Reference no: EM131270377

Part A -

Question 1: ________ is the time horizon during which at least one of the firm's inputs cannot be varied.

None of these answers are correct

The long run

The short run

The operating period

The business cycle

Question 2: Which of the following statements is false?

Direct materials is not an example of a discretionary fixed cost.

Liquidity ratios measure the ability of a company to meet its current obligations. 0 Discretionary fixed costs can be changed easily at management's discretion.

Standard hours allowed are computed using the equation: unit labor standard x actual output.

The inventory turnover ratio measures the number of days the average balance of accounts receivable is outstanding before being converted into cash.

Question 3: Countries can expect to gain from international trade as long as they:

Specialize according to their comparative advantage.

Use trade restrictions to reduce competition for domestic producers.

None of these answers are correct.

Keep production diversified.

Produce only those goods for which they have a relatively high opportunity cost.

Question 4: Which of the following statements is false?

Sunk costs are relevant costs in management decision-making.

Total cost equals total fixed cost plus total variable cost.

Total variable costs change as the level of output changes.

Average fixed cost = total fixed cost divided by output produced.

An explicit cost is an opportunity cost where an actual payment is made.

Question 5: Suppose that Country A's GOP (i.e., its economic output) is $440 billion and its population is 240 million. Also, suppose that its price level and its population increased by 24 percent. Its new level of per capita output will be 

$400

$4,400

None of these answers are correct

$4,000

$440

Question 6: Government expenditures for social security and unemployment insurance are, for GDP accounting purposes, considered:

None of these answers are correct

transfers, and are included in government spending as part of GDR

transfers, and are not included in government spending as part of GDP.

purchases, and are not included in government spending as part of GDR

purchases, and are included in government spending as part of GDP

Question 7: Company A employs one worker to produce 30 widgets. It decides to hire another worker and it then is able to produce 90 widgets. Feeling good about its business, it decides to hire a third worker and its production of widgets rises to 130. What is the marginal product of the third worker?

90

60

40

130

None of these answers are correct

Question 8: In the United States in July 2009, a recession ended. In business cycle terminology, July 2009 was the ________.

the depression of the cycle

the trough of the business cycle

None of these answers are correct

the peak of the recession

the end of the expansion of the cycle

Question 9: ______ per year is the secular trend growth rate in the United States.

7 to 7.5 percent

5 to 5.5 percent

None of these answers are correct

2.5 to 3.5 percent

1 to 1.5 percent

Question 10: Which of the following statements is not true about a firm's profit-maximizing output level?

A firm should produce the quantity of output closest to the point where marginal cost equals marginal revenue.

An increase in output will always lower profit whenever marginal revenue is less than marginal cost.

An increase in output will always raise profit as long as marginal revenue is greater than marginal cost.

A firm should increase output whenever marginal revenue is greater than marginal cost.

A firm should increase output whenever marginal revenue is less than marginal cost.

Question 11: Which of the following statements is true?

Gross profit includes only implicit costs.

Economic profit ignores explicit costs, but includes implicit costs.

Economic profit includes implicit costs and opportunity costs.

Accounting profit includes only implicit costs.

Net accounting profit includes implicit and explicit costs.

Question 12: All of the following statements are true except:

The long run is a time horizon during which at least one of the firm's inputs cannot be varied.

With respect to production in the short run, the marginal product of labor increases as more labor is hired.

The marginal product of labor is the additional output produced when one more worker is hired.

Variable costs change with output

Fixed costs remain constant as output changes.

Question 13: Blue Diamond Company sells office chairs at $350 each, incurs variable cost per unit of $100, and has a total fixed expense of 330,000. How many units must be sold to achieve a target operating income of 955,000?

535

290

400

620

340

Question 14: Consider the following data for Company A:  

It's target capital structure is 40% debt, 15% preferred, and 45% common equity.

It's after-tax cost of debt is 6.00%.

It's cost of preferred is 7.50%.

It's cost of retained earnings is 12.75%.

What is Company A's WACC?

9.83%

8.98%

 9.54%

10.12%

9.26%

Question 15: ______ are defined as fluctations around the long-term growth rate for a country.

Expansions

Recessions

Depressions

Business cycles

Stagnation periods

Question 16: All of the following statements are true except:

The real exchange rate is an exchange rate adjusted for differential changes in the price level.

One of the advantages of a fixed exchange rate system is international monetary stability.

The cost of debt is equal to one minus the marginal tax rate multiplied by the interest rate on new debt

If income or prices increase in the U.S., imports will decrease.

If a firm's marginal tax rate is increased, this would likely lower the cost of debt used to calculate WACC.

Question 17: With respect to the Audit Committee, SOX mandates a number of requirements for companies to adhere to. According to the Sarbanes-Oxley Act, which of the following statements would be correct regarding an issuer's audit committee financial expert?

i. The issuer's current outside CPA firm's audit partner would be a good choice to be the audit committee financial expert.

ii. The audit committee financial expert should be the issuer's audit committee chairperson to enhance internal control.

II only

I only

Both I and II

Neither I nor II

Question 18: Monetary policy affects exchange rates in all of the following ways, except:

its effect on government spending

its effect on price levels and inflation CJ None of these answers are correct

its effect on income

its effect on the interest rate

Question 19: Which of the following statements is true regarding business cycles?

They are generally considered in the long-run framework.

None of these answers are correct

They are generally considered in an intermediate-run framework.

They are generally considered in the short-run framework.

They are generally considered in both the short-run and long-run frameworks

Question 20: SOX addresses code of ethics requirements for management. Specifically, SOX requires that officers of a corporation be held accountable to a code of ethics. SOX mandates that the company should have a codification of ethical standards that include provisions for:

I. full, fair, accurate, and timely disclosure in periodic financial statements

II. honest and ethical conduct

II only

Neither I nor II

Both I and II

I only

Question 21: A company that retains a CPA with appropriate knowledge, skills and abilities to prepare timely and effective financial reporting is applying the ideas from which principle of effective internal control over financial reporting?

Integrity and ethical values

Management philosophy and operating style

Generally accepted accounting principles

Financial reporting competencies

Human resources

Question 22: Corporate governance is concerned with all of the following except ______

Corporate governance is concerned with all of these.

Incentivizing executives.

Strengthening the effectiveness of the company's board of directors.

Verifying the transparency of a firm's operations.

Maximizing value-creation for stakeholders and shareholders.

Question 23: Consider the following linear programming problem that is designed to plan the production of two products. The company wants to maximize its profits.

The variables are as follows:

X1 = number of product 1 produced in each batch

X2 = number of product 2 produced in each batch

MAX:                     150 X1 +250 X2

Subject to:          2 X1 + 5 X2 200 - resource 1

3X1 + 7X2 5 175 - resource 2

Xi, X2 ≥ 0

How many units of resource 1 are consumed by each unit of product 1 produced?

2

3

5

4

1

Question 24: Which of the following statements is true?

The value of intermediate goods is excluded from both GDP and GNP

None of these answers are correct.

The value of intermediate goods is included in GDP but not GNP

The value of intermediate goods is included in both GDP and GNP

The value of intermediate goods is included in GNP but not GDP

Question 25: Which of the following is not true regarding normal costing systems?

In a normal costing system overhead is assigned using a budgeted rate and actual activity

A normal costing system assigns direct materials and direct labor to products using a predetermined rate.

All of these statements are true

A normal costing system has less capacity for control than a standard costing system

A normal costing system predetermines overhead costs.

Question 26: In which of the following accounts are raw materials, direct labor, and applied overhead costs recorded at the time they are used?

Raw material inventory

Cost of goods sold

Finished goods inventory

Manufacturing expense

Work in process inventory

Question 27: Assume the following data for the U.S. economy in a recent year

Personal consumption expenditures = $5,015 billion

Exports = $106 billion

Government purchases of goods and services = $1,040 billion

M1 = $262 billion

Imports = $183 billion

Gross private domestic investment = $975 billion

Open market purchases by the Federal Reserve = $5 billion

Based on this information, the U.S. GDP for the year is:

$6,891 billion

$6,958 billion

$6,958 billion

None of these answers are correct

$7,215 billion

Question 28: Which of the following is true concerning the materials price variance?

It is the difference between the actual and standard unit price of an output multiplied by the number of inputs used

None of these.

It is the difference between the actual and standard unit price of an output multiplied by the number of inputs purchased.

It is the difference between the actual and standard unit price of an input multiplied by the number of inputs used

It is the difference between the actual and standard unit price of an input multiplied by the number of inputs purchased.

Question 29: All of the following statements are true except:

Enterprise Risk Management entails coordinating risk appetite and strategy.

The Board of Directors consists of inside and outside Directors_

The Board of Directors appoints officers of the corporation in accordance with the Articles of Incorporation.

Event identification is one of the 8 components of Enterprise Risk Management.

The Audit Committee of the Board of Directors must be no smaller than 3 members.

Question 30: At one time, most of the cars produced in Brazil were sold in Brazil. Today, however, Brazil both exports and imports cars. How can comparative advantage explain these data?

Brazil has a comparative disadvantage in automobiles.

Brazil specializes in the production of high-end cars, which it exports, and imports low-end cars that can be produced at lower cost elsewhere.

None of these answers are correct.

It cannot; comparative advantage predicts that a country either exports a product or imports it, not both.

The pattern is not due to comparative advantage but to government restrictions on production.

Question 31: Company A has adopted the internal control integrated framework and regularly surveys local employers and uses national services to ensure that the accounting staff is appropriately compensated. The principle of the control environment most closely related to this practice is:

Authority and responsibility

Adequate training

Financial reporting competencies

Human resources

Management philosophy and operating style

Question 32: The difference between the actual cost of the input and its planned cost is

the usage variance

the price variance

the budget variance

the total budget variance

the efficiency variance.

Question 33: As mandated by the Committee of Sponsoring Organizations (COO), which of the following would be an operations objective?

I. Maintaining adequate staffing to keep overtime and benefit costs within budget

II. Maintaining direct labor cost variances within published guidelines

III. Maintaining accounting principles that conform to US GAAP

II and III

I, II and III

I and III

I and II

Question 34: Which of the fallowing is not an explicit cost of running a small business?

The foregone investment income related to the business owner's monetary investment in the business_

The purchase cost of raw materials used in the business_

None of these answers are correct

The hourly wages paid to the employees of the business_

Rent paid to the business owner's landlord.

Question 35: Which of the following statements is CORRECT?

If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction.

Only institutions, and not individuals, can engage in derivative market transactions. c.) The NYSE is an example of an over-the-counter market.

If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a primary market transaction.

As they are generally defined, money market transactions involve debt securities with maturities of less than one year.

Question 36: Consider the following data for Company A:

It's current dividend per share is $0.90.

It's current stock price is $27.50.

It's dividends are expecting to grow by a constant rate of 7.00% per year for the foreseeable future.

What is Company A's cost of equity capital?

9.68%

9.29%

10.08%

10.50%

10.92%

Question 37: In an agency relationship, the _____ is the risk bearing specialist and the ______ is the managerial decision-making specialist.

None of these answers are correct

principal; agent

agent; principal

principal; shareholder

shareholder; agent

Question 38: Fixed cost per unit is $9 when 20,000 units are produced and S6 when 30,000 units are produced. What is the total fixed cost when nothing is produced?

$150,000

$240,000

$300,000

$360,000

$180,000

Question 39: A business cycle becomes a structural stagnation _________

None of these answers are correct_

When there are multiple business cycles in a short period of time

When a slow expansion keeps the economy below trend

When a trough that is lower than the peak occurs

When a downturn does not end.

Question 40: _______had the highest per capital growth rate in the world from 2001 to 2010.

India

China

North America

Western Europe

Latin America

Question 41: With respect to financial modelling, the second step in formulating a linear programming problem is

State the constraints as linear combinations of the decision variables.

Identify the decision variables.

State the objective function as a linear combination of the decision variables.

Identify any upper or lower bounds on the decision variables

Understand the problem

Question 42: Which of the following statements is false?

When the Fed sells government securities, the money supply decreases.

When the Fed buys government securities, the money supply increases.

When the Fed buys government securities, interest rates increase.

When the Fed buys government securities, employment increases.

When the Fed sells government securities, inflation pressures diminish.

Question 43: Which of the following statements is false?

Two major forms of common-size analysis are horizontal analysis and vertical analysis.

Managers develop quantity standards when they decide what amount of input should be used per unit of output.

As output decreases fixed costs per unit will increase.

Common-size analysis expresses each item in a financial statement as a percent of a base amount

One reason for adopting a standard cost system is to make product costing easier.

Question 44: Which of the following statements is true?

The difference between the value of a country's exports and imports

The income earned abroad by domestic factors.

The difference between that income earned abroad by domestic factors and the income earned domestically by foreign factors.

Net foreign factor income is the income earned from the domestic economy by foreign factors_

None of these answers are correct

Question 45: With respect to the Audit Committee, SOX mandates a number of requirements for companies to adhere to. According to the Sarbanes-Oxley Act, which of the following statements would be correct regarding an issuer's audit committee financial expert?

I. If an issuer does not have an audit committee financial expert, the issuer must disclose the reason why the role is not filled.

II. The issuer must fill the role with an individual who has been a financial expert before.

Neither I nor II

Both I and II

I only

II only

Question 46: The balance of trade measures the:

Share of U.S. exports going to various regions of the world.

None of these answers are correct.

Difference between the value of imports and that of exports.

Share of U.S. imports coming from various regions of the world

Exchange rate needed to make imports equal exports.

Question 47: All of the following statements are true except:

If a government buys its currency, it can increase its value.

While the two frequently perform similar functions, investment banks generally specialize in rending money, whereas commercial banks generally help companies raise large blocks of capital from investors

If IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker, this would be considered a primary market transaction.

One of the fundamental forces affecting exchange rates are changes in a country's trade policy.

A country's record of all transactions between its residents and the residents of all foreign nations is called its balance of payments.

Question 48: Consider the following data for Company A:

The risk free rate is 5.00%

The market risk premium is 6.00%

Beta is 1.05

What is the cost of equity for Company A based on the CAPM?

11.64%

12.35%

11.30%

12.72%

11.99%

Question 49: Which of the following statements is false?

Applied overhead costs are charged to Work-in-Process Inventory.

A plant wide overhead rate is a single overhead rate calculated by using all estimated overhead for a factory divided by the estimated activity level across the entire factory.

The difference between actual overhead and applied overhead is called a(n) overhead variance.

A materials requisition form is used by the cost accounting department to enter the cost of direct materials onto the correct job-order cost sheet.

When units are sold, their total cost is debited to Cost of Goods Sold and credited to Work-in-Process.

Question 50: Firms in the _____ business are most likely to use a process-costing system.

Automobile repair

Petroleum

Printing

Dental

Construction.

Part B -

Question 1: Currently, the top income tax rate in effect is not the highest it has ever been

True

False

Question 2: Gwen, age 68, claims head of household filing status. If she has itemized deductions of $10,250 for 2014, she should not claim the standard deduction.

True

False

Question 3: Consider the following facts:

- Company A has a fiscal year that ends on December 31, 2015

- It places non-real estate property in service during the year as follows:

Machinery costing $500,000 is placed in service on February 28, 2015

Equipment costing $1,250,000 is placed in service on November 30, 2015

This is the only property placed in service during the year.

Which of the following statements is true?

Company A should use the MACRS Convention to determine when the property was placed in service.

None of these answers are correct.

Company A should use the Mid-Quarter Convention to determine when the property was placed in service.

Company A should use the Half-Year Convention to determine when the property was placed in service.

Company A should use the Mid-Month Convention to determine when the property was placed in service.

Question 4: Consider the following facts:

- Taxpayer A is a widow, age 80 and blind

- She can be claimed as a dependent by her son

- In 2014, she received $4,800 from Social Security

- She earned $2,500 interest from her bank account

- She received $1,800 in cash dividends from her stocks

Taxpayer A's taxable income is:

$5,000

$1,750

None of these answers are correct

$1,200

$200

Question 5: Which, if any, of the following is a deduction for AG!?

Charitable contributions

None of these answers are correct

Interest on home mortgage

Unreimbursed moving expenses of an employee

State and local sales taxes

Question 6: Which of the following statements is true?

The cost of a student's books, room and board are considered qualified tuition and related expenses.

A taxpayer's membership dues to a health club is a deductible entertainment expense.

None of these answers are correct.

Business gifts of personal property with a value of $25 or less per person per year are deductible entertainment expenses.

An employee's gift to his employer is a deductible entertainment expense.

Question 7: Consider the following facts:

- Taxpayer A is 17 years old

- She is claimed by her parents as a dependent

- During 2014, she had interest income (from a bank account) of $2,000

- During 2014, she had a part-time job that paid her $4,200

Taxpayer A's taxable income for 2014 is:

$500

None of these answers are correct

$5,200

$0

$1,650

Question 8: The filing status of a taxpayer (e.g., single, HOH) must be identified before the applicable standard deduction is determined.

True

False

Question 9: Jackson pays a 33,800 premium for high-deductible medical insurance for himself and his family. In addition, he contributes $3,400 to a Health Savings Account. Which of the following statements is true?

If Jackson is self-employed, he may deduct $3,400 as a deduction for AGI and may include the 33,800 premium when calculating his itemized medical expense deduction.

If Jackson is self-employed, he may deduct 57,200 as a deduction for AGI.

If Boris is an employee, he may include 57,200 when calculating his itemized medical expense deduction.

None of these answers are correct

If Jackson is an employee, he may deduct 57,200 as a deduction for AGI.

Question 10: Joseph is married to Sarah, who abandoned him in 2013. He has not seen or communicated with her since April of that year. He maintains a household in which their son, Eric, lives. Eric is age 25 and earns over 56,000 each year. For tax year 2014, Joseph's Cling status is:

Surviving spouse.

Head of household.

Married, tiling jointly.

Single.

Married, tiling separately.

Question 11: Married taxpayers who Tile separately cannot later (i.e., after the due date for tiling) change to a joint return.

True

False

Question 12: Which of the following statements is false?

None of these answers are correct.

Corporations must choose a fiscal rather than a calendar year for their accounting year.

A corporation in the farming business can use the cash method of accounting.

Corporations must use the accrual method to determine cost of goods sold if they maintain inventory.

A newly formed corporation does not have to get IRS approval for its choice of accounting period.

Question 13: Which of the following statements is true about MAR S real property?

None of these answers are correct

Property can be depreciated over 15 years.

Straight-line depreciation is the only allowable depreciation method.

Property can be depreciated using the 200% declining balance method.

The Half-Year Convention must be used

Question 14: Which of the following statements is true?

Long-term capital gains for a corporation are taxed at rates higher than the rates for ordinary income.

Long-term capital gains for a corporation are taxed at rates lower than the rates for ordinary income.

None of these answers are correct.

Long-term capital gains for a corporation are taxed at rates equal to the rates for ordinary income.

Net capital losses for a corporation are currently deductible.

Question 15: Which of the following statements is true?

Unreimbursed moving expenses are deductible below the line_

Reimbursed moving expenses are deductible above the line.

If an employee incurs education expenses that allows him to qualify for a new trade, then those expenses are tax deductible.

The cost of meals, while moving, are not deductible moving expenses.

None of these answers are correct

Question 16: Which of the following statements is false?

Company A would recognize a gain when it distributes appreciated property to shareholders.

The income of a Subchapter S corporation is taxed to the corporation and to the owners of the corporation.

In order to qualify as a Subchapter S corporation, the corporation must be a domestic corporation.

None of these answers are correct.

Company A provides interest free loans to its shareholders. This is an example of a constructive dividend.

Question 17: Which of the following statements is false?

Farming losses can be carried back 5 years and forward for 20 years.

Individuals can carry back Net Operating Losses from casualty and thefts for 5 years.

Net Operating Losses from any one year can be used to offset taxable income from other years.

Net Operating Losses can generally be carried back 2 years and forward for 20 years

None of these answers are correct

Question 18: A taxpayer can choose to deduct actual auto costs (including depreciation) or take a mileage rate of S.235 per mile in 2014 for qualified moving expenses.

True

False     

Question 19: Surviving spouse tiling status begins in the year in which the deceased spouse died.

True

False

Question 20: During 2014, Sally had the following transactions:

Salary

570,000

Interest income on Xerox bonds 2,000

Inheritance from uncle 40,000

Contribution to traditional IRA 5,500

Capital losses 2,500

Sally's AI is:

$64,000

$67,000

$62,000

$104,000

$102,000

Question 21: Which of the following statements is true?

If a corporation receives a dividend from a company it has an investment in, it can deduct 100% of the dividend from its income if it owns between 20% - 80% of the company it invested in.

If a corporation receives a dividend from a company it has an investment in, it can deduct 100% of the dividend from its income if it owns less than 20% of the company it invested in.

None of these statements are correct.

If a corporation receives a dividend from a company it has an investment in, it can deduct 80% of the dividend from its income if it owns less than 20% of the company it invested in_

If a corporation receives a dividend from a company it has an investment in, it can deduct 70% of the dividend from its income if it owns less than 20% of the company it invested in.

Question 22: Peter is married to Amelia, who lives with him. Both are U.S. citizens and residents of Nebraska. Peter furnishes all of the support of his parents, who are citizens and residents of Mexico. He also furnishes all of the support of Amelia's parents, who are citizens and residents of El Salvador. Amelia has no gross income for the year. If Peter files as a married person fling separately, how many personal and dependency exemptions can he claim on his return?

None of these answers are correct

4

2

5

3

Question 23: Which of the following statements is false?

Losses from foreign government confiscations can create a deductible Net Operating Loss.

Casualty and theft losses related to personal property are subject to a 5100 per event limitation, but not the 10% AGI limitation.

Losses from a trade or business can create a deductible Net Operating Loss.

None of these answers are correct.

The deductible amount of a personal casualty and theft loss is the lesser of the decline in value of the property or the adjusted basis of the property, less any insurance proceeds received.

Question 24: Consider the following facts:

- Bill and Nancy are married

- Bill is age 33 and Nancy is age 32

- They have a combined AGI of $120,000 in 2014

- They have four dependents and file a joint return.

- They pay $5,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account

- During the year, they paid the following amounts for medical care: $9,200 in doctor and dentist bills and hospital expenses, and 53,000 for prescribed medicine and drugs.

- In October 2014, they received an insurance reimbursement of $4,400 for the hospitalization.

- They expect to receive an additional reimbursement of $1,000 in January 2015.

What is the maximum itemized deduction allowable for medical expenses in 2014?

$9,200

$3,400

None of these answers are correct

$12,800

$800

Question 25: Consider the following facts:

- Taxpayer A and B are married and under 65 years of age

- During 2014, they furnish more than half of the support for their 19-year old daughter, who lives with them

- Their daughter graduated from high school in 2013

- Their daughter earns $15,000 from a part-time job, most of which she sets aside for future college expenses

- Taxpayer A and B also provide more than half of the support for Taxpayer A's cousin who lives with them

- Taxpayer B's father, who died on January 3, 2014, at age 90, has for many years qualified as their dependent.

How many personal and dependency exemptions can Taxpayers A and B claim?

Two

Five

None of these answers are correct

Three

Four

Question 26: Consider the following facts:

- A corporation has a fiscal year-end of August 31, 2015.

The due date for the corporation's tax return is:

March 15th

None of these answers are correct

November 15th

April 15th

August 31st

Question 27: Using the Half-Year Convention with a December 31, 2015 fiscal year end, an asset purchased on April 30, 2015 and placed in service on May 15, 2015 would be treated as:

placed in service on May 15, 2015

placed in service on July 1, 2015

placed in service on June 30, 2015

placed in service on April 30, 2015

None of these answers are correct

Question 28: If a taxpayer is due a refund, it will be mailed to the taxpayer regardless of whether he or she files a tax return.

True

False

Question 29: Homer (age 68) and his wife Jean (age 70) file a joint return. They furnish all of the support of Luther (Homer's 90-year old father), who lives with them. In 2014, they received $6,000 of interest income on city of Chicago bonds and interest income on corporate bonds of $48,000. Compute Homer and Jean's taxable income for 2014.

None of these answers are correct

$24,550

$19,350

$21,750

$11,850

Question 30: Form 1040 allows a taxpayer to report which of the following items that are not allowed for taxpayers who file Form 1040A:

Self-employment income.

Withholding on wages

Joint return status

Salary income