excellent scholarly preparation to include the usual baccalaureate degree, and MBA and other post graduate
studies.
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?
10. An activity that is not considered part of the systems design phase is
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)?
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
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?
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.
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 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
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
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
2. Finance reporting and interpretation
3. Credit management
4. Sourcing and investing funds
5. Reporting to government regulatory agencies
6. Risk management
7. Economic appraisal
8. Planning for control
22. To distinguish between management accounting and financial accounting, the following statements are correct except:
a. Management accounting in view of its various integrated recipients should have a separate data recording and
retrieval system from financial accounting.
b. Financial accounting is bound by Generally Accepted Accounting Principles (GAAP), and management
accounting need not be in conformity with GAAP.
c. Financial accounting can be regarded as the process while management accounting can be regarded as the
product of that process.
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.
c. Both amounts should be converted to market value.
d. Comparisons with industry ratios are not meaningful.
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?
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:
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?
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?
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. 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
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.
The net proceeds of the loan was P1 million. The principal amount of the loan was
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. 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.
c. The level of production the firm’s bank is willing to finance.
d. The level of uncertainty with respect to an out-of-stock condition that management is willing to accept.
51. The following information regarding inventory policy was assembled by the JRJ Corporation. The company uses a 50-
week year in all calculations.
a. 3, 300 units
b. 2, 100 units
c. 100 units
d. 1, 300 units
XVI. CAPITAL BUDGETING
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%.
a. P34, 325
b. P36, 400
c. P90, 000
d. P125, 000
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
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
a. No No
b. No Yes
c. Yes Yes
d. Yes No
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).
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
XVII. FINANCING DECISIONS
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?
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.
a. The study is not affected by any significant change in actual business conditions as compared to the assumptions
used in making the forecast
b. The study is based on available information and opinions of the party involved in the preparation of the study.
c. (a) and (b)
d. None of the above
ANSWER KEY
1. A 26. B 44. D
2. A 27. C 45. A
3. C 28. C 46. D
4. C 29. B 47. A
5. B 30. A 48. D
6. C 31. C 49. D
7. A 32. A 50. D
8. A 33. D 51. B
9. D 34. D 52. A
10. D 35. D 53. D
11. A 36. C 54. C
12. B 37. D 55. C
13. D 38. A 56. D
14. C 39. C 57. B
15. A 40. A 58. A
16. B 41. B 59. A
17. D 42. C 60. B
18. A 43. 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