[Nov 18, 2021] Get New IIA-CIA-Part3 Practice Test Questions Answers
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NEW QUESTION 64
Large organizations often have their own telecommunications networks for transmitting and receiving voice, data, and images. Very small organizations, however, are unlikely to be able to make the investment required for their own networks and are more likely to use:
- A. Fast-packet switches.
- B. Standard electronic mail systems.
- C. A WAN.
- D. Public switched lines.
Answer: D
Explanation:
Companies can use public switched lines phone lines) on a per-transmission basis. This
option is the most cost-effective way for low-volume users to conduct telecommunications.
NEW QUESTION 65
In November of the current year, the vice-president of a local bank reviews the bank's mortgage portfolio prior to the December 31 year-end. The bank's largest client has mortgages on buildings in three cities. The client has incurred net losses for the past 3 years and is now experiencing serious cash flow problems. For the past 6 months, no payments have been made on any of the three mortgages. The vice-president reluctantly concludes that it is probable that the full amount of principal and interest will not be collected. What is the impact of this conclusion on the local bank's current year financial statements?
- A. The carrying amount of the mortgages should be reduced, with a charge directly to retained earnings.
- B. Contingency note disclosure of a possible impairment is required.
- C. No accounting or disclosure of a possible loss in value is necessary.
- D. The carrying amount of the mortgages should be reduced, with a charge to the income statement
Answer: D
Explanation:
A financial asset, such as a lender's mortgage receivable, is impaired if its carrying amount at the balance sheet date exceeds its estimated recoverable amount If it is probable that all amounts due on such a held-to-maturity investment a financial asset carried at amortized cost) cannot be collected, the loss should be included in profit or loss_ The loss equals the difference between the carrying amount and the present value of the expected future cash flows discounted at the original effective interest rate. The carrying amount of the asset should be reduced to its estimated recoverable amount directly or by crediting an allowance account.
NEW QUESTION 66
An accounting change requiring retrospective treatment is a change in:
- A. The residual value of equipment.
- B. An accounting policy inseparable from a change in an accounting estimate.
- C. A provision for warranty costs.
- D. Depreciation methods from straight-line to diminishing-balance.
Answer: D
Explanation:
A change in depreciation methods is reported as a change in accounting policy. A voluntary change in accounting policy is applied retrospectively unless it is impracticable. Retrospective application means adjusting the opening balances of equity for the first period presented and restating other comparative amounts.
NEW QUESTION 67
Which of the following is a primary driver behind the creation and prioritization of new strategic initiatives established by an organization?
- A. Threats and opportunities.
- B. Governance.
- C. Performance.
- D. Risk tolerance.
Answer: B
NEW QUESTION 68
Which statement best describes total quality management (TQM)?
- A. TQM emphasizes encouraging cross-functional teamwork.
- B. TQM emphasizes reducing the cost of inspection.
- C. TQM emphasizes doing each job right the first time.
- D. TQM emphasizes better statistical quality control techniques.
Answer: C
Explanation:
TQM establishes quality as an organizational objective and views it as a major component of the organization's service to its customers. It emphasizes employee training and commitment, product service design and production, and customer service. Ordinarily, the quality of a product or service is as important to customers as cost and timeliness. Superior product quality is not merely the result of more inspection, better statistical quality control, and cross-functional teamwork. Manufactures must make fundamental changes in the way they produce products and do each job right the first time.
NEW QUESTION 69
Consolidated financial statements are typically prepared when one entity has a majority voting interest in another unless:
- A. The two entities are in unrelated industries, such as manufacturing and real estate.
- B. The fiscal year-ends of the two entities are more than 3 months apart.
- C. The subsidiary is a financial institution.
- D. Control does not rest with the majority owners.
Answer: D
Explanation:
Consolidation normally is required when one entity owns, directly or indirectly, more than 50% of the outstanding voting interests of another entity. However, a majority owned subsidiary is not consolidated if control does not rest with the majority owners.
NEW QUESTION 70
Data regarding four different products manufactured by an organization are presented as follows. Direct material and direct labor are readily available from the respective resource markets. However, the manufacturer is limited to a maximum of 3.000 machine hours per month.
Units Produced per Machine Hour:
- A. 0
- B. Product B
- C. 1
- D. 3 The product that is the most profitable for the manufacturer in this situation is
- E. Product C
- F. Product A
- G. Product D
- H. 2
Answer: A
Explanation:
When resources are limited, maximum profits achieved by maximizing the dollar contribution margin per limited or constraining factor. In this situation, machine hours are the constraining factor. Product B has a contribution margin per machine hour of US $28 [4 x (US $18 - $11)], which is greater than that of Product A [3 x (US $15 - $7) = US $24], Product C [2 x (US $20 - $10) = US $20] or Product D [3 x (US $25 - $16) = US $27].
NEW QUESTION 71
Basic earnings per share for entity is approximately:
- A. US $2.00
- B. US $1 73
- C. US$227
- D. US $1.87
Answer: B
Explanation:
BEPS equals profit minus preference dividends, divided by ordinary shares outstanding_ Thus. BEPS equals US $1_73 {[$150.000 - $2 x 10.000 preference shares)] - 75.000 ordinary shares}.
NEW QUESTION 72
One of the main reasons total quality management (TQM) can be used as a strategic weapon is that:
- A. The cumulative improvement from a company's TQM efforts cannot readily be copied by competitors.
- B. TQM provides a comprehensive planning process for a business.
- C. Reduced costs associated with better quality can support higher shareholder dividends.
- D. Introducing new products can lure customers away from competitors.
Answer: A
Explanation:
TQM is a comprehensive approach to quality. It treats the pursuit of quality as a basic organizational function that is as important as production or marketing. Because TQM affects every aspect of the organization's activities, it is part of the organizational culture. Thus, the cumulative effect of TQM's continuous improvement process can attract and hold
customers and cannot be duplicated by competitors.
NEW QUESTION 73
User acceptance testing is more important in an object-oriented development process than in a traditional environment because of the implications of the:
- A. Inheritance of properties in hierarchies.
- B. Lack of a tracking system for changes.
- C. Absence of traditional design documents.
- D. Potential for continuous monitoring.
Answer: A
Explanation:
In object-oriented development, all objects in a class inherit the properties of higher classes in the hierarchy. Thus, changes in one object may affect many other objects, and the extent and effects of errors significantly increase. Testing one object provides no assurance that the objects are properly coordinated. Accordingly, user acceptance testing to verify correct functioning of the whole system becomes more important.
NEW QUESTION 74
If the average age of inventory is 60 days, the average age of the accounts payable is 30 days, and the average age of accounts receivable is 45 days, the number of days in the cash flow cycle is:
- A. 135 days.
- B. 90 days.
- C. 75 days.
- D. 105 days.
Answer: C
Explanation:
The cash flow cycle begins when the entity pays for merchandise it has purchased and ends when the entity receives cash from the sale of the merchandise. Inventory is held for an average of 60 days prior to sale, but the average age of accounts payable is 30 days.
Consequently, the average time between outlay and sale is 30 days. Receivables are collected an average of 45 days after sale, so the length of the cash flow cycle is 75 days (30 + 45).
NEW QUESTION 75
An entity started in Year 1 with 200 scent. 1 3ndles on hand at a cost of US $3.50 each.
These candles sell Lich. The following schedule represents the purchases and sales of candles during Year 1:
If the entity uses periodic FIFO inventory pricing, the gross profit for Year 1 would be:
- A. US $2,854
- B. US $2,805
- C. US $2,755
- D. US $2,920
Answer: B
Explanation:
The FIFO method assumes that the first goods purchased are the first goods sold and that ending inventory consists of the latest purchases. Moreover, whether the inventory system is periodic or perpetual does not affect FIFO valuation. The cost of goods sold is US $2.445 {beginning inventory200 units x $3.50) - purchases [(250 units x $3.30)200 units x $3.10) 350 units x $3.00)] - ending inventory250 units x $3.00)}_ Thus, the gross profit for Year 1 using FIFO is US $2.805 [sales750 units x $7.00) - cost of goods sold of $2 445].
NEW QUESTION 76
If the bank uses the rnaxirna criterion for selecting the location of the branch, it will select:
- A. L4
- B. L2
- C. L3
- D. L1
Answer: A
Explanation:
Under the maximax criterion, the decision maker selects the choice that maximizes the maximum profit. The maximum profits for the five locations are
A bank plans to open a branch in one of five locations labeled L1, L2, L3, L4, L5). Demand for bank services may be high, medium, or low at each of these locations. Profits for each location-demand combination are presented in the payoff matrix.
NEW QUESTION 77
Capacity overbuilding is most likely to occur when management is focused on which of the following?
- A. Diversification.
- B. Finance.
- C. Marketing.
- D. Production.
Answer: D
NEW QUESTION 78
A company manufactures a product that is sold for US $37.95. It uses an absorption-cost system. Plant capacity is 750,000 units annually, but normal volume is 500,000 units. Costs at normal volume are given below.
Fixed manufacturing overhead is budgeted at US $4.5 million. A customer has offered to purchase 100,000 units at US $25.00 each to be packaged in large cartons, not the normal individual containers. It will pick up the units in its own trucks. Thus, variable selling and administrative expenses will decrease by 60%. The company should compare the total revenue to be derived from this order with the total relevant costs of:
- A. U S $3,150,000
- B. U S $1,880,000
- C. U S $1.830,000
- D. U S $2,930,000
Answer: C
Explanation:
The necessary assumptions are that all fixed costs and the unit variable costs of direct materials, direct labor, and variable manufacturing overhead are not affected by the special order. Hence, the fixed costs are not relevant. The unit costs of direct materials and direct labor are given as US $9.80 and US $4.50, respectively. The unit variable manufacturing overhead cost is US $3.00 [ $6,000,000 total manufacturing overhead -$4,500,000 total fixed manufacturing overhead) 500,000 units normal volume]. The unit variable selling and administrative cost is US $1.00 [$2.50 x 1.0 - .6)]. Consequently, the total relevant cost of the special order is US $1,830,000 [100,000 units x $9.80 + $4.50 +$3.00 + $1.00)]. A manufacturing company is considering a new product for the coming year, which is an electric motor the company can purchase from a reliable vendor for US $21.00 per unit. The alternative is to manufacture the motor internally. The company has excess capacity to manufacture the 30,000 motors needed in the coming year except for manufacturing space and special machinery. The machinery can be leased for US $45,000 annually. Finished goods warehouse space adjoining the main manufacturing facility, leased for US $39,000 annually, can be converted and used to manufacture the motors. Additional off-site space can be leased at an annual cost of US $54,000 to replace the finished goods warehouse. The estimated unit costs for manufacturing the motors internally, exclusive of the leasing costs itemized above, are:
NEW QUESTION 79
No derivative financial instruments that have1) fixed or determinable payments, 2 a fixed maturity, and3) are held by the investing entity with a positive intent and ability to hold until maturity are what category of financial instruments?
- A. Available-for-sale financial assets.
- B. Financial assets or liabilities held for trading.
- C. Fair value hedges.
- D. Held-to-maturity investments.
Answer: D
Explanation:
Financial instruments are classified in three categories. Held-to-maturity investments are No derivatives that have fixed or determinable payments and a fixed maturity. The entity must have a positive intent and ability to hold such investments to maturity. The other categories are financial assets or liabilities held for trading and available-for-sale financial assets.
NEW QUESTION 80
An objective of financial reporting is
- A. Assessing the adequacy of internal control.
- B. Providing information on compliance with established procedures.
- C. Evaluating management results compared with standards.
- D. Providing information useful to investors, creditors, donors, and other users for decision making.
Answer: D
Explanation:
The objectives of financial reporting are concerned with the underlying goals and purposes of accounting. They are to provide information that1) is useful to those making investment and credit decisions, assuming that those individuals have a reasonable understanding of business and economic activities:2) is helpful to current and potential investors and creditors and other users in assessing the amount timing, and uncertainty of future cash flows; and3) discloses economic resources claims to those resources, and the changes therein.
NEW QUESTION 81
In which of the following plans is an employee most likely to find guidance on action and performance standards?
- A. Mission plans.
- B. Strategic plans.
- C. Tactical plans.
- D. Operational plans.
Answer: D
NEW QUESTION 82
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