Acc 497 final exam answers

ACC 497 Final Exam

1) The uniform law, issued in 1984 by the Committee on Corporate Laws of the American Bar Association, that regulates the formation, operation, and termination of corporations is

2) Which of the following statements is true?

3) Which of the following statements is true?

4) What effect would a decrease in interest rates by the Federal Reserve most likely have in the nation’s manufacturing sector, all other factors remaining constant?

5) A table that shows the relationship between the price of a good and the quantity demanded of that good is called

6) If policymakers increase aggregate demand, the price level

7) Which table would show the largest factor for an interest rate of 8% for five periods?

8) Financial service

9) As the interest rate increases for any given period, the future value interest factor will

10) The specific cost of each source of long-term financing is based on ________ and ________ costs.

11) At the operating break-even point, ________ equals zero.

Section 4: Information Technology (IT) Implications in the Business Environment

12) Justifying expenditures for new technologies is especially difficult because

13) The hardware of a computer system includes the computer itself and other devices that help the computer perform its tasks. These other devices are commonly also called

14) Software that enables businesses and government agencies to transmit and manipulate financial data on an organization-wide basis best describes

15) A simple diagram that shows estimated completion times versus actual completion times for the various activities in a systems implementation project

16) What would be the best explanation for the absence of complete information on computer crime?

17) Which of the following processes would be accounted for using a job order cost system?

18) In traditional costing systems, overhead is generally applied based on

19) If standard costs are incorporated into the accounting system

20) Generally accepted accounting principles are

21) Luca Company overapplied manufacturing overhead during 2006. Which one of the following is part of the year end entry to dispose of the overapplied amount assuming the amount is material?

22) The cost to produce Part A was $10 per unit in 2005. During 2006, it has increased to $11 per unit. In 2006, Supplier Company has offered to supply Part A for $9 per unit. For the make-or-buy decision,

23) Disney’s variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $22,000. If sales are expected to increase $40,000, by how much will the company's net income increase?

24) Kershaw Bookstore had 600 units on hand at January 1, costing $18 each. Purchases and sales during the month of January were as follows: Kershaw does not maintain perpetual inventory records. According to a physical count, 450 units were on hand at January 31. The cost of the inventory at January 31, under the LIFO method is:

25) The process of formally recording or incorporating an item in the financial statements of an entity is

26) The primary purpose of the statement of cash flows is to provide information

27) Which of the following is considered cash?

28) A company offers a cash rebate of $1 on each $4 package of batteries sold during 2007. Historically, 10% of customers mail in the rebate form. During 2007, 6,000,000 packages of batteries are sold, and 210,000 $1 rebates are mailed to customers. Assuming there is no beginning liability balance, what is the rebate expense and liability, respectively, shown on the 2007 financial statements dated December 31?

29) Which of the following is a debt security?

30) The balance in Newsprint Corp.'s foreign exchange loss account was $10,000 on December 31, 2008, before any necessary year-end adjustment relating to the following:

31) Costs incurred internally to create intangibles are

32) The amount to be recorded as the cost of an asset under capital lease is equal to the

33) In computations of weighted average of shares outstanding, when a stock dividend or stock split occurs, the additional shares are

34) Debt securities that are accounted for at amortized cost, NOT fair value, are

35) Elvis Company purchases inventory for $70,000 on March 19, 2008, and sells it to Graceland Corporation for $95,000 on May 14, 2008. Graceland still holds the inventory on December 31, 2008, and determines that its market value (replacement cost) is $82,000 at that time. Graceland writes the inventory down from $95,000 to its lower market value of $82,000 at the end of the year. Elvis owns 75% of Graceland. Based on this information, what amount of inventory should be eliminated in the consolidation workpaper for 2008?

36) Which of the following objectives is considered the cornerstone of financial reporting by a governmental entity?

37) Expenditures should be budgeted by character. An example of a character classification is

38) Which of the following funds is accounted for on the modified accrual basis of accounting?

39) Several years ago, Durham City issued $1 million in zero coupon bonds due and payable in 2010. The bonds were sold at an amount to yield investors 6% over the life of the bonds. During the current year, how much interest expenditures would Durham City recognize related to these bonds?

40) As used in governmental accounting, interperiod equity refers to a concept of

41) The state has a legally separate State Building Authority, which has a board appointed by the Governor. The authority issues debt in its name, holds title to buildings in its name, and leases its building exclusively to the state. The authority would be considered a(n)

42) Revenues of a not-for-profit organization should be reported as

43) Financial statements for a church-supported college should be prepared according to standards set by the

44) For a not-for-profit hospital, which of the following financial statements is required?

45) What agency has the ultimate authority in defining independence for publicly traded companies?

46) A report on internal control effectiveness by management of public companies is required by which of the following:

47) Once sufficient predication has been established, what is the first step a fraud examiner following the fraud theory approach should take?

48) Which of the following best describes the objective of a fraud examination?

49) Damages intended to punish a defendant and deter the defendant and others from engaging in the same tortious conduct in the future are called

50) Where a contract calls for action that violates a statute, in a breach of contract case the court will

51) Ted’s Gifts and Sweets enters into a written contract with Bannon Candies to supply Ted’s with 60 boxes containing a dozen coconut clusters each month for sale to the public. The agreement contained an integration clause. Before the first delivery under the contract, Ted and his warehouse manager called Debbie, the Bannon’s account representative, to request that the candies be delivered in special Valentine’s Day boxes. Debbie told Ted, “Don’t worry, I’ll tell the shipping department to take care of that.” When the candies were delivered, they were in standard cardboard boxes. Ted called Bannon and threatened to sue for breach of contract. Will Ted prevail in his suit?

52) Jane and Bill are married. They purchase a house and lot as tenants by the entirety. Then Jane is killed in a car accident. Her will leaves everything to her sister, Ruth. What will happen to Jane’s interest in the property?

53) Which of the following is a correct statement of the requirements for a bona fide occupational qualification?

54) Which of the following statements accurately describes the workers’ compensation rules?

55) When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies?

56) On December 31, 2008, Kean Company changed its method of accounting for inventory from weighted-average cost method to the FIFO method. This change caused the 2008 beginning inventory to increase by $420,000. The cumulative effect of this accounting change to be reported for the year ended December 31, 2008, assuming a 40% tax rate, is

57) Which of the following serves as the highest authority for tax research, planning, and compliance activities?

58) The retail inventory method is based on the assumption that the

59) When an item of expense is paid and recorded in advance, it is normally called

60) Antonio owns land held for investment with a basis of $28,000. The city of Lafayette exercises the right of eminent domain and Antonio receives a payment of $48,000. What is Antonio's realized gain?

61) In April 2009 of this year, Emma acquired a machine for $50,000 for use in her business. The machine is classified as 7-year property. Emma elects out of bonus depreciation and does not expense the asset under Sec. 179. Emma's depreciation on the machine this year is

62) During the current year, a corporation sells equipment for $300,000 that it had purchased and placed in service in 2007. The equipment cost $270,000, and $60,000 of depreciation deductions was allowed. The results of the sale are

63) Susie owns a ranch in Wyoming, which Pat offers to purchase. Susie is not willing to sell the ranch but is willing to exchange the ranch for an apartment complex in Louisiana. The complex is available for sale. Pat purchases the apartment complex in Louisiana from Jody and transfers it to Susie in exchange for Susie's ranch. The ranch and the complex each have a $1,000,000 fair market value. Which of the following is true?

64) A married person who files a separate return can claim a personal exemption for his or her spouse if the spouse is not the dependent of another and has

65) Ricky has rented a house from Sarah since last year. The rent is usually $800 per month, but Sarah reduced the monthly rent down to $600 for all 12 months this year in exchange for Ricky constructing an addition to the house. The addition has a fair market value of $3,500. How much total rental income must Sarah report this year?

66) Alex is a calendar-year sole proprietor. He began business on December 1 of this year. He uses the accrual method of accounting. Alex had the following collections in the same month: He collected $7,000 in December from clients who paid cash for services to be performed next year. He collected $5,000 in December for services performed during December, which he deposited in an operating account on December 31 of this year. He collected $9,000 in December on accounts receivable for services performed in December, which he deposited in an operating account on January 2 of next year. What is the amount Alex must include in his income for December?

67) Bianca is beneficiary of an $80,000 insurance policy on her father's life. Upon his death, she may elect to receive the proceeds in 5 yearly installments of $17,500 or may take the $80,000 lump sum. She elects to take the lump sum payment. What are the tax consequences in year one?

68) Nonrefundable tax credits

69) Paul makes the following property transfers in the current year: $22,000 cash to his wife, $34,000 cash to a qualified charity, $120,000 house to his son, and $3,000 computer to an unrelated friend. The total of Paul's taxable gifts, assuming he does not elect gift splitting with his spouse, subject to the unified transfer tax, is

70) Which of the following best describes the weight of a revenue ruling?

71) Which of the following statements is true?

72) One consequence of a property distribution by a corporation to a shareholder is

73) Joshua owns 100% of Steeler Corporation's stock. Joshua's basis in the stock is $8,000. Steeler Corporation has E&P of $40,000. If Steeler Corporation redeems 60% of Joshua's stock for $50,000, Joshua must report dividend income of

74) In computing the ordinary income of a partnership, a deduction is allowed for

75) Which of the following would terminate a Subchapter S election?

76) The function of auditing is

77) Auditing is based on the assumption that financial data are verifiable. Data are verifiable when two or more qualified individuals,

78) Statement on Quality Control Standards No. 2 identifies certain quality control elements that should be considered when performing which types of services?

79) Internal auditors are primarily involved with

80) The statement that the reviewer “is not aware of any material modifications that should be made to the statements in order for them to be in conformity with GAAP” is known as

81) The assessment of inherent risk requires considering matters that have a pervasive effect on assertions for all or many accounts and matters that may pertain only to assertions for specific accounts. Which of the following is an example of a pervasive effects matter?

82) Specific audit objectives are normally

83) The Committee of Sponsoring Organizations (COSO) report identified five interrelated components of internal control. Since then, a sixth category has been identified, which is

84) Which of the following necessary controls would address a potential misstatement arising from a voucher being paid twice?

85) An effective accounting system should identify and record only the valid transaction of the entity that occurred in the current period, which relates to the

86) One of the six steps involved in performing analytical procedures includes the following:

87) In a normal audit, the relationship between the level of materiality used to plan the engagement and the level of materiality used to evaluate evidence is that

88) Use of auditor judgment or of a risk matrix is necessary in revising planned detection risk whenever

89) In the audit risk model, audit sampling applies to

90) Audit sampling is involved whenever an auditor

91) How can long-term assets best be tested for ownership?

92) How can long-term assets best be tested for current present value?

93) Because of the effects of circulation, some audit evidence is more reliable than other evidence. Which of the following is generally considered to be most reliable?

94) Which of the following accounts in a merchandising company is affected by both the revenue cycle and another cycle?

95) The auditor’s strategy in performing test counts during the inventory observation is to

96) Which one of the following analytical procedures may indicate possible inventory obsolescence problems when ratios are large?

97) The control of all funds during the count of cash on hand is meant primarily to prevent

98) Whether the entity maintains effective controls to provide reasonable assurance that private customer information obtained because of e-commerce is protected is defined as

99) A lawyer’s refusal to respond to a letter of audit inquiry normally requires the auditor to

100) Which of the following is a tort?