Exit model exam 2017

1. ABC comp has days sale outstanding 40 days, annual sale 7300,000, what is level of
accounting receivable if days in a year 365?
a. 800,000
b. 540,000
c. 300.000
d. 80,000
2. An employee has monthly basic salary of birr 10,520 and has worked and overtime of
birr 13 hours of which,6 hours worked in weekly rest day 4 hours worked before 4;00 pm
and 3 hours are worked from 4;00 pm-6;00 am. The employee also has a taxable position
allowance of birr 2500 per month. Based on the information what would be the net
income of employee? Assume normal working hour is 8 hour per day
a. Birr 10,881.85
b. Birr 10,145.45
c. Birr 10,384.37
d. Birr 11933/62
3. Assume ABC ending inventory is overstated by birr 200, what would be the affect of this
error on the current year cost of goods sold and net income respectively
a. Over stated by 200 and overstated by 200
b. Understated by 200 and understated by 200
c. Understated by 200 and overstated by 200
d. Overstated by 200 and understated by 200
4. Tolesa is an employee in ABC factory Ethiopia. His monthly basic salary is 2600, he has
taxable allowance of 300 birr and non- taxable allowance of birr 200. He earned over
time of birr 100. What is amount of taxable deducted from tolesa earning?
a. 407.9
b. 489.5
c. 400
d. 307.50
5. I f the overhead applied in th period is birr 200,000 and the actual overhead amount is
birr 220,000, then it will be fair to say
a. Its over applied
b. Its over absorbed
c. Its over allocated
d. Its under applied
6. To record manufacturing overhead under applied which is true
a. Debited cost of good sold to manufacturing overhead cost
b. Credited work in process to the manufacturing overhead cost
c. Debited manufacturing overhead cost to cost of good sold
d. Debited manufacturing overhead cost to finished goods
7. Which of the following statement matches M&M proposition I without taxes?
a. The cost of equity capital varies in response to changes in firms capital structure
b. The value of firm is independent of the firm’s capital structure
c. The use of equity capital has a positive linear relationship with firms capital structure
d. The dividend paid by a firm determine the firms value
8. Which of the following is false in connection to job-order costing system?
a. In normal costing method, working progress is debited factory overhead applied
b. Finished goods is debited for goods completed and sold during the period
c. Finished goods are credited for cost of good shipped to customers
d. Work in process is credited for transfer of completed item to finished goods inventory
9. At the end of June 30,2022 the following item were reported by ABC manufacturing
company. Finished goods birr 500,000, raw material birr 200,000, work in process
100,000 and office supplies bout for use by managers 30,000. Which of the following
statement of financial statement is correct?
A. Inventory birr 800,000 and office supplies birr 30,000
B. Inventory birr 680,000 and raw material birr 20,000
C. Inventory birr 500,000 and other item birr 330,000
D. Inventory birr 730,000 and working in process birr100,000
10. Assume that the inventory on January 01 is birr 57,000 that net purchase during the
month are birr 180,000 that net sale during the month are birr 250,000 and finally that the
gross profit is estimated to be 30% of net sale. what is estimated ending inventory?
a. 62,000
b. 60,000
c. 237,000
d. 175,000
11. From the following given what is the ending inventory cost under Fifo, Lifo and
weighted average respectively?
Jan 1 Inventory ----------------20 units at 78
Jan 15 purchase-----------------15 units at 80
Jan 20 purchase-----------------20 units at 84
Jan 30 purchase-----------------15 units at 82
a. 3600, 3710 and 3645
b. 2070, 1960 and 2025
c. 2070,3710 and 3600
d. 1960, 2025 and 3600
12. Which is correct statement about the difference between variable cost and absorption
costing?
a. Under absorption costing fixed manufacturing costs are expensed
b. Under absorption costing fixed manufacturing costs are non-inventorial cost
c. In variable costing variable cost are excluded and fixed costs are included
 d. In variable costing manufacturing cost are not included but included in absorption
13. Consolidation is required when
a. Holding of 30 percent of equity
b. Holding of less than 20 percent of equity
c. Holding between 20 percent and 50 percent of equity
d. Holding of more than 50 percent of equity
14. Assume the damaged merchandises which have a selling value of birr 1500 could be sold
at birr 800 and to sell these proud we have direct expense of birr 150. What should value
at NRV?
a. 650
b. 800
c. 950
d. 1150
15. Correct order of financing sources based on pecking order capital structure policy.
a. Debt, retained earnings and external equity
b. External equity, retained earnings and debt
c. Retained earnings, debt and external equity
d. Debt, external equity and retained earnings
16. Abc company on june 15, sell merchandise on account to its members mr-X for birr 2000
terms 2/10,n/30 ,on june 20, mr- X returns merchandise worth 600 to ABC. On june 24
payment is received from mr- X for the balance due. What is amount of cash received ?
a. Birr 2000
b. Birr 1372
c. Birr 1400
d. Birr 600
17. Identify the effect of understated ending inventory on the current accounting periods cost
of goods sold and net income respectively?
a. Understated and overstated
b. Overstated and overstated
c. Understated and understated
d. Overstated and understated
18. Which is incorrect about A standard cost?
a. Standard costing is a very important technique of cost control
b. minimize the cost of production and maximize the profits
c. designed to show in detail how much each product should cost to produce
d. appropriate for small concerns
19. Suppose, for example a business enterprise acquires a new computer (office equipment)
at accost of Birr 6,000. It is estimated that computer has an estimated residual value of
Birr 1,000 at the end of its estimated useful life of 4-years. The yearly depreciation at
third year would be used double-declining –Balance Method
a. 28,800
 b. 80,000
c. 5,920
d. 10,368
20. Which of the following is would be subjected to income taxation
a. hardship allowance
b. transportation allowance
c. Medical Allowance
d. position allowance
21. Partnership agreement may identify
a. Name, location and nature of the business
b. their duties and rights of each
c. Withdrawals to be allowed by partners and
d. All
22. Assume that the articles of partnership of Rita and Katherine agreed to share gain and
losses in the ratio of 2:1, after selling all assets for cash, dividing the losses on realization
and paying liabilities as part of liquidation process, the balance in capital account were as
follows. 10,000 cr and 2000 cr respectively. How much of the cash of birr 12,000 would
be distributed to Katherine?
a. 4000
b. 6000
c. 8000
d. 2000
23. Which of the following characteristics of financial information that ensure it is capable of
making a difference in decision making?
a. Understandability
b. Timeliness
c. Relevance
d. Verifiability
24. An analysis of the items and amounts that result in the cash balance reported in the bank
statement to differ from the balance of the cash account in the ledger is
a. Bank statement
b. Bank analysis
c. Bank reconciliation
d. Bank account
25. If you have a choice to earn simple interest on birr 10,000 for three years at 8% or
compound interest at 7.5% for three years which one will pay more and by how much?
a. Simple interest by birr 150
b. Compound interest by birr 150.75
c. Compound interest by birr 22.97
d. Simple interest by birr 1500
26. Which of the following shows expanded accounting equation correctly?
 a. Assets = liabilities + owners capital - owners drawings + revenue - expense
b. Assets +liabilities = owners capital - owners drawings + revenues - expenses
c. Assets + liabilities = owners capital - owners drawings – revenue + expense
d. Assets = liabilities + owners capital + owners drawing + revenues – expenses
27. Which is the most expensive source of funds?
a. New Equity Shares
b. New Preference Shares
c. New Debts
d. Retained Earnings
28. Debt Financing is a cheaper source of finance because of:
a. Time Value of Money
b. Rate of Interest,
c. Tax-deductibility of Interest
d. Dividends not Payable to lenders.
29. Advantage of Debt financing is
a. Interest is tax-deductible
b. It reduces WACC
c. Does not dilute owners control
d. All of the above.
30. Operating leverage helps in analysis of:
a. Business Risk
b. Financing Risk
c. Production Risk
d. Credit Risk
31. High degree of financial leverage means:
a. High debt proportion
b. Lower debt proportion
c. Equal debt and equity
d. No debt
32. Operating leverage arises because of:
a. Fixed Cost of Production
b. Fixed Interest Cost
c. Variable Cost
d. None of the above
33. Financial Leverage measures relationship between
a. EBIT and PBT
b. EBIT and EPS
c. Sales and PBT
d. Sales and EPS
34. If a firm has a DOL of 2.8, it means:
a. If sales increase by 2.8%, the EBIT will increase by 1%,
 b. If EBIT increase by 2.896, the EPS will increase by 1 %,
c. If sales rise by 1%, EBIT will rise by 2.8%,
d. None of the above
35. Financial Break-even level of EBIT is one at which:
a. EPS is one
b. EPS is zero
c. EPS is Infinite
d. EPS is Negative
36. In case of Net Income Approach, the Cost of equity is:
a. Constant
b. Increasing
c. Decreasing
d. None of the above
37. NOI Approach advocates that the degree of debt financing is:
a. Relevant
b. May be relevant
c. Irrelevant
d. May be irrelevant
38. Which one is true for Net Operating Income Approach?
a. VD = VF – VE
b. VE = VF + VD
c. VE = VF – VD
d. VD = VF + VE
39. A hybrid costing system combine characteristics of
a. Job order and normal costing systems
b. Process and standard costing systems
c. Job order and process costing systems
40. An entity exchanged equipment and birr 18,000 cash for similar equipment. The book
value and the fair value of the old equipment were birr 82,000, respectively. Assuming
that the exchange has commercial substance. The entity would record a gain or (loss) on
exchange of assets in the amount of;
a. Birr 26,000
b. Birr 8,000
c. Birr 4,000
d. None
41. Which of the following is a means of short-term borrowing by large corporation?
a. Certificate of deposit
b. Saving account
c. Commercial paper
d. Repo
42. Buyer OLC uses perpetual inventory system. On April 15, 2023, the balances of
merchandise inventory per count shows Br 878,000. If merchandise inventory balance
per record the record shows Br 880,000. Which of the following is correct?
a. Ending inventory is reported on balance sheet at Br 880,000
b. There is an inventory shortage of Br 2000
c. Cost of goods sold is credited by Br 2000
d. There is an inventory overage of Br 2000
43. Which of the following is correct about depreciation expense?
a. It is a cost allocation process
b. It is not recorded for PPE items whose market value has increased
c. It has an effect of decreasing cash
d. It is recorded on all PPE items
44. Which of the following is correct sequence of flow of accounting data in accounting
record?
a. Ledge-journal- source of document- occurrence of transaction
b. Occurrence of transaction- source document- journal- ledge
c. Source document- journal-occurrence of transaction-ledger
d. Journal-source of document-occurrence of transaction-ledger
45. Before recording adjustment, the balance of unearned rent revenue account was Br
30,000. After adjustment it this account shows a balance of Br 10,000; The adjusting
entry is recorded as
a. Debit Unearned rent revenue and credit rent income by br 20,000
b. Debit unearned rent revenue and credit rent income by br30,00
c. Debit rent income and credit unearned rent revenue by br 20,000
d. Debit rent income and credit unearned rent revenue by br 20,000
46. A total of 6850 kilograms of a raw material was purchased at a total cost of birr 21,920.
the material price variance was birr 1370 favorable. the standard price per kilogram for
the raw material must be
a. Birr 3.40
b. Birr 3
c. Birr 3.2
d. Birr 0.2
47. A and B formed a partnership by investing Br 400,00 each. They agreed to accept a new
partner, E. E joined the partnership by buying, 25% A’s interest at br 130,000. Which of
the following is correct in the admission of E?
a. E’s capital is credited by br 130,000
b. E’s capital credited by br 100,00
c. The event causes liquidation of a partnership
d. The partnership’s capital will increase by Br 30,000
48. When a scarce resource, such as space, exits in an organization, the criterion that should
be used to determine production is
 a. Contribution margin per unit of scarce resource.
b. Selling price per unit
c. Contribution margin per unit
d. Total variable costs of products
49. Under the retail method, in determining the cost to retail percentage for the current year
a. Net markups are included
b. Net markdowns are excluded
c. Beginning inventory is excluded
d. Employee discounts included
50. Which of the following items is considered investment property?
a. Part of a building held to earn rentals
b. Land held for use in the production or supply of goods or services
c. Land held for sale in the ordinary course of business
d. A building held for use for administrative purpose
51. Your firm is considering an investment that will cost birr 750,000 today. The investment
will produce cash flows of birr 250,000 in a year 1, birr 300,000 in a year 2 through 4,
and birr 100,000 in year 5. The discount rate that your firm uses for projects of this type
is 13.25%. what is the investment internal rate of return?
a. 25.9%
b. 23.4%
c. 12.8%
d. 21.6%
52. In a product mix decision, which is the most important factor to consider in order trying
to maximize profit?
a. Product unit selling price
b. Contribution unit of the product
c. Variable cost per unit of the product
d. Contribution per unit of scarce resource used to make the product
53. Which of the following assumes constant cost to sales ratio for all joint products
produced?
a. Physical measure method
b. Net realizable value method
c. Sales value at split off method
d. Constant gross margin NRV method
54. One of the following statement is true about business activities of SACCOs?
a. The interest on loans granted to the member should be higher than that available
elsewhere
b. Surplus of SACCOs provide margin to meet unforeseen circumstances
c. SACCOs should pay lower interest on members’ savings than that available
elsewhere
d. Operating expenses of SACCOs must be in excess of the differential to have surplus
55. Given standard cost specifications time 5 hours per unit and cost Br. 5 per labor. Actual
performance in cost period is production hours 10,800 hours. Payment done is average
per hour Br. 5.20 for10,800 hours. What is the labor rate variance and labor efficiency
variance respectively?
a. Br. 2160 and Br 2000 both unfavorable
b. Br 2160 and Br 2000 both favorable
c. Br 2000 and Br 2160 both unfavorable
d. Br 2000 and Br 2160 both favorable
56. Now a days, the price of some basic food items like sugar, food, oil, etc. in the open
market is generally high. In this regard, which of type of cooperative do you think solves
this problem?
a. Saving and credit cooperative
b. Housing cooperatives
c. Irrigation cooperatives
d. Consumer cooperative
57. Activities that provide post sale support to customers are referred as
a. Inbound logistics
b. Service activities
c. Outbound logistics
d. Marketing and sales
58. Which of the following activities is not necessarily the duty of general assembly?
a. Appointment of a manager
b. Determination of share amount
c. Amendment of bylaw
d. Disposal of net profit
59. For process costing using weighted average method, cost per equivalent unit is based on
a. Equivalent unit of work done to date
b. Cost of work in process beginning only
c. Current period cost only
d. Equivalent unit of work done in current period only
60. An attitude that includes a critical assessment of audit evidence is referred to as;
a. Reasonable assurance
b. Supervision
c. Due professional care
d. Independence
61. Which of the following may be used as a procedure to search for contingent liabilities?
a. Examine payroll reports
b. Analyze legal expense
c. Review internal revenue agent reports
d. Examine letters of credit
62. At the end of the reporting period, the perpetual inventory account reported an inventory
balance of Birr 5000. However, a physical count indicates inventory of birr 4750 is
actually on hand. The appropriate journal entry to record the necessary write-down is
a. Debit over and short birr 250 and credit birr 250
b. Debit inventory over and short birr 4750 and credit birr 4750
c. Inventory over and short birr 5000 and credit 5000
d. Inventory birr 250 and credit inventory over and short bir 250
63. All of the following are components of taxable income except
a. Salaries and wages
b. House allowances
c. Reimbursement of traveling expenses
d. Overtime earnings
64. The decision whether to invest in the proposed cooperative is reached after
a. Starting the operation
b. Feasibility study
c. Recruiting members
d. Hiring professional managers
65. Which one of the following step is logical and natural in the process of preparing
financial statements at the end of an accounting period?
a. Income statement, balance sheet and statement of owner’ equity
b. Balance sheet, income statement and owners’ equity
c. Balance sheet, statement of owner’s equity and income statement
d. Income statement, statement of owners equity and balance sheet
66. The risk that a material misstatement that could occur in an assertion will not be
prevented or detected on a timely basis by the entity’s internal control is
a. Detection risk
b. Inherent risk
c. Audit risk
d. Control risk
67. Which one of the following is correct about the duties and powers of control committee?
a. Decide on the manner of distribution of the net profit to members
b. Calling the general assembly while the management committee is in change of other
duty
c. Protecting assets from misappropriation, embezzlement and theft
d. Prepare annual work plan and budget and submit report on its execution
68. Which one of the following credit control method is preferable in a deflation period to
expand business activity and credit there encourages price level to increase?
a. Open market operation
b. Required reserve ratio
c. Retaining of credit
d. Bank rate policy
69. XYZ company has equipment that, due to changes in its use, it reviews for possible
impairment. The equipment’s carrying amount is birr 600,000. The expected future net
cash flows from the use of the equipment and its eventual disposal is determined to be
birr 650,000. Therefore XYZ company should
a. Record an impairment loss of birr 50,000
b. Record an impairment gain o 50,000
c. Record an impairment loss of birr 200,000
d. Should not recognized any impairment loss
70. Of the following is the most objective way of measuring fair value is
a. Inputs other than quoted prices that is observable for the asset or liability either
directly or through corroboration with observable data
b. Unobservable inputs that affect quoted price for identical assets or liabilities in active
markets
c. Unobservable inputs like a companys own data or assumption
d. Observable inputs that reflects quoted price for identical assets or liabilities in active
markets
71. One of the following is not factors for the success of the cooperative management
a. Proper division of responsibility
b. Vigilance of the members over the board of directors
c. Following cooperative principles and values
d. Less participation of member
72. Identify the characteristics of a profession
a. There is admission criteria
b. No need to maintaining public trust
c. Incompetence
d. No need complex body of knowledge
73. What is the objective of the financial statement audit by an external auditor?
a. To detect fraud
b. To determine whether the client’s financial statements are fairly stated
c. To assure consistent application of correct accounting procedure
d. To examine individual transactions so that the auditor may certify their validity
74. Identify the correct order of financing source based on pecking order capital structure
policy
a. Debt, retained earnings and external equity
b. External equity, retained earnings and debt
c. Retained earnings, debt and external equity
d. Debt, external equity and retained earning
75. Which of the following economic event affects owners equity?
a. Collection of cash from previous sale on accounts
b. Conducting an interview to hire a marketing manager
c. Generating revenue through sale of goods and services
 d. Losses resulted theft of finished goods inventory in store
76. All of the following statement are true about stock splits except.
a. Market price per share is reduced after the split
b. Retained earnings are changed
c. The number of outstanding share is increased
d. Proportional ownership is unchanged
77. One of the following is wrong about control committee in cooperative societies;
a. Its accountable to management committee of the society
b. May be dismissed by the general assembly before expiry of its term
c. Its term of office is 3 years
d. Follow up activities of the society carried out as per the bylaw or not
78. A partnership agreement should include each of the following except
a. Names and capital contribution of partners
b. Provision for withdrawal of asset
c. Right and duties of partners
d. Basis of splitting partnership income taxes
79. Which one of the following is true about activity based costing system? It
a. Provides data for external reports
b. Focuses on departments rather than activities
c. ABC uses a single rate to assign overhead costs
d. Is designed to be used for internal decision making
80. Derivatives are primarily used for
a. Long term investment strategies
b. Increasing the money supply
c. Simplifying the trading process
d. Managing risk (hedging) and speculation
81. Which one is not the power of general assembly?
a. Approval of audit report
b. Approval of budget
c. Recruitment of employees
d. Election of committee members
82. Cooperative policy objective is the transformation of subsistence farming in to
a. Family farming
b. Modern commercial farming
c. Joint farming
d. Substantial farming
83. Abc furnishing want to reduce its cash conversion cycle. Which of the following action
should it take?
a. Start paying its bill sooner, which would reduce the average accounts payable but not
affect slaes
b. Take steps to reduce the days sale outstanding(DOS)
 c. Increase average inventory without increasing sales
d. Sell an issue of long term bonds and use the proceeds to buy back some of its
common stock
84. Which cooperative principle was approved in 1995 ICA convention?
a. Concern for community
b. Voluntary and open membership
c. Cooperative among cooperatives
d. Autonomy and independence
85. Make investments in the name of the credit union, if the board has delegated the authority
a. Responsibility of members
b. Duty of management committee
c. Duty of a manager
d. Duty of a board member
86. The title of U.N. resolution 56/114 on co-operatives is
a. Report on the situation and potential of the cooperative movement as a development
actor/ cooperative in economic development
b. Report on the situation and potential of the cooperative movement as a development
actor/ cooperative in social development
c. Report on the situation and potential of the cooperative movement as a development
actor/ cooperative in development
d. Report on the situation and potential of the cooperative movement as a development
actor/ cooperative in socio-economic development
87. Federal cooperative commission was established in the year in Ethiopia
a. 2002
b. 2001
c. 2011
d. 2012
88. Any investment may be accounted for by fair value through profit and loss providing
a. It is a debt instrument
b. It is traded in active market
c. It is an equity instrument
d. The instrument matures with in 2 years
89. In cooperative form of business if member purchase from cooperatives. It is
a. Voluntary and open membership
b. Autonomy and independence
c. Member democratic control
d. Member economic participation
90. Luigi luzzatti established
a. Agri cooperative
b. Urban consumer cooperative
c. Credit consumer cooperative
 d. Rural consumer cooperative
91. In cooperative business voting principle one member has-------------vote(s)
a. Two
b. One
c. Ten
d. Equal to number of shares
92. While Germany is kown for SACCO, Italy is known in starting-------------
a. Agricultural cooperatives
b. Consumer cooperatives
c. Labor cooperatives
d. Health cooperatives
93. ABC PLC uses perpetual inventory system on April 15, 2023, the balance of merchandise
inventory per count shows br 878,000. If merchandise inventory balance per record
shows br 880,000. Which of the following is correct?
a. Ending inventory was reported on the balance sheet at birr 880,000
b. There is an inventory shortage ao birr 2000
c. Cost of goods is credited by birr 2000
d. There is an inventory overage of birr 2000
94. How can the audit program best be described at the beginning of audit process?
a. Optional
b. Comprehensive
c. Tentative
d. Conclusive
95. All of the following are likely to result of a lower dividend, other things the same, except
a. Statutory restriction
b. Liquidity constraints
c. Debt covenants
d. Highly diverse ownership
96. Identify the one that is not the cause of liquidation of a cooperative society
a. I f number of member fall below 50 or minimum requirement
b. By court decision, to be liquidated
c. Bankruptcy proceeding for two consecutive years
d. By 2/3 majority vote of the general assembly decisi
97. The frist formal cooperative was established in Ethiopia in the year----------G.C.
a. 1974
b. 1950
c. 1966
d. 1960
98. Which one of the following is correct about sociological motives to join the
cooperatives?
a. Search for security
 b. Isolation and loneliness
c. Search for protection
d. Intention for being rich
99. Abc Company purchased a piece of equipment January 2, 2012. The equipment cost
$60,000 and has an estimated life of 8 years and a salvage value of $ 8000. What is
depreciation expense for the asset for 2013 under the double declining balance method?
a. $15,000
b. $6562
c. $6500
d. $11250
100. Under the retail method, in determining the cost –to- retail percentage for the
current year
a. Net markups are included
b. Employee discounts included
c. Net markdown are excluded
d. Beginning inventory is excluded
101. Contribution margin ratio always increase when the
a. Break even point increases
b. Variable expenses as a percentage of net sale increase
c. Break even depreciation
d. Variable expenses as a percentage of net sale decrease
102. Rochdale equitable society was formed at
a. Italy
b. Denmark
c. Englang
d. Germany
103.