Wiley CPA Exam Review Problems And Solutions Vol 2 2011-2012 38th Edition O. Ray Whittington, Patrick R. Delaney - Solutions

Discover comprehensive support for "Wiley CPA Exam Review Problems And Solutions Vol 2 2011-2012" with our extensive collection of resources. Access the online answers key and solution manual to navigate through solved problems efficiently. Our solutions PDF offers detailed chapter solutions and step-by-step answers to enhance your understanding. Whether you're looking for a test bank or instructor manual, we provide essential tools to aid your study of this textbook. Enjoy the convenience of a free download to unlock all questions and answers, ensuring you’re fully prepared for your CPA exam.

40. A company uses process costing to assign product costs. Available inventory information for a period is as follows:Inventory(in units)MaterialcostConversioncostBeginning 0 Started during the period 15,000 $75,000 $55,500 Transferred out 13,500 End of period 1,500 The ending inventory was 25%
39. The New Wave Co. is considering a new method for allocating overhead to its two products, regular and premium coffee beans. Currently New Wave is using the traditional method to allocate overhead, in which the cost driver is direct labor costs. However, it is interested in using two different
38. Which of the following is one of the four perspectives of a balanced scorecard?a. Just in time.b. Innovation.c. Benchmarking.d. Activity-based costing.
37. A manufacturing firm identified that it would have difficulty sourcing raw materials locally, so it decided to relocate its production facilities. According to COSO, this decision represents which of the following responses to the risk?a. Risk reduction.b. Prospect theory.c. Risk sharing.d.
36. Each of the following is a limitation of enterprise risk management (ERM), excepta. ERM deals with risk, which relates to the future and is inherently uncertain.b. ERM operates at different levels with respect to different objectives.c. ERM can provide absolute assurance with respect to
35. Which of the following solutions creates an encrypted communication tunnel across the Internet for the purpose of allowing a remote user secure access into the network?a. Packet-switched network.b. Digital encryption.c. Authority certificate.d. Virtual private network.
34. Which of the following types of risk can be reduced by diversification?a. High interest rates.b. Inflation.c. Labor strikes.d. Recessions.
33. A company produces and sells two products. The first product accounts for 75% of sales and the second product accounts for the remaining 25% of sales. The first product has a selling price of $10 per unit, variable costs of $6 per unit, and allocated fixed costs of $100,000. The second product
32. A company recently issued 9% preferred stock. The preferred stock sold for $40 a share with a par of $20. The cost of issuing the stock was $5 a share. What is the company’s cost of preferred stock?a. 4.5%b. 5.1%c. 9.0%d. 10.3%
31. A company has the following target capital structure and costs:Proportion ofcapital structureCost ofcapitalDebt 30% 10%Common stock 60% 12%Preferred stock 10% 10%The company’s marginal tax rate is 30%. What is the company’s weighted-average cost of capital?a. 7.84%b. 9.30%c. 10.30%d. 11.20%
30. Variations between business cycles most likely are attributable to which of the following factors?a. The law of diminishing returns.b. Comparative advantage.c. Duration and intensity.d. Opportunity costs.
29. Which of the following technologies is specifically designed to exchange financial information over the World Wide Web?a. Hypertext markup language (HTML).b. Extensible business reporting language (XBRL).c. Hypertext transfer protocol (HTTP).d. Transmission control program/Internet
28. What is the primary objective of data security controls?a. To establish a framework for controlling the design, security, and use of computer programs throughout an organization.b. To ensure that storage media are subject to authorization prior to access, change, or destruction.c. To formalize
27. Which of the following metrics equates the present value of a project’s expected cash inflows to the present value of the project’s expected costs?a. Net present value.b. Return on assets.c. Internal rate of return.d. Economic value added.
26. Which of the following is a limitation of the profitability index?a. It uses free cash flows.b. It ignores the time value of money.c. It is inconsistent with the goal of shareholder wealth maximization.d. It requires detailed long-term forecasts of the project’s cash flows.
25. A company has gathered the following information from a recent production run:Standard variable overhead rate $10 Actual variable overhead rate 8 Standard process hours 20 Actual process hours 25 What is the company’s variable overhead spending variance?a. $50 unfavorable.b. $50 favorable.c.
24. A corporation is considering purchasing a machine that costs $100,000 and has a $20,000 salvage value. The machine will provide net annual cash inflows of $25,000 per year and has a six-year life. The corporation uses a discount rate of 10%. The discount factor for the present value of a
23. Farrow Co. is applying for a loan in which the bank requires a quick ratio of at least 1. Farrow’s quick ratio is 0.8. Which of the following actions would increase Farrow’s quick ratio?a. Purchasing inventory through the issuance of a long-term note.b. Implementing stronger procedures to
22. Which of the following types of variances would a purchasing manger most likely influence?a. Direct materials price.b. Direct materials quantity.c. Direct labor rate.d. Direct labor efficiency.
21. In order to comply with a director’s duty of loyalty to a corporation, what action(s) should a director take when presented with a corporate opportunity?a. Reject the opportunity and not offer it to the corporation.b. Accept the opportunity and not offer it to the corporation.c. Accept the
20. Which of the following indicates that the economy is in a recessionary phase?a. The rate of unemployment decreases.b. The purchasing power of money declines rapidly.c. Potential national income exceeds actual national income.d. There is a shortage of essential raw materials and costs are
19. Which of the following positions best describes the nature of the Board of Directors of XYZ Co.’s relationship to the company?a. Agent.b. Executive.c. Fiduciary.d. Representative.
18. Which of the following is necessary to be an audit committee financial expert according to the criteria specified in the Sarbanes-Oxley Act of 2002?a. A limited understanding of generally accepted auditing standards.b. Education and experience as a certified financial planner.c. Experience
17. According to COSO, the use of ongoing and separate evaluations to identify and address changes in internal control effectiveness can best be accomplished in which of the following stages of the monitoring-for-change continuum?a. Control baseline.b. Change identification.c. Change management.d.
16. An enterprise resource planning system is designed toa. Allow nonexperts to make decisions about a particular problem.b. Help with the decision-making process.c. Integrate data from all aspects of an organization’s activities.d. Present executives with the information needed to make
15. Each of the following periods is included when computing a firm’s target cash conversion cycle, except thea. Inventory conversion period.b. Payables deferral period.c. Average collection period.d. Cash discount period.
14. Which of the following costing methods will yield the lowest inventory value?a. Absorption.b. Hybrid.c. Process.d. Variable.
13. A corporation manages inventory performance by monitoring its inventory turnover. Selected financial records for the corporation are as follows:Year 1 Year 2 Year 3Annual sales $1,262,500 $1,062,500 $1,459,000 Gross annual profit percentage 45% 30% 40%The beginning finished goods inventory for
12. Which of the following types of unemployment typically results from technological advances?a. Cyclical.b. Frictional.c. Structural.d. Short-term.
11. A company has a policy of frequently cutting prices to increase sales. Product demand is significantly elastic.What impact would this have on the company’s situation?a. Quantity increases proportionally more than the price declines.b. Quantity increases proportionally less than the price
10. A corporation obtains a loan of $200,000 at an annual rate of 12%. The corporation must keep a compensating balance of 20% of any amount borrowed on deposit at the bank, but normally does not have a cash balance account with the bank. What is the effective cost of the loan?a. 12.0%b. 13.3%c.
9. Yarrow Co. is considering the purchase of a new machine that costs $450,000. The new machine will generate net cash flow of $150,000 per year and net income of$100,000 per year for five years. Yarrow’s desired rate of return is 6%. The present value factor for a five-year annuity of $1,
8. In a large firm, custody of an entity’s data is most appropriately maintained by which of the following personnel?a. Data librarian.b. Systems analyst.c. Computer operator.d. Computer programmer.
7. Jones Corp. had an opportunity to use its capacity to produce an extra 5,000 units with a contribution margin of$5 per unit, or to rent out the space for $10,000. What was the opportunity cost of using the capacity?a. $35,000b. $25,000c. $15,000d. $10,000
6. Jackson Co. is considering a project that will use 2,000 square feet of storage space at one of its facilities to store used equipment. What will determine Jackson’s opportunity cost?a. The net present value of the project.b. The internal rate of return of the project.c. The value of the next
5. What is the correct ascending hierarchy of data in a system?a. Character, record, file, field.b. Field, character, file, record.c. Character, field, record, file.d. Field, record, file, character.
4. Limitations of an activity based costing system include which of the following?a. Control of overhead costs is enhanced.b. Activity-based costing systems are less reliable.c. The expense of obtaining cost data is relatively high.d. It eliminates arbitrary assignment of overhead costs.
3. The following information pertains to a manufacturing company:Total sales $80,000 Total variable costs 20,000 Total fixed costs 30,000 What is the breakeven level in sales dollars?a. $30,000b. $40,000c. $50,000d. $80,000
2. Black Co.’s breakeven point was $780,000. Variable expenses averaged 60% of sales, and the margin of safety was $130,000. What was Black’s contribution margin?a. $ 364,000b. $ 546,000c. $ 910,000d. $1,300,000
1. The ABC Company is trying to decide between keeping an existing machine and replacing it with a new machine.The old machine was purchased just two years ago for$50,000 and had an expected life of 10 years. It now costs$1,000 a month for maintenance and repairs due to a mechanical problem. A new
40. In the current year, when Hoben’s tax basis in Lynz Partnership interest was $10,000, Hoben received a liquidating distribution as follows:Adjusted tax basis Fair market value Marketable securities $ 5,000 $ 5,000 Land 25,000 27,000 Lynz had no appreciated inventory, unrealized receivables,
39. As a general partner in Greenland Associates, an individual’s share of partnership income for the current tax year is $25,000 ordinary business income and a $10,000 guaranteed payment. The individual also received $5,000 in cash distributions from the partnership. What income should the
38. George and Martha are equal partners in G&M Partnership.At the beginning of the current tax year, the adjusted basis of George’s partnership interest was $32,500, which included his share of $40,000 of partnership liabilities.During the tax year, the following information applied to
37. “Hot assets” of a partnership would include which of the following?a. Cash.b. Unrealized receivables.c. Section 1231 assets.d. Capital assets.
36. Robin, a C corporation, had revenues of $200,000 and operating expenses of $75,000. Robin also received a$20,000 dividend from a domestic corporation and is entitled to a $14,000 dividend-received deduction. Robin donated$15,000 to a qualified charitable organization in the current year. What
35. Farr, an unmarried taxpayer, had $70,000 of adjusted gross income and the following deductions for regular income tax purposes:Home mortgage interest on a loan to acquire a principal residence $11,000 Miscellaneous itemized deductions above the threshold limitation $2,000 What are Farr’s
34. Stone owns 100% of an S corporation and materially participates in its operations. The stock basis at the beginning of the year is $5,000. During the year, the corporation makes a distribution of $3,500 and passes through a loss from operations of $2,000 for the year. What loss can Stone deduct
33. In the current year, a taxpayer reports the following items:Salary $50,000 Income from partnership A, in which the taxpayer materially participates 20,000 Passive activity loss from partnership B (40,000)During the year, the taxpayer disposed of the interest in partnership B, which had a
32. Lobster, Inc. incurs the following losses on disposition of business assets during the year:Loss on the abandonment of office equipment $ 25,000 Loss on the sale of a building (straight-line depreciation taken in prior years of $200,000) 250,000 Loss on the sale of delivery trucks 15,000 What
31. Decker sold equipment for $200,000. The equipment was purchased for $160,000 and had accumulated depreciation of $60,000. What amount is reported as ordinary income under Code Sec. 1245?a. $0b. $ 40,000c. $ 60,000d. $100,000
30. On January 1, Fast, Inc. entered into a covenant not to compete with Swift, Inc. for a period of five years, with an option by Swift to extend it to seven years. What is the amortization period of the covenant for tax purposes?a. 5 years.b. 7 years.c. 15 years.d. 17 years.
29. Sam’s year 2 taxable income was $175,000 with a corresponding tax liability of $30,000. For year 3, Sam expects taxable income of $250,000 and a tax liability of$50,000. In order to avoid a penalty for underpayment of estimated tax, what is the minimum amount of year 3 estimated tax payments
28. In the current year, Essex sold land with a basis of$80,000 to Yarrow for $100,000. Yarrow paid $25,000 down and agreed to pay $15,000 per year, plus interest, for the next five years, beginning in the second year. Under the installment method, what gain should Essex include in gross income for
27. Which of the following transactions is subject to registration requirements of the Securities Act of 1933?a. The public sale of stock of a trucking company regulated by the Interstate Commerce Commission.b. A public sale of municipal bonds issued by a city government.c. The issuance of stock by
26. Which of the following interests in real property gives the holder of that interest the greatest possessory interest in the property?a. Easement.b. Restrictive covenant.c. License.d. Fee simple
25. Under the Secured Transactions Article of the UCC, which of the following statements is correct regarding a security interest that has not attached?a. It is effective against the debtor, but not against third parties.b. It is effective against both the debtor and third parties.c. It is
24. Under the Negotiable Instruments Article of the UCC, the proper party to whom a check is presented for payment isa. The drawer.b. The maker.c. The holder.d. The drawee.
23. In which of the following types of action, brought against a CPA who issues an audit report containing an unqualified opinion on materially misstated financial statements, may a plaintiff prevail without proving reliance on the audit report?a. An action for common law fraud.b. An action for
22. A company engaged a CPA to perform the annual audit of its financial statements. The audit failed to reveal an embezzlement scheme by one of the employees. Which of the following statements best describes the CPA’s potential liability for this failure?a. The CPA’s adherence to generally
21. Under the position taken by a majority of the courts, to which third parties will an accountant who negligently prepares a client’s financial report be liable?a. Only those third parties in privity of contract with the accountant.b. All third parties who relied on the report and sustained
20. Campbell acquired a 10% interest in Vogue Partnership by contributing a building with an adjusted basis of $40,000 and a fair market value of $90,000. The building was subject to a $60,000 mortgage that was assumed by Vogue. The other partners contributed cash only. The basis of Campbell’s
19. Simon, a C corporation, had a deficit in accumulated earnings and profits of $50,000 at the beginning of the year and had current earnings and profits of $10,000. At year end, Simon paid a dividend of $15,000 to its sole shareholder.What amount of the dividend is reported as income?a. $0b. $
18. Lamont signed a promissory note in favor of Roth as part of Lamont’s purchase of supplies from Roth. The note required that the $10,000 be repaid 90 days from the date of the note. There were no conditions attached to repayment.Roth endorsed the note in blank and sold it to the bank.Lamont
17. Absent an election to close the books, the allocation of nonseparately stated income or loss for an S corporation shareholder that changed his ownership interest during the year is computed based on which of the following ownership percentages?a. Ownership percentage at the end of the S
16. Which of the following statements about qualifying shareholders of an S corporation is correct?a. A general partnership may be a shareholder.b. Only individuals may be shareholders.c. Individuals, estates, and certain trusts may be shareholders.d. Nonresident aliens may be shareholders.
15. Doyle has gambling losses totaling $7,000 during the current year. Doyle’s adjusted gross income is $60,000, including $3,000 in gambling winnings. Doyle can itemize the deductions. What amount of gambling losses is deductible?a. $0b. $3,000c. $5,800d. $7,000
14. Cole earned $3,000 in wages, incurred $1,000 in unreimbursed employee business expenses, paid $400 as interest on a student loan, and contributed $100 to a charity. What is Cole's adjusted gross income?a. $3,000b. $2,600c. $2,500d. $1,60011. Hogan exchanged a business-use machine having an
13. Carter incurred the following expenses in the current year: $500 for the preparation of a personal income tax re- turn, $100 for custodial fees on an IRA, $150 for profes- sional publications, and $2,000 for union dues. Carter's current year adjusted gross income is $75,000. Carter, who is not
12. A married couple purchased their principal residence for $300,000. They spent $40,000 on improvements. After living in it for 10 years, the couple sold the home for $650,000 and paid $36,000 in real estate commissions. What gain should the couple recognize on their joint return? $0a. $ 60,000b.
11. Hogan exchanged a business-use machine having an original cost of $100,000 and accumulated depreciation of $30,000 for business-use equipment owned by Baker having a fair market value of $80,000 plus $1,000 cash. Baker as- sumed a $2,000 outstanding debt on the machine. What taxable gain should
10. A taxpayer purchased five acres of land for $20,000 and placed in service other tangible business assets that cost$100,000. Disregarding business income limitations and assuming that the annual Section 179 (Election to Expense Certain Depreciable Business Assets) limit is $108,000, what maximum
9. Which of the following costs are subject to the Uniform Capitalization Rules of Code Sec. 263A for manufactured tangible personal property?a. Off-site storage.b. Advertising.c. Research.d. Marketing.
8. In calculating the tax of a corporation for a short period, which of the following processes is correct?a. Divide current year income by prior year income, then multiply the result by prior year tax.b. Compute tax on short-period income, then multiply the result by 12 divided by the number of
7. An individual taxpayer agreed to a finding of fraud on an income tax return filed two years ago. What is the maximum time limitation, if any, after which the IRS may not assess any additional taxes against the taxpayer for this tax return?a. One year.b. Two years.c. Three years.d. There is no
6. Under the Sales Article of the UCC, which of the following statements is correct regarding the creation of express warranties?a. Express warranties must contain formal words such as warranty or guarantee.b. Express warranties must be part of the basis of the bargain between buyer and seller.c.
5. Pierce owed Duke $3,000. Pierce contracted with Lodge to paint Lodge's house and Lodge agreed to pay Duke $3,000 to satisfy Pierce's debt. Pierce painted Lodge's house but Lodge did not pay Duke the $3,000. In a lawsuit by Duke against Pierce and Lodge, who will be lia- ble to Duke?a. Pierce
4. Under agency law, which of the following statements best describes ratification?a. A principal's affirmation of an agent's authorized act.b. A principal's affirmation of an agent's unautho- rized act.c. A principal's approval in advance of an agent's act.d. A principal's disavowal of an agent's
3. Louis, the volunteer treasurer of a nonprofit organiza- tion and a member of its board of directors, compiles the data and fills out its annual Form 990, Return of Organiza- tion Exempt From Income Tax. Under the Internal Revenue Code, Louis is not considered a tax return preparer because He is
2. According to the AICPA Statements on Standards for Tax Services, which of the following factors should a CPA consider in choosing whether to provide oral or written ad- vice to a client?a. Whether the client will seek a second opinion.b. The tax sophistication of the client.c. The likelihood
1. Pursuant to Treasury Circular 230, which of the follow- ing statements about the return of a client's records is cor- rect?a. The client's records are to be destroyed upon sub- mission of a tax return.b. The practitioner may retain copies of the client's records. C. The existence of a dispute
50. Campbell Corp. exchanged delivery trucks with Highway, Inc. Campbell’s truck originally cost $23,000, its accumulated depreciation was $20,000, and its fair value was$5,000. Highway’s truck originally cost $23,500, its accumulated depreciation was $19,900, and its fair value was$5,700.
49. Which of the following statements correctly describes the proper accounting for nonmonetary exchanges that are deemed to have commercial substance?a. It defers any gains and losses.b. It defers losses to the extent of any gains.c. It recognizes gains and losses immediately.d. It defers gains
48. If a city government is the primary reporting entity, which of the following is an acceptable method to present component units in its combined financial statements?a. Consolidation.b. Cost method.c. Discrete presentation.d. Government-wide presentation.
47. Damon Co. purchased 100% of the outstanding common stock of Smith Co. in an acquisition by issuing 20,000 shares of its $1 par common stock that had a fair value of$10 per share and providing contingent consideration that had a fair value of $10,000 on the acquisition date. Damon also incurred
46. A company enters into a three-year operating lease agreement effective January 1, year 1. The amounts due on the first day of each year are $25,000 in year 1, $30,000 in year 2, and $35,000 in year 3. What amount, if any, is the related liability on the first day of year 2?a. $0b. $ 5,000c.
45. Toigo Co. purchased merchandise from a vendor in England on November 20 for 500,000 British pounds. Payment was due in British pounds on January 20. The spot rates to purchase one pound were as follows:November 20 $1.25 December 31 1.20 January 20 1.17 How should the foreign currency
44. In year 1, a company reported in other comprehensive income an unrealized holding loss on an investment in available-for-sale securities. During year 2, these securities were sold at a loss equal to the unrealized loss previously recognized. The reclassification adjustment should include which
43. When the effective interest method of amortization is used for bonds issued at a premium, the amount of interest payable for an interest period is calculated by multiplying thea. Face value of the bonds at the beginning of the period by the contractual interest rate.b. Face value of the bonds
42. What are the components of the lease receivable for a lessor involved in a direct-financing lease?a. The minimum lease payments plus any executory costs.b. The minimum lease payments plus residual value.c. The minimum lease payments less residual value.d. The minimum lease payments less initial
41. Restorations of carrying value for long-lived assets are permitted if an asset’s fair value increases subsequent to recording an impairment loss for which of the following?Held for use Held for disposala. Yes Yesb. Yes Noc. No Yesd. No No
40. A company records items on the cash basis throughout the year and converts to an accrual basis for year-end reporting.Its cash-basis net income for the year is $70,000.The company has gathered the following comparative balance sheet information:Beginning of year End of year Accounts payable
39. A company calculated the following data for the period:Cash received from customers $25,000 Cash received from sale of equipment 1,000 Interest paid to bank on note 3,000 Cash paid to employees 8,000 What amount should the company report as net cash provided by operating activities in its
38. When purchasing a bond, the present value of the bond’s expected net future cash inflows discounted at the market rate of interest provides what information about the bond?a. Price.b. Par.c. Yield.d. Interest.
37. A nongovernmental not-for-profit organization received a $2 million gift from a donor who specified it be used to create an endowment fund that would be invested in perpetuity.The income from the fund is to be used to support a specific program in the second year and beyond. An investment
36. Hilltop Co.’s monthly bank statement shows a balance of $54,200. Reconciliation of the statement with company books reveals the following information:Bank service charge $10 Insufficient funds check 650 Checks outstanding 1,500 Deposits in transit 350 Check deposited by Hilltop and cleared by
35. Assuming constant inventory quantities, which of the following inventory-costing methods will produce a lower inventory turnover ratio in an inflationary economy?a. FIFO (first in, first out).b. LIFO (last in, first out).c. Moving average.d. Weighted-average.
34. Fern Co. has net income, before taxes, of $200,000, including $20,000 interest revenue from municipal bonds and $10,000 paid for officers’ life insurance premiums where the company is the beneficiary. The tax rate for the current year is 30%. What is Fern’s effective tax rate?a. 27.0%b.
33. Neron Co. has two derivatives related to two different financial instruments, instrument A and instrument B, both of which are debt instruments. The derivative related to instrument A is a fair value hedge, and the derivative related to instruments B is a cash flow hedge. Neron experienced
32. In preparing Chase City’s reconciliation of the statement of revenues, expenditures, and changes in fund balances to the government-wide statement of activities, which of the following items should be subtracted from changes in fund balances?a. Capital assets purchases.b. Payment of long-term
31. Abbott Co. is preparing its statement of cash flows for the year. Abbott’s cash disbursements during the year included the following:Payment of interest on bonds payable $500,000 Payment of dividends to stockholders 300,000 Payment to acquire 1,000 shares of Marks Co. common stock 100,000

Showing 1 - 100 of 4678

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Last

Wiley CPA Exam Review Problems And Solutions Vol 2 2011-2012 38th Edition O. Ray Whittington, Patrick R. Delaney - Solutions

Step by Step Answers