CPA-TEST Online Practice Questions and Answers
Selected data pertaining to ABC Co. for the calendar year 20X4 is as follows: What was the inventory turnover for 20X4?
A. 1.2 times.
B. 1.5 times.
C. 2.0 times.
D. 3.0 times.
A client has a large and active investment portfolio that is kept in a bank safe deposit box. If the auditor is unable to count the securities at the balance sheet date, the auditor most likely will:
A. Request the bank to confirm to the auditor the contents of the safe deposit box at the balance sheet date.
B. Examine supporting evidence for transactions occurring during the year.
C. Count the securities at a subsequent date and confirm with the bank whether securities were added or removed since the balance sheet date.
D. Request the client to have the bank seal the safe deposit box until the auditor can count the securities at a subsequent date.
Hannah, CPA, has been engaged to perform financial statement audits for three different clients. The first two clients, ABC Shop and XYZ Technologies, are both nonissuers, while the third client, DEF Industries, is an issuer. Hannah is required to follow PCAOB standards in her audit of DEF Industries. She has also been asked to conduct the XYZ audit in accordance with both generally accepted auditing standards and the auditing standards of the PCAOB. Regarding the ABC engagement, Hannah has decided to follow only generally accepted auditing standards, and not the standards of the PCAOB. Which of the following best describes the scope of Hannah's work related to internal control in these three engagements?
A. Hannah must express an opinion on the effectiveness of internal control in all three engagements.
B. Hannah must express an opinion on the effectiveness of internal control in both the DEF and XYZ engagements, but is not required to express such an opinion in the ABC engagement.
C. Hannah must express an opinion on the effectiveness of internal control in the DEF engagement, but is not required to express such an opinion in the XYZ and ABC engagements.
D. Hannah is not required to express an opinion on the effectiveness of internal control in any of the three engagements, since she was hired to perform a financial statement audit and not to report on internal control.
ABC Corp. and XYZ Corp. are contemplating entering into an unincorporated joint venture. Such a joint venture:
A. Will be treated as a partnership in most important legal respects.
B. Must be dissolved upon the completion of a single undertaking.
C. Will be treated as an association for federal income tax purposes and taxed at the prevailing corporate rates.
D. Must file a certificate of limited partnership with the appropriate state agency.
Which of the following statements is correct if there is an increase in the resources available within an economy?
A. More goods and services will be produced in the economy.
B. The economy will be capable of producing more goods and services.
C. The standard of living in the economy will rise.
D. The technological efficiency of the economy will improve.
Frictional unemployment refers to unemployment resulting from:
A. The skills of workers do not correspond to the skills demanded by employers.
B. The time needed to match qualified job seekers with available jobs.
C. Seasonal decreases in demand for labor.
D. A recession in the economy.
Which one or the following statements about the payback method of investment analysis is correct? The payback method:
A. Does not consider the time value of money.
B. Uses discounted cash flow techniques.
C. Generally leads to the same decision as other methods for long-term projects.
D. Is rarely used in practice.
ABC outlet, a relatively new store, is a cafe that offers customers the opportunity to browse the Internet or play computer games at their tables while they drink coffee. The customer pays a fee based on the amount of time spent signed on to the computer. The store also sells books, tee shirts, and computer accessories. ABC has been paying all of its bills on the last day of the payment period, thus forfeiting all supplier discounts. Shown below are data on ABC's two major vendors, including average monthly purchases and credit terms.
Assuming a 360-day year and that ABC continues paying on the last day of the credit period, the company's weighted annual interest rate for trade credit (ignoring the effects of compounding) for these two vendors is:
A. 27.0 percent.
B. 28.0 percent.
C. 29.3 percent.
D. 30.2 percent.
The following selected data pertain to the Darwin Division of ABC Co. for 1994:
What was Darwin's 1994 residual income?
A. $0
B. $4,000
C. $10,000
D. $30,000
ABC Corp. has three manufacturing divisions, each of which has been determined to be a reportable segment. In 1989, Clay division had sales of $3,000,000, which was 25% of ABC's total sales, and had operating costs of $1,900,000, as reported to the CFO. In 1989, ABC incurred operating costs of $500,000 that were not directly traceable to any of the divisions. In addition, ABC incurred corporate interest expense of $300,000 in 1989. In reporting segment information, what amount should be shown as Clay's operating profit for 1989?
A. $875,000
B. $900,000
C. $975,000
D. $1,100,000
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