Question

A management assertion category which asserts whether particular compone

Which of the following is not true with respect to the auditors' report for a
Which of the following is not true with respect to the concept of reasonab
Which of the following is measures a quality of evidence, meaning its relev
In which of Audit report opinion type that the financial statements are fair
Which of general standards is a means that auditors are professionals respon
An audit to determine whether an entity is following specific procedures or
Which of the following best describes the risk of a firm with both high op
Which capital structure is likely to minimize the Weighted Average Cos
Which of the following dividend policies involves paying a fixed amount o
PrintQuik Inc. has a cost of equity of 14% and a cost of debt of 6%. If the
According to Modigliani and Miller's Proposition I without taxes, how is th
Which one of the following would tend to favor a low dividend pay-out?
In which of the following condition a corporation may pay a dividend?
Which of the following statement is not an assumption of Walters’ model
Which of the following items would typically vary with sales in financial
Which of the following statements is most consistent with efficient inve
The firm's capital structure refers to:
A firm should select the capital structure which:
Long term sources of financing include all except:
A market for short-term debt securities is usually known as:
Which of the following actions would increase a firm's liquidity?
Finance is about:
A financial management decision that deals with the mix of debt and equity
Profit maximization, as the goal of a firm is inappropriate for which of th
Assuming the existence of flotation costs, which of the following list incl
As part of its effort of raising enough funds for an upcoming project, XY
If you want to accumulate Birr 500,000 in 15 years by making equal annua
According to the principle of diversification, investors should:
Find the wrong statement about portfolio
In joint arrangement “joint control” is exist only when:
The interest in acquiree which is held by the party other than the acquirer
If three parties (T, M &S) establish an arrangement: T has 50% of the voti
Which one of the following is true about investment in branch ledger acco
Which one of the following is true about business combination through S
Which one of the following account is not included in Combined Financi
What will happen in business combination, if net identifiable asset of co
What is the main objective of one business entity to forming business uni
Which one of the following statements is false about joint arrangement?
Which of the following is the last resort defensive strategy that taken by
Which of the following is not exempted from Value-Added Tax?
Category “A” taxpayers in Ethiopia_______________________ for busine
 Which one is not allowable deduction if the leaser maintains book of acc
Which of the following is true about fiscal imbalance?
Fines and Penalties are imposed as a form of punishment for the mistakes
Which of the following expenditure is not capital expenditure?
Which of the following different?
Selam plc paying its bank loan obtained from Abyssinia bank S. co. at 15%
Which of the following statements refers to management accounting info
Which of the following BEST explains the primary purpose of cost alloca
The following are features of process costing EXCEPT:
A manufacturing company has three support departments (Maintenance, I
When Job #X-125 is completed in a job order costing system, which of the f
Which of the following activities is true about the cost variance under t
Which of the following is an advantage of the Standard Costing System?
Under absorption cost the managerial decision is based on:
Margin of safety can be improved by:
Which of the following methods costing methods charges all the manufactu
If the material price variances is $3000 F and the material quantity and la
Which of the following equations can be used to calculate a material quan
The unit contribution margin is calculated as the differences between:
What are costs that are directly related to a decision made by managemen
What are the three basic activities of accounting?
If a company's retained earnings decrease from the beginning to the end o
A Credit may show a(n):
Which of the following is not correct about double entry recording syste
Identify an event that is not recorded in accounting records:
Which of the following business structure provides limited liability to its
Net income appears on which two financial statements?
What happens if an adjusting entry for accrued revenues is not recorded?
When recording an adjusting entry for a prepaid expense, which of the fo
What is the effect of a regressive tax system on income inequality?
Bonds that are sold in a foreign country and are denominated in the coun
If businesses are "governed by the marketplace, governments are govern
Company S acquires 80% of the outstanding shares of company T for Birr 80
On January 1, 2012, Eba Company acquires Br. 200,000 of Worku, Inc., 8%
Resources that are held in trust for the benefit of the government’s own p
Which of the following transactions would result in a cash outflow from fi
A company reports the following: Net income = 150,000; Depreciation = 20
At lease commencement, lessees must recognize:
IFRS 16 allows lessees to exempt from lease recognition:
According to IAS 12, deferred tax assets are recognized only when:
A permanent difference will:
Which of the following would create a deferred tax asset?
Accounting depreciation = 5,000; Tax depreciation = 8,000. Tax rate = 30
OptionA
Valuation
The report title should contain the word "independent."
Reasonable assurance allows for mistakes and misinterpretations by t
Appropriateness of evidence
Standard unqualified audit opinion
Adequate Technical Training and Proficiency
Audit of financial statements.
Low business and financial risk
100% equity financing
Residual dividend policy
9.80%
The value of the leveraged firm increases with the use of debt.
Elimination of the tax deferral on capital gains
When the firm's liabilities exceed its assets
The firm finances its entire investments by means of retained earnings
Account payable
Relatively low days sales outstanding (DSO).
The way a firm invests its assets.
Produces the highest cost of capital.
corporate bonds
Money market
selling stock and buying machineries
Managing people
Investing and financing decisions
Ignores EPS and focuses on total profit of a firm
Debt, new common stock, preferred stock, and retained earnings
7.50%
Birr 21,504.28
Invest only in a single asset class for maximum return
The expected portfolio return is simply a weighted average of the indi
investors have equal share
Minority interest
T&M
is credited for all merchandise send to branch
both or all Constituent Companies are continue as separate legal entiti
Asset account
Goodwill will recognized and reported on the book of combinor as an
To control each branch through financial report
arrangement in a separate vehicle in which parties have right to asset a
Pac-man defense
Import of gold for National Bank of Ethiopia
Should file to the Tax Authority profit and loss statement (income sta
 Tax on land and buildings being leased
It is mismatch of revenue and expenditure in state or among the states
To improve government revenue.
Spending on construction of power plants
Employment income tax
400,000
There are no regulations governing the reports.
To comply with tax regulations by inflating reported product costs.
Costs are accumulated by department rather than by individual job.
IT department costs would be allocated to HR before being allocated
Debit Work in Process 15,000;CreditFinishedGoods15,000
Cost variance is the difference between the standard cost and the actua
It helps in promoting and measuring efficiencies within an organization
Variable cost
Increasing sales volume
Marginal costing
$1800 U
(AQ X AP) – (AQ X SP)
selling price and fixed cost per unit
Relevant
Identifying, recording, communicating
Net income is less than dividends paid.
increase in an asset account
Every transaction affects at least two accounts
A company pays an employee for work performed.
Proprietorship
Income Statement and Statement of Cash Flows
Assets will be overstated
A decrease (credit) to an expense account
It benefits lower-income individuals
Country bonds.
State constitutions
Birr 160,000
Br. 19,005.26
Governmental fund.
Purchase of a building
145,000
Lease revenue and lease receivable
Leases of intangible assets
The company has taxable temporary differences
Reverse over time
Revenue recognized in tax before accounting
Deferred tax liability of 900
OptionB
Presentation and disclosure
The report provides a detailed listing of major auditing procedures performed during th
The nature of many audit procedures is such that they cannot always be relied upon to d
Sufficiency of evidence
Unqualified with explanatory paragraph
Independence in Mental Attitude
Compliance audit.
High financial risk but low business risk
100% debt financing
Compromise Dividend Policy
10.50%
The value of the leveraged firm decreases with the use of debt.
Investors' desire for a high-dividend yield
When the amount of the dividend exceeds the accumulated profits (retained earnings)
The firm uses either debt or equity for financing its investment
Interest expense
Relatively high current ratio
The amount of capital in the firm.
Maximizes the value of the firm.
commercial paper
Capital market
selling machinery and using proceeds to retire bonds
Managing the assets and equities of a firm
Capital structure decisions
Disregard the fact that risk drives return
Debt, preferred stock, retained earnings, and new common stock
8.55%
Birr 22,153.89
Spread their investments across a variety of assets to reduce risk
Portfolio risk is a weighted average of the individual security's standard deviations
both or all parties invest more than 50%
Parent interest
S &M
is non-current asset account
Consolidate F/s will prepared at the end of operation period
Reciprocal ledger account
Gain on acquisition will recognized and immidiatly reported on the OCI of combinor
To prepare consolidated financial statement that show each branch performance
joint arrangement without a separate vehicle is a J.O
Greenmail
Medical Services and Prescription Drugs
Includes business which has an annual turnover of over Birr 500,000 but below Birr 1,0
Cost of lease (rent) of land
It is concerned vertical imbalance only.
To improve saving and investment.
Spending on land development
Excise tax
600,000
The reports are generally delayed and historical.
To assign indirect costs to cost objects (products/departments) for accurate pricing and pr
Production is continuous and not tied to specific customer orders.
Maintenance department costs would be allocated directly to Assembly and Finishing o
Debit Finished oods 15,000;Credit Cost of Goods Sold 15,000
Cost variance is the difference between the standard cost and the budgeted cost
It helps to control and reduce the overall costing within an organization
Fixed cost
Lowering variable cost
Budgeting costing
$3600 U
(AP X SP) – (AQ X SP)
selling price and variable cost per unit
Direct
Investing, financing, operating
Total Liability is greater than total assets.
decrease in a liability account
Total debits must equal total credits
A company hires employees
Partnership
Income Statement and Retained Earnings Statement
Liabilities will be overstated
A decrease (credit) to an asset account
It reduces inequality
Foreign bonds.
Budgets
Birr 240,000
Br. 3,005.26
Fiduciary fund.
Payment of interest on a loan
155,000
Lease expense only
Leases with fair value less than $10,000
It is probable that taxable profit will be available in the future
Result in deferred tax
Accounting depreciation lower than tax depreciation
Deferred tax asset of 900
OptionC
Existence and occurrence
The opinion assesses the financial statements against an applicable financi
Audit teams should evaluate all transactions and components of an account b
Relevance of evidence
Qualified opinion
Due Professional Care
Operational audit.
High business risk and high financial risk
A mix of debt and equity at the optimal point
No dividend policy
11.60%
The value of the leveraged firm is independent of its capital structure.
Higher tax rates on capital gains than on dividend income
When the dividend is being paid from capital invested in the firm
Internal rate of return (R) and cost of capital (K) of the firm remains constan
long-term debt
Below average inventory turnover ratio
The amount of dividends a firm pays.
Minimizes taxes.
Common stock
Physical asset market
collecting accounts receivable and buying corporate bonds
Managing the sources and uses of funds firms and individuals
Working capital decisions
Ignores the size of funds disbursed to stockholders as dividends
New common stock, retained earnings, preferred stock, and debt
12%
Birr 23,058.29
Avoid any form of risk in their portfolio
Portfolio beta is a measure of the market risk of a portfolio
investors had invest 20%-50% on project
controlling interest
T&S
is debited for all cash received from branch
Acquired company is liquidet on the date of acquisition
Liabilities account
No Goodwill is recognized
To prepare separate financial statements of each branch
If the arrangement is formed as partnership form of business the arrangemen
Selling the crown(Scorched Earth )
Religious related Services
Neither balance sheet nor income statement is a requirement to this categor
 Income from rent of furniture and equipment
It is concerned horizontal imbalance only.
To prevent the people from making mistakes.
Spending Wages/salary
Value added tax
480,000
The audience tends to be stockholders, creditors, and tax authorities.
To eliminate variable costs from financial statements.
Output consists of heterogeneous products with varying costs.
HR department costs would first be allocated to IT and Maintenance before
Debit Finished Goods 15,000;Credit WorkinProcess15,000
Cost variance is the difference between the standard cost and the marginal c
It helps to fix the selling price for the products manufactured within an org
Total cost
Lowering fixed cost
Absorption costing
$3000 F
(AQ X SP) – (SQ X SP)
selling prices and product cost per unit
Irrelevant
Analyzing, reporting, auditing
The company issued additional shares.
increase in an Expense account
Recording is done by debiting at least one account and crediting at least on
A company performs a service
Corporation
Balance Sheet and Income Statement
Revenues will be understated
An increase (credit) to a liability account
It has no impact on inequality
Equity bonds:
Legislative bodies
Birr 150,000
Br. 16,000
Proprietary fund.
Repayment of a loan principal
165,000
Right-of-use asset and lease liability
Short-term leases (≤12 months) and leases of low-value assets
Tax rates are stable
Not result in deferred tax
Provisions for bad debts not deductible for tax
Deferred tax liability of 1,500
OptionD Correct Explanation
Right and obligations B
The report specifically identifies the financial statements and years exami B
Auditors should control the overall risk in an audit to an acceptably low leC
Reliability of evidence A
Adverse Opinion B
Adequate Planning and Supervision C
None of the above B
Low overall risk due to risk diversification C
A zero-debt policy C
Stable dividend policy D
10.00% C
The value of the leveraged firm is maximized when there is no debt. C
High flotation cost for equity issues D
When the government gives tax incentives D
The firms’ earnings are either distributed as dividends or reinvested internB
Dividends A
Low incidence of production schedule D
The mix of debt and equity used to finance the firm's assets D
Is fully unlevered B
preferred stock B
‘B’ and ‘C’ are correct A
selling bonds and holding proceeds in the cash account D
All except ‘A’ D
All of the above B
All of the above D
Preferred stock, new common stock, retained earnings, and debt B
7.10% A
Birr 24,161.02 D
Focus only on high-risk assets for higher returns B
All of the above B
decision require unanimous consent D
subsidiary A
Among all parties A
is credited for expense paid by home office for branch B
No journal entry on the date of acquisition C
Revenue account B
None of the above B
To achieving marketing objectives D
In joint venture arrangement equity method is used for financial report A
White knight C
Production or Import Beverage D
Any other business having an annual turnover of less than Birr 500,000. A
Interest on bank loan if any C
All D
All C
Spending on buildings dams C
Turnover tax A
200,000 C
It primarily measures and records business transactions A
To reduce total production costs by reallocating administrative salaries. B
A production cost report is used to track unit costs. C
All interdepartmental services are fully recognized through simultaneous B
Debit Cost of Goodssold 15,000;Credit Raw Materials15,000;0 and CreditCWages Payable $6,000
Cost variance is the difference between the actual cost and the marginal coA
All of the above D
None of the above C
All of the above D
Standard costing C
$1200 F D
(AQ X SP) – (AQ X AP C
fixed cost and variable cost per unit B
Indirect A
Identifying, recording, summarizing A
Net income is greater than dividends paid. A
increase in the Retained earnings account D
The number of debited accounts must equal the number of credited accounD
The purchase of a new computer B
A and B are correct C
Balance Sheet and Statement of Cash Flows B
Expenses will be overstated C
An increase (credit) to a revenue account B
It increases inequality D
Eurobonds B
Taxes B
Birr 50,000 B
Br. 20,000 B
Enterprise fund B
Payment for inventory C
185,000 C
Operating asset and deferred income C
Leases with variable payment terms C
The company has no liabilities B
Be recognized in equity C
Tax on dividend income C
Deferred tax asset of 1,500 A
xplanation