PTB Flashcards
Question 6
AICPA.040156BEC-SIM
On August 31, 2004, Ashe Corp. adopted a plan to accumulate $1,000,000 by September 1, 2008. Ashe plans to make four equal annual deposits to a fund that will earn interest at 10% compounded annually.
Ashe will make the first deposit on September 1, 2004. Future value and future amount factors are as follows:
Future value of $1.00 at 10%
for 4 periods
1.46
Future amount of ordinary annuity of
$1.00 at 10% for 4 periods
4.64
Future amount of annuity due of
$1.00 at 10% for 4 periods
5.11
Present value of ordinary annuity of
$1.00 at 10% for 4 periods
3.17
Which one of the following would be the amount of annual deposits Ashe should make (rounded)?
$250,000
$215,500
$195,700
$146,000
C - 195,700 The question is concerned with determining a series of equal deposit amounts that would total $1,000,000 at the end of four years, a future amount. Thus, a future value table, not a present value table, should be used.
Because Ashe will make a series of payments, not a single lump-sum payment, the future value of $1.00 table (1.46) is not appropriate. Finally, since Ashe will make the first payment at the beginning of the first year of the four year period (9/1/04 - 9/1/08), the appropriate future value (or amount) table is for an annuity due – payments are made at the beginning of each period.
Thus, the correct factor is 5.11 and the calculation would be:
$X (annual deposit) x 5.11 = $1,000,000
$X = $1,000,000/5.1 = $195,700 (rounded)
So, $195,700 deposited on September 1 of 2004, 2005, 2006 and 2007 at an interest rate of 10% would accumulate to $1,000,000 by September 1, 2008.
A digital signature is used primarily to determine that a message is Unaltered in transmission. Not intercepted en route. Received by the intended recipient. Sent to the correct address.
Unaltered in transmission. This Answer is Correct
This answer is correct. A digital signature consists of a digest of the original message that is encrypted with the sender’s private key. The use of the private key provides the sender’s authentication, and the transmission of the encrypted digest (which is later decrypted and compared to a digest of the message received) permits the detection of any alterations during transmission.
A company's target gross margin is 40% of the selling price of a product that costs $89 per unit. The product's selling price should be $124.60. $142.40. $148.33. $222.50.
The problem provides that the company has a 40% gross margin. By extension, costs are 60% of sales. If costs are $89, then selling price must be $148.33, as calculated below:
Selling price
÷ Ratio of costs to sales
$89 ÷ 60%
$148.33
Which of the following assumptions is associated with the economic order quantity formula?
The carrying cost per unit will vary with quantity ordered.
The cost of placing an order will vary with quantity ordered.
Periodic demand is known.
The purchase cost per unit will vary based on quantity discounts.
Periodic demand is known.
This Answer is Correct
The economic order quantity determines the order size that will minimize total inventory cost – both order cost and carrying cost. The economic order quantity model (formula) assumes that periodic demand is known and constant during the period. It also assumes that order cost and carrying cost per unit are known and constant during the period.
If a country with a developed economy faces a debt crisis that makes it unable to satisfy its foreign debt obligations, which of the following international organizations is most likely to be called upon to help resolve the debt crisis? International Monetary Fund (IMF). World Bank. World Trade Organization (WTO). United Nations (UN).
The objective of the International Monetary Fund is to maintain order in the international monetary system by providing funds to countries in financial crisis. It can assist countries facing currency, banking, and financial debt crises.
Outco, Inc., a U.S. firm, has a contract to acquire spare parts from a foreign supplier. The contract provides that the parts are to be manufactured to Outco's specifications and Outco is to pay in U.S. dollars. Which of the following risks will Outco encounter as a direct result of the contract? Currency Exchange Risk Quality Risk Yes Yes Yes No No Yes No No
No Yes
This Answer is Correct
Outco will not face currency exchange risk because payment is to be made in U.S. dollars. Any change in exchange rate will be a risk for the foreign supplier. Outco will face quality risk, i.e., the risk that the quality of the spare parts does not meet Outco’s specifications.
Dough Distributors has decided to increase its daily muffin purchases by 100 boxes. A box of muffins costs $2 and sells for $3 through regular stores. Any boxes not sold through regular stores are sold through Dough’s thrift store for $1. Dough assigns the following probabilities to selling additional boxes:
Additional sales Probability
60 .6
100 .4
What is the expected value of Dough’s decision to buy 100 additional boxes of muffins?
$28.
$40.
$52.
$68.
Income or net cash inflow is expected to increase:
$52 = .6[60($3-$2) + 40($1-$2)] + .4[100($3-$2)].
The .6 term reflects the expected sales of 60 units at regular price less their cost, and 40 at the reduced price less their cost. The .4 term reflects the expected sales all at regular prices less their cost.
In the COSO enterprise risk management framework, the term risk tolerance refers to
The level of risk an organization is willing to accept.
The acceptable variation with respect to a particular objective.
The risk of an event after considering management’s response.
Events that require no risk response.
COSO ERM framework defines risk tolerance as the acceptable variation with respect to a particular organizational objective.
Question 29
COST-0007
Mason Company uses a job-order cost system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct-labor dollars. The rate for the current year is 200% of direct-labor dollars. This rate was calculated last December and will be used throughout the current year. Mason had one job, No. 150, in process on August 1 with raw materials costs of $2,000 and direct-labor costs of $3,000. During August, raw materials and direct labor added to jobs were as follows:
No. 150 No. 151 No. 152
Raw materials $ X $4,000 $1,000
Direct labor 1,500 5,000 2,500
Actual manufacturing overhead for the month of August was $20,000. During the month, Mason completed Job Nos. 150 and 151. For August, manufacturing overhead was Overapplied by $4,000 Underapplied by $7,000 Underapplied by $2,000 Underapplied by $1,000
C is correCt because predetermined overhead rate is based on 200% of direct-labor dollars. The sum of the direct-labor dollars for the month of August was $9,000. To find manufacturing overhead applied for August, the $9,000 direct-labor dollars is multiplied by 200%, which is $18,000. Therefore, subtracting applied manufacturing overhead from $20,000, actual manufacturing overhead accounts for $2,000 of underapplied manufacturing overhead in the month of August.
A data warehouse in an example of Online analytical processing. Online transaction processing. Essential information batch processing. Decentralized processing.
Online analytical processing.
This Answer is Correct
This answer is correct because a data warehouse is an approach to online analytical processing that combines data into a subject oriented, integrated collection of data used to support management decision-making processes.
