PTA Flashcards
Question 1
AICPA.010405BEC
Which of the following statements concerning the business cycle, if any, is correct?
I. Business cycles recur with a consistent pattern of length and magnitude.
II. Business cycles impact individual industries at different times and with different degrees of severity.
I only is correct.
II only is correct.
Both I and II are correct.
Neither I nor II is correct.
II Only is Correct
The business cycle does not recur in a consistent pattern of length or magnitude. Cycles are of somewhat varying lengths and of different degrees of severity. Moreover, business cycles impact some industries before others and with different degrees of intensity.
Question 3 AICPA.040105BEC-SIM The demand for a commodity would increase when the price of a Substitute Commodity Complementary Commodity Increases Increases Increases Decreases Decreases Increases Decreases Decreases
increases/decreases is Correct
A substitute commodity is one which satisfies the same basic need or want as another commodity. When the price of a substitute commodity increases, consumers will shift demand away from that commodity to other commodities which satisfy the same basic purpose. For example, as the price of cable TV increases customers shift to satellite-based TV, a substitute commodity for cable.
A complementary commodity is one which is used together with another commodity. When the price of a complementary commodity decreases, the demand for that commodity increases and so does the demand for the commodity for which it is complementary. For example, automobiles and tires are complementary.
As the price of automobiles decrease, the demand for automobiles and for tires increases.
Which of the following is not a benefit of using an electronic data interchange (EDI) system?
Reduction in the number of suppliers a company must deal with.
Reduction in the ordering costs.
Faster transaction processing.
Reduction in the lead time between placing the order and receiving the goods.
reduction in the number of suppliers is Correct
EDI does not necessarily reduce the number of suppliers a company works with.
Question 10
AICPA.060630BEC
Jonathan Mfg. adopted a job-costing system. For the current year, budgeted cost driver activity levels for direct labor hours and direct labor costs were 20,000 and $100,000, respectively. In addition, budgeted variable and fixed factory overheads were $50,000 and $25,000, respectively.
The actual costs and hours for the year were as follows:
Direct labor hours 21,000
Direct labor costs $110,000
Machine hours 35,000
For a particular job, 1,500 direct labor hours were used. Using direct labor hours as the cost driver, what amount of overhead should be applied to this job?
$3,214.
$5,357.
$5,625.
$7,500.
5625 is Correct
Overhead is applied to jobs using a pre-determined overhead rate, which is calculated by dividing estimated overhead costs (both variable and fixed) by a budgeted or estimated quantity of a cost driver. In this case, the total overhead costs of $75,000 are divided by the 20,000 budgeted direct labor hours to arrive at an overhead application rate of $3.75 per direct labor hour.
The costs are applied to production based on the 1,500 actual direct labor hours used ($3.75 * 1,500 = $5,625).
Question 12 AICPA.070702BEC-SIM Which one of the following generally is not an advantage associated with the use of trade accounts payable and accrued accounts payable for short-term financing needs? Flexibility. Ease of use. Available for all short-term needs. Absence of collateral required.
available for short term needs is Correct
Trade and accrued accounts payable are not available for financing all short-term needs. They can be used only for financing costs/expenses acquired through trade and accrual accounts. For example, they could not be used to finance short-term cash borrowings. A short-term note (or other source) would be used to meet short-term cash needs.
Question 13
assess.AICPA.070903BEC-III.E_2-18
The controller of Peabody, Inc. has been asked to present an analysis of accounts receivable collections at the upcoming staff meeting. The following information is used:
12/31, year 2 12/31, year 1
Accounts receivable $100,000 $130,000
Allowance, doubtful accounts (20,000) (40,000)
Sales 400,000 200,000
Cost of goods sold 350,000 70,000
What is the receivables turnover ratio as of December 31, year 2?
- 0
- 7
- 5
- 6
4.7 is Correct
Accounts receivable turnover is calculated as: (Net Credit) Sales/Average Net Accounts Receivable.
In this question, it is first necessary to compute average net accounts receivable.
Average Net Accounts Receivable = [Beginning Net Accounts Receivable ($130,000 - $40,000 = $90,000) + Ending Net Accounts Receivable ($100,000 - $20,000 = $80,000)]/2 = ($90,000 + $80,000 = $170,000)/2 = $85,000
Accounts Receivable Turnover = $400,000/$85,000 = 4.705
Question 20 AICPA.090557BEC-SIM Which one of the following typically is not a characteristic of commercial paper? Matures in the short-term. Loans are secured. Users have high credit ratings. Provide cash for operating use.
loans are secured Correct
Commercial paper is short-term unsecured promissory notes. Typically, use of commercial paper does not involve security from the borrower.
Question 21 AICPA.090570BEC-SIM Allen issues $100 par value preferred stock that is selling for $101 per share, on which the firm has to pay an underwriting fee of $5 per share sold. The stock is paying an annual dividend of $10 per share. Allen's tax rate is 40%. Which one of the following is the cost of preferred stock financing to Allen? 4.2% 6.2% 9.9% 10.4%
10.4%
The correct calculation is the annual dividend divided by the net proceeds of the stock issuance. Therefore, the calculation would be $10 annual dividend/$101 selling price - $5 underwriter’s fee = $96 proceeds, or $10/$96 = 10.4%
Question 24 AICPA.130518BEC-SIM According to the 17 COSO control principles, change management primarily relates to which fundamental component of internal control: Control activities. Control environment. Risk assessment. Monitoring.
risk assessment is Correct
According to the COSO principles, risk assessment primarily relates to organizational objectives, risk assessment, fraud, and change management.
According to the 17 COSO control principles, change management primarily relates to which fundamental component of internal control: Control activities. Control environment. Risk assessment. Monitoring.
According to the COSO principles, risk assessment primarily relates to organizational objectives, risk assessment, fraud, and change management.
Which of the following is assigned to goods that were either purchased or manufactured for resale? Relevant cost. Period cost. Opportunity cost. Product cost.
Product costs include direct materials costs and, in a manufacturing environment, direct labor and indirect manufacturing costs assigned to goods held for resale.
Which of the following statements concerning the leasing of an asset is/are correct?
I. If the net present value of purchasing an asset is not positive, then leasing the asset should not be considered as an alternative.
II. In a net-net lease, the lessee is responsible for executory costs and residual value of the leased asset.
Statement II is correct.
In a net-net lease agreement, the lessee assumes responsibility for both executory costs (i.e., insurance, taxes, maintenance, etc.) of the asset and for the asset having a pre-established residual value at the end of the lease.
