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model based testing for embedded systems

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

1. For $50 a month, Rawl Co. visits its customers’ premises and performs insect control services. If customers experience problems between regularly scheduled visits, Rawl makes service calls at no additional charge. Instead of paying monthly, customers may pay an annual fee of $540 in advance.
6. During an engagement to review the financial statements of a nonissuer (nonpublic) entity, an accountant becomes aware that several leases that should be capitalized are not capitalized. The accountant considers these leases to be material to the financial statements. The accountant decides to
5. Which of the following information discovered during an audit most likely would raise a question concerning possible illegal acts?a. Related-party transactions, although properly disclosed, were pervasive during the year.b. The entity prepared several large checks payable to cash during the
4. In planning an audit, the auditor’s knowledge about the design of relevant controls should be used toa. Identify the types of potential misstatements that could occur.b. Assess the operational efficiency of internal control.c. Determine whether controls have been circumvented by collusion.d.
3. Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle?a. Fictitious transactions may be recorded that cause an understatement of revenues and an overstatement of receivables.b. Claims received from
2. Which of the following characteristics most likely would heighten an auditor’s concern about the risk of material misstatements in an entity’s financial statements?a. The entity’s industry is experiencing declining customer demand.b. Employees who handle cash receipts are not bonded.c.
1. According to the profession’s ethical standards, an auditor would be considered independent in which of the following instances?a. The auditor is the officially appointed stock transfer agent of a client.b. The auditor’s checking account that is fully insured by a federal agency is held at a
24. According to the net present value criterion, which of the following is true?a. Manager one will recommend that the project be accepted.b. Manger two will recommend that the project be accepted.c. All three managers will recommend acceptance of the project.d. All three managers will recommend
23. A call option on a share of common stock is more valuable when there is lowera. Market value of the underlying share.b. Exercise price on the option.c. Time to maturity on the option.d. Variability of market price on the underlying share.
22. Davis Corp. is considering establishing a lockbox system.The bank will charge $30,000 annually for the service, which will save the firm approximately $15,000 in processing costs. The lockbox system will reduce the float for cash receipts by 2 days. Assuming that the average daily cash receipts
21. The company’s direct labor efficiency variance for the current month would bea. $600 unfavorable.b. $602 unfavorable.c. $2,400 unfavorable.d. $3,000 unfavorable.
20. The company’s direct labor rate variance for the current month would bea. $10 unfavorable.b. $240 unfavorable.c. $248 unfavorable.d. $250 unfavorable.
19. If a movie theater increases ticket prices for the matinee shows by 10% and the quantity of tickets demanded decreases by 5% then the demand for matinee movie tickets isa. Inelastic.b. Elastic.c. Unitary.d. Not related to the change in price.
18. From an investor’s viewpoint, the least risky type of bond in which to invest is a(n)a. Debenture bond.b. Deep discount bond.c. Income bond.d. Secured bond.
17. The best reason corporations issue Eurobonds rather than domestic bonds is thata. These bonds are denominated in the currency of the country in which they are issued.b. These bonds are normally a less expensive form of financing because of the absence of government regulation.c. Foreign buyers
16. Deming Corporation utilizes the capital asset pricing model (CAPM) to estimate the cost of its common stockholder equity. Calculate CAPM given the following: the risk-free rate of return is 5%, the expected rate of return is 10%, and firm’s beta is 1.APPENDIX A: BUSINESS ENVIRONMENT AND
15. The primary reason for adopting TQM is to achievea. Greater customer satisfaction.b. Reduced delivery time.c. Reduced delivery charges.d. Greater employee participation.
14. A reduction in economic activity will be displayed by all of the following except:a. Decreased housing starts.b. Increase in the quantity of unemployment claims.c. Reduction in the amount of luxury purchases.d. Increase in personal travel.
13. Assuming that the company sells 80,000 units, what is the maximum that can be paid for an advertising campaign while still breaking even?a. $ 135,000b. $1,015,000c. $ 535,000d. $ 695,000
12. How many units does the company need to produce and sell to make a before-tax profit of 10% of sales?a. 65,000 units.b. 36,562 units.c. 90,000 units.d. 29,250 units.
11. In forecasting purchases of inventory for a firm, all of the following are useful except:a. Knowledge of the behavior of business cycles.b. Internal allocations of costs to different segments of the firm.c. Information on the seasonal variations in demand.d. Econometric modeling.
10. A commercial disaster recovery service that allows a business to continue computer operations in the event of a computer disaster is aa. Hot site.b. Checkpoint.c. Rollback.d. DOS (Disaster Operating System).
9. When using a “join” operation with SQL, one would most likely bea. Adding a new computed column to a table.b. Combining some or all of the information in two tables.c. Extending computer memory capability by combining two or more CPUs.d. Encrypting data.
8. One would most frequently expect a “help desk” to be a responsibility ofa. Applications programming.b. Data library.c. Operations.d. Systems programming.
7. In encryption, a value that must be placed into the algorithm to decode an encrypted message is referred to as a(n)a. Key.b. Algoret.c. Router.d. Alphanumeric.
6. A combination of hardware and software that links to different types of networks is referred to as aa. Bridge.b. Gateway.c. Switch.d. Router.
5. Which of the following is not a control for limiting access to particular electronic information within the IT system?a. Database replication.b. Views.c. Passwords.d. Restricting privileges.
4. Which of the following is not a component of the COSO’s integrated enterprise risk management framework?a. Objective setting.b. Risk response.c. Risk assessment.d. Strategy mapping.
3. Which of the following best describes the New York Stock Exchange rules regarding the independence of directors?a. All directors must be independent.b. Two-thirds of all directors must be independent.c. More than one-half of all directors must be independent.d. There are no requirements
2. Which of the following committees of a board of directors is most critical to corporate governance?a. The audit committee.b. The finance committee.c. The investment committee.d. The executive committee.
1. All of the following represent particular risks of outsourcing a process to foreign operations except:a. Quality risk.b. Language risk.c. Core competency risk.d. Public opinion risk.
24. A consultant recommends that a company hold funds for the following two reasons.Reason 1: Cash needs can fluctuate substantially throughout the year.Reason 2: Opportunities for buying at a discount may appear during the year.The cash balances used to address the reasons given above are
23. X and Y are complementary products. If the price of product Y increases, the immediate impact on product X is that itsa. Price will decrease.b. Quantity demanded will decrease.c. Quantity supplied will decrease.d. Price, quantity demanded, and supplies will remain unchanged.
22. The economic order quantity for inventory is higher for an organization that hasa. Lower annual unit sales.b. Higher fixed inventory ordering costs.c. Higher annual carrying costs as a percentage of inventory value.d. A higher purchase price per unit of inventory.
21. A company expects to produce 100,000 units of a product at a total cost of $500,000. The selling price of the product that will provide the company with a 15% beforetax return, to the nearest cent, isa. $0.75b. $1.15c. $5.75d. $7.67
20. The formula for calculating the times-interest-earned ratio is a.Earnings before interest and taxes Interest expense b.Earnings before taxes Interest expense c.Interest expense Earnings before interest and taxes d.Interest expense Earnings before taxes
19. An organization has an opportunity to establish a zero balance account system using four different regional banks.The total amount of the maintenance and transfer fees is estimated to be $8,000 per annum. The organization believes that it will increase the float on its operating disbursements
18. What is the best measure of risk for a well-diversified portfolio?a. Beta.b. Standard deviation.c. Variance.d. Expected value.
17. What is Lopinsky’s debt-to-equity ratio?a. 1.28b. 0.56c. 1.20d. 2.10
16. What is Lopinsky’s weighted-average cost of capital?a. 9.50%b. 8.75%c. 8.22%d. 6.10%
15. If the economy is facing demand-pull inflation, which of the following would be a logical action by the government?a. Decrease income taxes.b. Sell government securities.c. Lower the discount rate.d. Increase government spending.
14. In the cost of quality, liability claims are examples ofa. Prevention costs.b. Appraisal costs.c. Internal failure costs.d. External failure costs.
13. Economists generally agree that business cycles are caused by changes ina. Aggregate expenditures resulting from technological changes, political events, or government monetary policy.b. Stock prices resulting from the need for market corrections, inflation, or government intervention.c. Public
12. Without prejudice to your answer in 11, assume that the manufacturing company employs the step-down allocation method to allocate service department costs. If it allocates the cost of the maintenance department first, then the amount of the maintenance department’s costs that are directly
11. The allocation method that would provide this manufacturer with the theoretically best allocation of service department costs would bea. A dual-rate allocation method allocating variable cost on expected actual usage and fixed costs on long-run capacity usage.b. The step-down allocation
10. As used in information technology, a protocol is a set of rules fora. Exchanging data between two computers.b. Operating an operating system.c. Identifying proper computer technology needs.d. Measuring IT transmission speed.
9. The network most frequently used for private operations designed to link computers within a building in a research park is referred to as a(n)a. Bulletin board service.b. Local area network.c. Wide area network.d. Zero base network.
8. Using sophisticated techniques from statistics, artificial intelligence, and computer graphics to explain, confirm, or explore relationships among data is referred to asa. Data mining.b. Data warehousing.c. Decision support.d. Distributed analysis.
7. Which of the following is not a widely used disaster recovery approach?a. Hot site.b. Firewall.c. Regular backups.d. Cold site.
6. Which of the following is most likely to be considered an advantage of a sophisticated multiuser database?a. It may be operated and maintained without particular computer expertise.b. Information may be retrieved quickly.c. Conversion of traditional files to such a format is ordinarily extremely
5. A common input device is a(n)a. Compiler.b. Printer.c. Expert system.d. Point-of-sale recorder.
4. In project management, a technique that involves classifying tasks into categories based on how urgent they are is referred to asa. ABC Analysis.b. Project crashing.c. Critical path analysis.d. Sensitivity analysis.
3. A framework for enterprise risk management was developed bya. The American Institute of CPAs (AICPA).b. The Committee of Sponsoring Organizations(COSO).c. The Governmental Accountability Office (GAO).d. The Securities and Exchange Commission (SEC).
2. Proper segregation of duties for control purposes involves segregation of authorization, approval, execution, anda. Custody of assets.b. Recordkeeping.c. Budgeting.d. Review.
1. The component of COSO’s Framework for internal control that deals with ensuring that employees have timely information to make decisions is referred to asa. The control environment.b. Information and communication.c. Knowledge management.d. Business knowledge.
24. A company obtaining short-term financing with trade credit will pay a higher percentage financing cost, everything else being equal, whena. The discount percentage is lower.b. The items purchased have a higher price.c. The items purchased have a lower price.d. The supplier offers a longer
23. Which one of the following is not a determinant in valuing a call option?a. Exercise price.b. Expiration date.c. Forward contract price.d. Interest rate.
22. Inventory turnover is calculated as follows: a. b. C. d. Net sales Year-end inventory Year-end inventory Net sales Cost of goods sold Average inventory Net sales Average inventory
21. The marginal cost of capital (MCC) curve for a company rises twice, first when the company has raised $75 million and again when $175 million of new funds have been raised. These increases in the MCC are caused bya. Increases in the returns on the additional investments undertaken.b. Decreases
20. The retail computer store’s budgeted total costs and expenses for the coming year would bea. $7,252,400b. $7,526,960c. $7,558,960d. $7,893,872
19. The retail computer store’s budgeted total revenue for 2009 would bea. $8,804,000b. $8,460,000c. $8,904,000d. $8,964,000
18. Which type of economic market structure is characterized by many firms selling a differentiated product with no significant barriers to entry?a. Monopoly.b. Oligopoly.c. Perfect competition.d. Monopolistic competition.
17. Which of the following measures residual income for Lenley Manufacturing Company for the year?a. $1,000,000b. $2,000,000c. $3,000,000d. $6,000,000
16. Which of the following measures the return on investments for Lenley Manufacturing Company for the year?a. 2%b. 8%c. 10%d. 30%
15. A strategy map in the balanced scorecard framework isa. A statement of what the strategy must achieve and what is critical to its success.b. Key action programs required to achieve strategic objectives.c. Diagrams of the cause-and-effect relationships between strategic objectives.d. The level
14. Layton Co. has an average accounts payable balance of$850,000 and its cost of goods sold for the year is$8,750,000. Using a 365-day year, calculate the firm’s payables deferral period.a. 25.50 days.b. 30.50 days.c. 35.46 days.d. 42.33 days.
13. Identify the cost curve for the average cost per unit for cost Y.a. Curve 1.b. Curve 2.c. Curve 3.d. Curve 4. Curve 1 Curve 2 Curve 3 Quantity Curve 4 Quantity Quantity Quantity
12. What is the average cost per unit at a production level of 8,000 units for cost X?a. $5.98b. $5.85c. $7.90d. $4.83
11. A system that stores transactions in a single database, but process them at various sites is referred to asa. Centralized system.b. Database management normalization system.c. Decentralized system.d. Distributed system.
10. A method to originally capture data to multiple magnetic disks is referred to asa. Analog approach.b. Parallel magnetic drums.c. RAID.d. Zip drive approach.
9. Which of the following is correct concerning the Internet?a. All communications are processed using URL—Uniform Resource Language.b. It is composed of an international collection of networks of independently owned computers.c. It requires the use of viruses, which invariably escape their
8. The type of system most likely to be used to initially record the daily processing of transactions isa. Transaction processing system.b. Management information system.c. Decision support system.d. Executive information system.
7. A data model developed specifically for use in designing accounting information databases isa. REA data model.b. Data definition language.c. Entity-relationship model.d. Networked model.
6. Which of the following is a part of the central processing unit?a. Analog translator converter.b. Arithmetic/logic unit.c. Optical disk.d. Printer unit.
5. Which of the following is not an appropriate response to an identified enterprise risk?a. Acceptance.b. Avoidance.c. Sharing.d. Assessing.
4. Effective enterprise risk management will provide the following benefits for a company except:a. Fewer financial surprises.b. Ability to seize opportunities.c. Avoidance of all significant risks.d. Alignment of risk with risk appetite.
3. Which of the following is a compensation system that may result in shirking on the part of management?a. A fixed salary.b. A fixed salary plus a bonus based on accounting income.c. A fixed salary plus stock options.d. A fixed salary plus stock grants.
2. Which of the following is not a monitoring device for effective corporate governance?a. The audit committee.b. The chief financial officer.c. The SEC.d. External auditors.
1. Which of the following is not a component of internal control as set forth by the COSO internal control framework?a. Control environment.b. Control activities.c. Risk assessment.d. Segregation of duties.
24. Following are the fair market values of Wald’s assets at the date of death:Personal effects and jewelry $1,400,000 Land bought by Wald with Wald’s funds five years prior to death and held with Wald’s sister as joint tenants with right of survivorship 3,900,000 The executor of Wald’s
23. Steve and Kay Briar, US citizens, were married for the entire 2010 calendar year. In 2010, Steve gave a $30,000 cash gift to his sister. The Briars made no other gifts in 2010. They each signed a timely election to treat the$30,000 gift as made one-half by each spouse. Disregarding the unified
22. On July 1, 2010, in connection with a recapitalization of Yorktown Corporation, Robert Moore exchanged 1,000 shares of stock that cost him $95,000 for 1,000 shares of new stock worth $108,000 and bonds in the principal amount of $10,000 with a fair market value of $10,500.What is the amount of
21. Bern Corp., an S corporation, had an ordinary loss of$36,500 for the year ended December 31, 2010. At January 1, 2010, Meyer owned 50% of Bern’s stock. Meyer held the stock for forty days in 2010 before selling the entire 50%interest to an unrelated third party. Meyer’s basis for the stock
20. The following information pertains to Hull, Inc., a personal holding company, for the year ended December 31, 2010:Undistributed personal holding company income $100,000 Dividends paid during 2010 20,000 Consent dividends reported in the 2010 individual income tax returns of the holders of
19. Roberta Warner and Sally Rogers formed the Acme Corporation on October 1, 2010. On the same date Warner paid $75,000 cash to Acme for 750 shares of its common stock. Simultaneously, Rogers received 100 shares of Acme’s common stock for services rendered. How much should Rogers include as
18. Clark and Hunt organized Jet Corp. with authorized voting common stock of $400,000. Clark contributed$60,000 cash. Both Clark and Hunt transferred other property in exchange for Jet stock as follows:Other property Adjusted basis Fair market value Percentage of Jet stock acquired Clark $ 50,000
17. Hall and Haig are equal partners in the firm of Arosa Associates. On January 1, 2010, each partner’s adjusted basis in Arosa was $40,000. During 2010 Arosa borrowed$60,000, for which Hall and Haig are personally liable.Arosa sustained an operating loss of $10,000 for the year ended December
16. In 2008, Martha received as a gift several shares of Good Corporation stock. The donor’s basis of this stock was $2,800, and he paid gift tax of $50. On the date of the gift, the fair market value of the stock was $2,600. If Martha sells this stock in 2010 for $2,700, what amount and type of
15. On July 1, 2010, Riley exchanged investment real property, with an adjusted basis of $160,000 and subject to a mortgage of $70,000, and received from Wilson $30,000 cash and other investment real property having a fair market value of $250,000. Wilson assumed the mortgage. What is Riley’s
14. A calendar-year taxpayer files an individual tax return for 2010 on March 20, 2011. The taxpayer neither committed fraud nor omitted amounts in excess of 25% of gross income on the tax return. What is the latest date that the Internal Revenue Service can assess tax and assert a notice of
13. This item is based on the following selected 2010 information pertaining to Sam and Ann Hoyt, who filed a joint federal income tax return for the calendar year 2010. The Hoyts had adjusted gross income of $34,000 and itemized their deductions for 2010. Among the Hoyts’ cash expenditures
12. On August 1, 2010, Graham purchased and placed into service an office building costing $264,000 including$30,000 for the land. What was Graham’s MACRS deduction for the office building in 2010?a. $9,600b. $6,000c. $3,600d. $2,250
11. Axis Corp. is an accrual-basis calendar-year corporation.On December 13, 2010, the Board of Directors declared a 2% of profits bonus to all employees for services rendered during 2010 and notified them in writing. None of the employees own stock in Axis. The amount represents reasonable
10. For the year ended December 31, 2010, Don Raff earned $1,000 interest at Ridge Savings Bank on a certificate of deposit scheduled to mature in 2011. In January 2011, before filing his 2010 income tax return, Raff incurred a forfeiture penalty of $500 for premature withdrawal of the funds. Raff
9. Moch sold her farm to Watkins and took back a purchase money mortgage on the farm. Moch failed to record the mortgage. Moch’s mortgage will be valid against all of the following parties excepta. The heirs or estate of Watkins.b. A subsequent mortgagee who took a second mortgage since he had
8. A dispute has arisen between two merchants over the question of who has the risk of loss in a given sales transaction.The contract does not specifically cover the point. The goods were shipped to the buyer who rightfully rejected them. Which of the following factors will be the most important
7. In which of the following situations would an oral agreement without any consideration be binding under the Uniform Commercial Code?a. A renunciation of a claim or right arising out of an alleged breach.b. A firm offer by a merchant to sell or buy goods which gives assurance that it will be held
6. Your client has in its possession the following instrument:$700.000 Provo, Utah May 1, 2002 Thirty days after date I promise to pay to the order of Cash Seven hundred Dollars at Boise, Idaho Value received with interest at the rate of 10% per annum.This instrument is secured by a conditional
5. Which of the following statements is(are) true of the National Environment Policy Act?I. The Act provides tax breaks for those companies that help accomplish national environmental policy.II. Enforcement of the Act is primarily accomplished by litigation of persons who decide to challenge
4. One of the major purposes of federal security regulation is toa. Establish the qualifications for accountants who are members of the profession.b. Eliminate incompetent attorneys and accountants who participate in the registration of securities to be offered to the public.c. Provide a set of

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