[Oct-2021] Dumps Brief Outline Of The IIA-CIA-Part3 Exam - TroytecDumps
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NEW QUESTION 98
The management and employees of a large household goods moving company believe that it if became nationally known as adhering to total quality management and continuous improvement, one result would be an increase in the company's profits and market share. What should the company focus onto achieve quality more economically?
- A. External failure costs.
- B. Appraisal costs.
- C. Prevention costs.
- D. Internal failure costs.
Answer: C
Explanation:
Prevention costs are incurred to prevent defects. Prevention is ordinarily less costly than the combined costs of appraisal, internal failure, and external failure.
NEW QUESTION 99
A service entity keeps its accounting records on a cash basis. During the recent year the entity collected US $600,000 from customers. The following information is also available:
What was the amount of service revenue for the year on an accrual basis?
- A. US $525.000
- B. US $555,000
- C. US $645.000
- D. US $675.000
Answer: C
Explanation:
The amount of service revenue for the year on an accrual basis equals US $645,000$600,000 cash collected - $15,000 unearned revenue + $60,000 increase in accounts receivable).
NEW QUESTION 100
Which of the following price adjustment strategies is designed to smooth production for the selling firm?
- A. Quantity discounts.
- B. Seasonal discounts.
- C. Cash discounts.
- D. Functional discounts.
Answer: B
Explanation:
Seasonal discounts are designed to smooth production by the selling firm. For example, a ski manufacturer offers seasonal discounts to retailers in the spring and summer to encourage early ordering.
NEW QUESTION 101
What language interface would a database administrator use to establish the structure of database tables?
- A. Data control language.
- B. Data definition language.
- C. Data manipulation language.
- D. Data query language.
Answer: B
Explanation:
The schema is a description of the overall logical structure of the database using data definition language DDL), which is the connection between the logical and physical structure of the database. DDL is used to define, or determine, the database.
NEW QUESTION 102
The activity that involves a trial run of a product in a typical segment of the market before proceeding to a national launch is referred to as:
- A. Experimentation
- B. Segmentation
- C. Positioning
- D. Test marketing
Answer: D
NEW QUESTION 103
Which of the following describes the result if an organization records merchandise as a purchase, but fails to include it in the closing inventory count?
- A. The net income for the period will be understated.
- B. There will be no effect on the cost of goods sold or the net income for the period.
- C. The cost of goods sold for the period will be overstated.
- D. The cost of goods sold for the period will be understated.
Answer: C
NEW QUESTION 104
The economic order quantity can be calculated using the following formula:
Which of the following describes how the optimal order size will change if the annual demand increases by 36 percent?
- A. Increase by about 7 percent.
- B. Decrease by about 17 percent.
- C. Decrease by about 7 percent.
- D. Increase by about 17 percent.
Answer: D
NEW QUESTION 105
A capital investment project will have a higher net present value, everything else being equal, if it has:
- A. A higher initial investment level.
- B. A higher discount rate.
- C. Cash inflows that are larger in the later years of the life of the project.
- D. Cash inflows that are larger in the earlier years of the life of the project.
Answer: D
NEW QUESTION 106
Which of the following statements about desktop computers, servers, and mainframe computers is true?
- A. The cost per transaction to process on each type of computer has decreased in recent years.
- B. Servers must be programmed directly in machine language while mainframes use higher-level language.
- C. Desktop computers usually more than servers but less than mainframes.
- D. Because of the increase, desktop computers, there will be little need for mainframes in the near future.
Answer: A
Explanation:
Advances in technology have resulted in less expensive computers and increased computing power. The cost to process transactions on all kinds of computers has therefore decreased.
NEW QUESTION 107
Which of the following is a type of network in which an organization permits specific users (such as existing customers) to have access to its internal network through the Internet by
building a virtual private network?
- A. Broadband.
- B. Extranet.
- C. Digital subscriber line.
- D. Intranet.
Answer: B
NEW QUESTION 108
If a system does not have a mainframe computer or a file server but does processing within a series of personal computers, the network is a(n):
- A. Offline processing system.
- B. Direct access system.
- C. Expert system.
- D. Peer-to-peer system.
Answer: D
Explanation:
A local area network is a user-controlled network that operates without the assistance of a common carrier. It can have several personal computers attached to a host computer, can be linked as part of several LANs that may or may not communicate with a host computer, or can be connected together but not connected to a host computer stand alone). A peer-to-peer network operates without a mainframe or file server.
NEW QUESTION 109
A contract dispute has arisen between an organization and a major supplier. To resolve the dispute, the most competent evidence is:
- A. The original contract.
- B. A letter from the supplier's attorney.
- C. Oral testimony of contracting parties.
- D. Actions by parties to the contract.
Answer: A
Explanation:
The best primary) evidence is the most persuasive evidence. Reliability and the best evidence rule are closely related. The best evidence rule is ordinarily applied only to documentary evidence, especially to proof of the content of a writing. If the original writing is available, the best evidence rule prohibits a parry from proving the content of a writing through oral testimony. Therefore, the original writing is the most competent evidence.
NEW QUESTION 110
When sales volume is seasonal in nature, certain items in the budget must be coordinated.
The three most significant items to coordinate in budgeting seasonal sales volume are:
- A. Production volume, finished goods inventory, and sales volume.
- B. Raw material inventory, direct labor hours, and manufacturing overhead costs.
- C. Raw material inventory, work-in-process inventory, and production volume.
- D. Direct labor hours, work-in-process inventory, and sales volume.
Answer: A
Explanation:
The most difficult items to coordinate in any budget, particularly for a seasonal business are production volume, finished goods inventory, and sales. Budgets usually begin with sales volume and proceed to production volume, but the reverse is sometimes used when production is more of an issue than generation of sales. Inventory levels are also important because sales cannot occur without inventory and the maintenance of high inventory levels is costly. The Raymar Company is preparing its cash budget for the months of April and May. The firm has established a US $200,000 line of credit with its bank at a 12% annual rate of interest on which borrowings for cash deficits must be made in US$ increments. There is no outstanding balance on the line of credit loan on April 1 Collections. 50% of the current month's sales budget and 50% of the Principal repayments are to be made in any month in which previous month's sales budget there is a surplus of cash. Interest is to be paid monthly. If Accounts Payable Disbursements. 75% of the current month's there are no outstanding balances on the loans. Raymar will invest any cash in excess of its desired end-of-month cash accounts payable budget and 25% of the previous month's accounts payable budget balance in U.S Treasury bills. Raymar intends to maintain a All other disbursements occur in the month in which they are budgeted minimum balance of US $100,000 at the end of each month by either borrowing for deficits below the minimum balance or investing any excess cash. Expected monthly collection and disbursement patterns are shown in the columns to the right.
NEW QUESTION 111
The following information applies to an entity. Purchases Sales:
A cash payment equal to 40% of purchases is made at the time of purchase, and 30% is paid in each of the next 2 months. Purchases for the previous November and December were US $150,000 per month. Payroll is 10% of sales in the month it occurs, and operation expenses are 20% of the following month's sales July sales were US $220,000). Interest payments were US , " x,000 paid quarterly in January and April.
What were the entity's cash disbursements for the month of April?
- A. US $200,000
- B. US $140,000
- C. US $152,000
- D. US $254,000
Answer: D
Explanation:
The cash disbursements for the month of April include 40% of April purchases, 30% of March purchases, 30% of February purchases, April payroll 10% of April sales), operating expenses 20 I of May sales), and an interest payment of US $20.000.
NEW QUESTION 112
The price that one division of a company charges another division for goods or services provided is called the:
- A. Distress price.
- B. Market price
- C. Outlay price
- D. Transfer price.
Answer: D
Explanation:
A transfer price is the price charged by one segment of an organization for a product or
service supplied to another segment of the same organization.
NEW QUESTION 113
The practice of recording advanced payments from customers as liabilities is an application of the:
- A. Monetary unit assumption.
- B. Historic cost principle.
- C. Going concern assumption.
- D. Revenue recognition principle.
Answer: D
Explanation:
Since the amount received in cash has not yet been earned, it is appropriate to record the advance payment as a liability of the company. This is an example of the revenue recognition principle. Which states that revenue should not be recognized until it is earned.
NEW QUESTION 114
A major justification for investments in computer-integrated manufacturing (CIM) projects is:
- A. Increased working capital.
- B. Stabilization of market share.
- C. Reduction in the costs of spoilage, reworked units, and scrap.
- D. Lower carrying amount and depreciation expense for factory equipment.
Answer: C
Explanation:
Automating and computerizing production processes requires a substantial investment in fixed assets and an increase in risk because of greater fixed costs. CIM also necessitates an increase in software costs and extensive worker retraining. However, the costs of spoilage, rework, and scrap are reduced along with labor costs. The qualitative advantages of CIM are increased flexibility, shorter manufacturing lead time, quicker development of new products, better product delivery and service, faster response to market changes, and improved competitiveness.
NEW QUESTION 115
The assets of a liquidating entity should be shown on the balance sheet at their
- A. Undepreciated historical cost.
- B. Current cost.
- C. Fair value
- D. Realizable value.
Answer: D
Explanation:
When liquidation is imminent, and the going concern assumption is no longer valid, the most appropriate measurement attribute for assets is realizable value which is the amount of cash currently obtainable by sale in an orderly disposal.
NEW QUESTION 116
When developing an effective risk-based plan to determine audit priorities, an internal audit activity should start by:
- A. Prioritizing known risks.
- B. Observing and analyzing controls.
- C. Identifying risks to the organization's operations.
- D. Reviewing organizational objectives.
Answer: D
NEW QUESTION 117
An organization with an annual demand of 25.000 units correctly computes its economic order quantity to be 1,000 units Its safety stock is 300 units and the lead time is two days If there are 250 production days in a year what is the reorder point1?
- A. 200 units.
- B. 500 units.
- C. 300 units.
- D. 1,000 units.
Answer: B
NEW QUESTION 118
Which adjusting entry should be used at year-end to account for interest expense on the long-term debt?
- A. Interest expense US $50,000 Cash US $50,000
- B. Interest expense US $100,000 Interest payable US $100,000
- C. Interest expense US $50,000 Interest payable US $50,000
- D. Interest payable US $100,000 Interest expense US $100,000
Answer: C
Explanation:
The debt was issued on July 1 and has been outstanding for only 6 months. Interest expense equals the face amount of the debt multiplied by the interest rate and the fraction of the year the debt was outstanding [US $1.000.000 x 10% x6 - 12) = US $50,000].
Because interest is payable on July1 6 months' interest is accrued and expensed in the current period. The payable is also recognized in the current period. Thus, the adjusting entry should be
Interest expense US $50,000 Interest payable US $50.000
Copper Co. had the pre-closing trial balance at December 31 shown below. Additional information: The balance of opening inventory was US $140,000. The long-term debt pays interest at a rate of 10% per annum, payable every 12 months. The debt was issued on July 1 of the current year and originally had 5 years to maturity. The assets classified as property, plant, and equipment have a 10-year estimated useful life and were 1 year old at the start of the current year Straight-line depreciation is used.
NEW QUESTION 119
In a statement of cash flows in direct method, depreciation expense should be presented as:
- A. A deduction from profit in converting profit or loss to net cash flows from operating activities.
- B. An outflow of cash.
- C. An inflow of cash.
- D. An addition to profit in converting profit or loss to net cash flows from operating activities.
Answer: D
Explanation:
Net cash flow from used by operating activities may be reported indirectly by removing from profit or loss the effects of1) deferrals of past operating cash flows,2) accruals of expected future operating cash flows.3) income or expense items related to financing and investing cash flows, and4) noncash transactions. These adjustments include such items as depreciation, amortization of patents, amortization of bond discount and bond premium gains and losses. changes during the period in trade receivables, changes in inventory, and changes in accounts payable and accrued liabilities. In the reconciliation of profit or loss to net cash from used by) operations, depreciation a noncash expense) is added to profit or loss.
NEW QUESTION 120
Capital structure decisions involve determining the proportions of financing from:
- A. Debt or equity.
- B. Short-term or long-term assets.
- C. Retained earnings or ordinary stock.
- D. Short-term or long-term debt
Answer: A
Explanation:
The optimal capital structure minimizes the weighted average cost of capital and thereby maximizes the value of the entity's stock. Both debt and equity are factors in an entity's capital structure.
NEW QUESTION 121
An entity has daily cash receipts of US $300,000. A bank has offered to provide a lockbox service that will reduce the collection time by 3 days. The bank requires a monthly fee of US $2,000 for providing this service. If money market rates are expected to average 6% during the year, the additional annual income loss) of using the lockbox service is:
- A. US $54,000
- B. US $30,000
- C. US $(24,000)
- D. US $12,000
Answer: B
Explanation:
Because collections will be accelerated by 3 days at a rate of US $300,000 per days, the entity will have an additional US $900,000 to invest. At a rate of 6%, the interest earned will be US $54,000 per year. However, the bank will charge US $24,000 $2,000 per month x 12 months) for its services. Thus, the entity will increase its income by US $30,000 54,000 $24,000).
NEW QUESTION 122
At its balance sheet date, an entity reliably estimates that the expected cost of compensated absences resulting from short-term disability will be US $100,000. This unused entitlement arose from employee services rendered during the period and is accumulating. How should it be accounted for?
- A. An expense should be recorded for US $100,000.
- B. An asset of US $100,000 should be recognized.
- C. Only a disclosure should be made because recognition does not occur until the absences occur.
- D. A direct reduction to retained earnings of US $100,000 should occur.
Answer: A
Explanation:
Short-term employee benefits expected to be paid as a result of service rendered during the period ordinarily should be recognized as an expense and a liability accrued expense). For short-term compensated absences, the timing of recognition del ends on whether the benefits accumulate. If the benefits for compensated absences accumulate, the .,.i_1ect1d cost of short-term compensated absences is recognized when services are rendered that increase the employees entitlement to future compensated absences. The obligation is recognized whether it is vesting the employee is entitled to a cash payment for an unused entitlement upon leaving the entity) or not vesting. The amount should not be discounted. It equals the additional amount expected to be paid as a result of the unused accumulated entitlement at the balance sheet date. Hence, the entity should debit expense and credit liability for US $100,000 because the entitlement accumulates and the employees have rendered services during the period that increase their future entitlement.
NEW QUESTION 123
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