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NEW QUESTION # 202
Which of the following security controls might prevent unauthorized access to sensitive data via an unattended workstation directly connected to a mainframe?
- A. Use of a screen saver.
- B. Encryption of data files.
- C. Automatic log-off of inactive users.
- D. Use of passwords to identify users.
Answer: C
Explanation:
Automatic log-off of inactive users is a utility that disconnects a workstation from the mainframe or server after a certain amount of time. Once the workstation has been disconnected, the user must log back into the system.
NEW QUESTION # 203
The following information is available for an entity for the quarter ended March 31 of the current year:
The gross profit margin is normally 200 of sales. What is the estimated cost of the merchandise inventory at March 31 of the current year?
- A. US $20,000
- B. US $60.000
- C. US $180,000
- D. US $40,000
Answer: B
Explanation:
The gross profit margin percentage is given as 20% of sales. Hence, cost of goods sold must have been US $160,000 [$:4110,000 sales x1_0 - 2)]. The estimated cost of the inventory at March 31 is computed as follows:
An entity had the following opening and closing inventory balances during the current
The following transactions and events occurred during the current year:
US $300,000 of raw materials were purchased, of which US $20,000 were returned
because of defects. US $600,000 of direct labor costs were incurred.
US $750,000 of production overhead costs were incurred.
NEW QUESTION # 204
Which of the following IT operational areas is responsible for the integrity of data flow within an organization?
- A. Database
- B. Server
- C. Operating system
- D. Network
Answer: D
NEW QUESTION # 205
One of the primary advantages of budgeting is that it:
- A. Bases the profit plan on estimates.
- B. Is continually adapted to fit changing circumstances.
- C. Requires departmental managers to make plans in conjunction with the plans of other interdependent departments.
- D. Does not take the place of management and administration.
Answer: C
Explanation:
A budget is a quantitative model of a plan of action developed by management. A budget functions as an aid to planning, coordination, and control. Thus, a budget helps management to allocate resources efficiently and to ensure that subunit goals are congruent with those of other subunits and of the organization.
NEW QUESTION # 206
Participating preference shareholders are entitled to:
- A. Monitor any sinking funds for the purchase and retirement of debt.
- B. Convert their shares into ordinary shares.
- C. Share in the entity's earnings beyond the stated dividend level.
- D. Vote at all annual meetings.
Answer: C
Explanation:
Participating preference shareholders are entitled to share in the earnings of the entity. They participate in earnings distributions under set terms and conditions. Hence, after the stated preference dividend is paid, and ordinary shareholders receive an equal dividend, any remaining dividends are allocated to all shareholders in proportion to the par values of their shares.
NEW QUESTION # 207
Which of the following statements is correct regarding risk analysis?
- A. The highest risk assessment should always be assigned to the area with the highest probability of occurrence.
- B. The extent to which management judgments are required in an area could serve as a risk factor in assisting the auditor in making a comparative risk analysis.
- C. Risk analysis must be reduced to quantitative terms in order to provide meaningful comparisons across an organization.
- D. The highest risk assessment should always be assigned to the area with the largest potential loss.
Answer: B
NEW QUESTION # 208
For an entity with a defined postemployment benefit plan, the fair value of plan assets at the beginning of the year was US $500,000. No unrecognized net cumulative actuarial gain or loss existed. On the last day of the fiscal year the fair value of plan assets was US $620.000. Benefits paid equaled US $100,000 and the entity made US $120.000 in contributions. The discount rate was 10% and the expected long-term rate of return on plan assets was 12%. The actual return on plan assets was:
- A. US $50,000
- B. US $60,000
- C. US 100,000
- D. US $75,000
Answer: C
Explanation:
The actual return on plan assets is equal to the difference between the fair value of plan assets at the beginning and the end of the year adjusted for contributions and benefits paid. Thus, the actual return is US $100,000.
NEW QUESTION # 209
Using an EOQ analysis (assuming a constant demand), it is determined that the optimal order quantity is 2,500. The company desires a safety stock of 500 units. A 5-day lead time is needed for delivery. Annual inventory holding costs equal 25% of the average inventory level. It costs the company US $4 per unit to buy the product, which it sells for US $8. It costs the company US $150 to place a detailed order, and the monthly demand for the product is 4,000 units.
Annual inventory holding costs equal:
- A. US$750
- B. US$1,750
- C. US$2,250
- D. US$1,250
Answer: B
Explanation:
Given that demand is constant and the EOQ is 2,500 units, the average inventory level without regard to safety stock is 1,250 units (2.500 + 2). Adding safety stock results in an average level of 1,750 units (1,250 + 500). Given also that annual holding costs are 25% of average inventory and that unit cost is US $4. total annual holding cost is US $1,750 [(1,750 units x US $4) x 25%].
NEW QUESTION # 210
A company services office equipment. Some customers bring their equipment to the company's service shop; other customers prefer to have the company's service personnel come to their offices to repair their equipment. The most appropriate costing method for the company is:
- A. A job-order costing system.
- B. An operation costing system.
- C. An activity-based costing system.
- D. A process costing system.
Answer: A
Explanation:
Job-order costing systems are designed to accumulate costs for tasks or projects that are unique and non repetitive. Service organizations are interested in identifying the costs applicable to each customer and/or each serum.
NEW QUESTION # 211
The following forms of short-term borrowing are available to an entity: Floating lien Factoring Revolving credit Chattel mortgages Bankers' acceptances . Lines of credit Commercial paper
The forms of short-term borrowing that are unsecured credit are:
- A. Floating lien, revolving credit, chattel mortgage, and commercial paper
- B. Factoring, chattel mortgage, bankers' acceptances, and line of credit
- C. Floating lien, chattel mortgage, bankers' acceptances, and line of credit
- D. Revolving credit, bankers' acceptances, line of credit, and commercial paper
Answer: D
Explanation:
An unsecured loan is a loan made by a bank based on credit information about the borrower and the ability of the borrower to repay the obligation. The loan is not secured by collateral, but is made on the signature of the borrower. Unsecured credit is not backed by collateral. Revolving credit bankers' acceptances, lines of credit, and commercial paper are all unsecured means of borrowing. A chattel mortgage is a loan secured by personal property movable property such as equipment or livestock). A floating lien is also secured by property, such as inventory, the composition of which may be constantly changing. Factoring is a form of financing in which receivables serve as security.
NEW QUESTION # 212
For a finance lease, the gross investment, lease payments receivable, recorded by the lesser is equal to the:
- A. Minimum lease payments plus the unguaranteed residual value accruing to the lesser at the end of the lease term
- B. Present value of the minimum lease payments minus the unguaranteed residual value accruing to the lesser at the end of the lease term.
- C. Difference between the present value of the minimum lease payments and the unearned finance income.
- D. Lower of 90% of the present value of the minimum lease payments or the fair value of the leased asset.
Answer: A
Explanation:
For a finance lease, the lesser should record as the gross investment in the lease the amount of the minimum lease payments (payments plus either any bargain purchase option or any residual value guaranteed by the lessee, a party related to the lessee, or by a financially capable parry unrelated to the lesser or the lessee) plus any amounts of unguaranteed residual value. The net investment in the lease is equal to the gross investment minus unearned finance income.
NEW QUESTION # 213
The decision to implement enhanced failure detection and back-up systems to improve data integrity is an example of which risk response?
- A. Risk acceptance.
- B. Risk avoidance.
- C. Risk sharing.
- D. Risk reduction.
Answer: D
NEW QUESTION # 214
The practice of recording advance payments from customers as a liability is an example of applying the:
- A. Going concern assumption.
- B. Historical cost principle.
- C. Monetary unit assumption.
- D. Revenue recognition principle.
Answer: D
Explanation:
Recognition of revenue occurs when the flow of future economic benefits to the enterprise is probable and such benefits are reliably measurable. Recording advance payments as a Ii ability reflects a determination that the receipt of future economic benefits is not sufficiently certain to merit revenue recognition, given that the enterprise has not yet performed its obligations.
NEW QUESTION # 215
On May 1, Year 1, an entity issued, at 103 plus accrued interest, 500 of its 12%, US $1,000 bonds. The bonds are dated January 1, Year 1, and mature on January 1, Year 6. Interest is payable semiannually on January 1 and July 1 The journal entry to record the issuance of the bonds and the receipt of the cash proceeds is
- A. Option D
- B. Option B
- C. Option C
- D. Option A
Answer: C
Explanation:
The face amount of the 500 bonds is equal to US $500,000500 x $1,000). The cash proceeds excluding interest from the issuance of the bonds are US $515.000$500,000 103%). The US $15,000 premium is the difference between the cash issuance proceeds and the face amount of the bonds. Because the bonds were issued between interest payment dates, the issuer is also entitled to receive accrued interest for the 4 months between the prior interest date and the issuance date. The accrued interest is US $20,000 [500 bonds x $1,000 face value 12% stated rate x4 - 12)]. The issuing entity will therefore receive US $535,000 in cash$515,000 + $20,000). The resulting journal entry includes a US $535,000 debit to cash, a US $500,000 credit to bonds payable, a US $15,000 credit to premium, and a US $20,000 credit to either interest payable or interest
NEW QUESTION # 216
Which of the following can be viewed as a potential benefit of an enterprisewide resource planning system?
- A. Integration of business processes into multiple operating environments and databases.
- B. Exploitation of opportunities and mitigation of risks associated with e-business.
- C. Real-time processing of transactions and elimination of data redundancies.
- D. Fewer data processing errors and more efficient data exchange with trading partners.
Answer: C
NEW QUESTION # 217
The management of working capital is most crucial for which of the following aspects of business?
- A. Efficiency
- B. Profitability
- C. Liquidity
- D. Solvency
Answer: C
NEW QUESTION # 218
The bullwhip, or whiplash, effect on inventories begins when retailers face uncertain demand from consumers caused by randomness in buying habits. It can be avoided by:
- A. Shortages that may lead to rationing by suppliers or manufacturers and hoarding by manufacturers or retailers.
- B. The need to purchase or manufacture goods in cost-efficient batches.
- C. Changes in price that may encourage purchases in anticipation of future increases.
- D. Sharing of information and coordination among the organizations in the supply chain.
Answer: D
Explanation:
Sharing information about sales, inventory, pricing, advertising campaigns, and sales forecasts by all functions and organizations in the supply chain moderates demand uncertainty for all parties. The desired results are a) minimization of inventories held by suppliers, manufacturers, and retailers; b) avoidance of stackouts; c) fewer rush orders; and d) production as needed by retailers.
NEW QUESTION # 219
In an organization where enterprise risk management practices are mature, which of the following is a core internal audit role?
- A. Coaching management in responding to risk.
- B. Giving assurance that risks are evaluated correctly.
- C. Developing the risk management strategy for the board's approval.
- D. Facilitating the identification and evaluation of risks.
Answer: B
NEW QUESTION # 220
A restaurant deeded to expand its business to include delivery services rather than relying on third-party food delivery services. Which of the following best describes the restaurant's strategy?
- A. Vertical integration
- B. Risk avoidance
- C. Differentiation
- D. Diversification
Answer: A
NEW QUESTION # 221
Which of the following is a product-oriented definition of a business rather than a market-oriented definition of a business?
- A. We are a people-and-goods mover.
- B. We make movies.
- C. We supply energy.
- D. We provide climate control in the home.
Answer: B
NEW QUESTION # 222
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