ACC 497 Final Exam Guide / acc497dotcom

10) The specific cost of each source of long-term financing is basedon ________ and ________ costs.11) At the operating break-even point, ________ equals zero.Section 4: Information Technology (IT) Implications in the BusinessEnvironment12) Justifying expenditures for new technologies is especially difficultbecause13) The hardware of a computer system includes the computer itselfand other devices that help the computer perform its tasks. Theseother devices are commonly also called14) Software that enables businesses and government agencies totransmit and manipulate financial data on an organization-wide basisbest describes15) A simple diagram that shows estimated completion times versusactual completion times for the various activities in a systemsimplementation project16) What would be the best explanation for the absence of completeinformation on computer crime?17) Which of the following processes would be accounted for using ajob order cost system?18) In traditional costing systems, overhead is generally applied basedon19) If standard costs are incorporated into the accounting system20) Generally accepted accounting principles are21) Luca Company overapplied manufacturing overhead during 2006.Which one of the following is part of the year end entry to dispose ofthe overapplied amount assuming the amount is material?

22) The cost to produce Part A was $10 per unit in 2005. During 2006,it has increased to $11 per unit. In 2006, Supplier Company hasoffered to supply Part A for $9 per unit. For the make-or-buy decision,23) Disney’s variable costs are 30% of sales. The company iscontemplating an advertising campaign that will cost $22,000. If salesare expected to increase $40,000, by how much will the company'snet income increase?24) Kershaw Bookstore had 600 units on hand at January 1, costing$18 each. Purchases and sales during the month of January were asfollows: Kershaw does not maintain perpetual inventory records.According to a physical count, 450 units were on hand at January 31.The cost of the inventory at January 31, under the LIFO method is:25) The process of formally recording or incorporating an item in thefinancial statements of an entity is26) The primary purpose of the statement of cash flows is to provideinformation27) Which of the following is considered cash?28) A company offers a cash rebate of $1 on each $4 package ofbatteries sold during 2007. Historically, 10% of customers mail in therebate form. During 2007, 6,000,000 packages of batteries are sold,and 210,000 $1 rebates are mailed to customers. Assuming there is nobeginning liability balance, what is the rebate expense and liability,respectively, shown on the 2007 financial statements dated December31?29) Which of the following is a debt security?30) The balance in Newsprint Corp.'s foreign exchange loss accountwas $10,000 on December 31, 2008, before any necessary year-endadjustment relating to the following:31) Costs incurred internally to create intangibles are

32) The amount to be recorded as the cost of an asset under capitallease is equal to the33) In computations of weighted average of shares outstanding, whena stock dividend or stock split occurs, the additional shares are34) Debt securities that are accounted for at amortized cost, NOT fairvalue, are35) Elvis Company purchases inventory for $70,000 on March 19,2008, and sells it to Graceland Corporation for $95,000 on May 14,2008. Graceland still holds the inventory on December 31, 2008, anddetermines that its market value (replacement cost) is $82,000 at thattime. Graceland writes the inventory down from $95,000 to its lowermarket value of $82,000 at the end of the year. Elvis owns 75% ofGraceland. Based on this information, what amount of inventoryshould be eliminated in the consolidation workpaper for 2008?36) Which of the following objectives is considered the cornerstoneof financial reporting by a governmental entity?37) Expenditures should be budgeted by character. An example of acharacter classification is38) Which of the following funds is accounted for on the modifiedaccrual basis of accounting?39) Several years ago, Durham City issued $1 million in zero couponbonds due and payable in 2010. The bonds were sold at an amount toyield investors 6% over the life of the bonds. During the current year,how much interest expenditures would Durham City recognize relatedto these bonds?40) As used in governmental accounting, interperiod equity refers to aconcept of41) The state has a legally separate State Building Authority, whichhas a board appointed by the Governor. The authority issues debt in

its name, holds title to buildings in its name, and leases its buildingexclusively to the state. The authority would be considered a(n)42) Revenues of a not-for-profit organization should be reported as43) Financial statements for a church-supported college should beprepared according to standards set by the44) For a not-for-profit hospital, which of the following financialstatements is required?45) What agency has the ultimate authority in defining independencefor publicly traded companies?46) A report on internal control effectiveness by management ofpublic companies is required by which of the following:47) Once sufficient predication has been established, what is the firststep a fraud examiner following the fraud theory approach should take?48) Which of the following best describes the objective of a fraudexamination?49) Damages intended to punish a defendant and deter the defendantand others from engaging in the same tortious conduct in the futureare called50) Where a contract calls for action that violates a statute, in a breachof contract case the court will51) Ted’s Gifts and Sweets enters into a written contract with BannonCandies to supply Ted’s with 60 boxes containing a dozen coconutclusters each month for sale to the public. The agreement containedan integration clause. Before the first delivery under the contract, Tedand his warehouse manager called Debbie, the Bannon’s accountrepresentative, to request that the candies be delivered in specialValentine’s Day boxes. Debbie told Ted, “Don’t worry, I’ll tell theshipping department to take care of that.” When the candies were

delivered, they were in standard cardboard boxes. Ted called Bannonand threatened to sue for beach of contract. Will Ted prevail in hissuit?52) Jane and Bill are married. They purchase a house and lot astenants by the entirety. Then Jane is killed in a car accident. Her willleaves everything to her sister, Ruth. What will happen to Jane’sinterest in the property?53) Which of the following is a correct statement of the requirementsfor a bona fide occupational qualification?54) Which of the following statements accurately describes theworkers’ compensation rules?55) When a company holds between 20% and 50% of the outstandingstock of an investee, which of the following statements applies?56) On December 31, 2008, Kean Company changed its method ofaccounting for inventory from weighted-average cost method to theFIFO method. This change caused the 2008 beginning inventory toincrease by $420,000. The cumulative effect of this accountingchange to be reported for the year ended December 31, 2008,assuming a 40% tax rate, is57) Which of the following serves as the highest authority for taxresearch, planning, and compliance activities?58) The retail inventory method is based on the assumption that the59) When an item of expense is paid and recorded in advance, it isnormally called60) Antonio owns land held for investment with a basis of $28,000.The city of Lafayette exercises the right of eminent domain andAntonio receives a payment of $48,000. What is Antonio's realizedgain?

61) In April 2009 of this year, Emma acquired a machine for $50,000for use in her business. The machine is classified as 7-year property.Emma elects out of bonus depreciation and does not expense the assetunder Sec. 179. Emma's depreciation on the machine this year is62) During the current year, a corporation sells equipment for$300,000 that it had purchased and placed in service in 2007. Theequipment cost $270,000, and $60,000 of depreciation deductions wasallowed. The results of the sale are63) Susie owns a ranch in Wyoming, which Pat offers to purchase.Susie is not willing to sell the ranch but is willing to exchange theranch for an apartment complex in Louisiana. The complex isavailable for sale. Pat purchases the apartment complex in Louisianafrom Jody and transfers it to Susie in exchange for Susie's ranch. Theranch and the complex each have a $1,000,000 fair market value.Which of the following is true?64) A married person who files a separate return can claim a personalexemption for his or her spouse if the spouse is not the dependent ofanother and has65) Ricky has rented a house from Sarah since last year. The rent isusually $800 per month, but Sarah reduced the monthly rent down to$600 for all 12 months this year in exchange for Ricky constructingan addition to the house. The addition has a fair market value of$3,500. How much total rental income must Sarah report this year?66) Alex is a calendar-year sole proprietor. He began business onDecember 1 of this year. He uses the accrual method of accounting.Alex had the following collections in the same month: He collected$7,000 in December from clients who paid cash for services to beperformed next year. He collected $5,000 in December for servicesperformed during December, which he deposited in an operatingaccount on December 31 of this year. He collected $9,000 inDecember on accounts receivable for services performed in December,

which he deposited in an operating account on January 2 of next year.What is the amount Alex must include in his income for December?67) Bianca is beneficiary of an $80,000 insurance policy on herfather's life. Upon his death, she may elect to receive the proceeds in 5yearly installments of $17,500 or may take the $80,000 lump sum.She elects to take the lump sum payment. What are the taxconsequences in year one?68) Nonrefundable tax credits69) Paul makes the following property transfers in the current year:$22,000 cash to his wife, $34,000 cash to a qualified charity,$120,000 house to his son, and $3,000 computer to an unrelatedfriend. The total of Paul's taxable gifts, assuming he does not elect giftsplitting with his spouse, subject to the unified transfer tax, is70) Which of the following best describes the weight of a revenueruling?71) Which of the following statements is true?72) One consequence of a property distribution by a corporation to ashareholder is73) Joshua owns 100% of Steeler Corporation's stock. Joshua's basisin the stock is $8,000. Steeler Corporation has E&P of $40,000. IfSteeler Corporation redeems 60% of Joshua's stock for $50,000,Joshua must report dividend income of74) In computing the ordinary income of a partnership, a deduction isallowed for75) Which of the following would terminate a Subchapter S election?76) The function of auditing is77) Auditing is based on the assumption that financial data areverifiable. Data are verifiable when two or more qualified individuals,

78) Statement on Quality Control Standards No. 2 identifies certainquality control elements that should be considered when performingwhich types of services?79) Internal auditors are primarily involved with80) The statement that the reviewer “is not aware of any materialmodifications that should be made to the statements in order for themto be in conformity with GAAP” is known as81) The assessment of inherent risk requires considering matters thathave a pervasive effect on assertions for all or many accounts andmatters that may pertain only to assertions for specific accounts.Which of the following is an example of a pervasive effects matter?82) Specific audit objectives are normally83) The Committee of Sponsoring Organizations (COSO) reportidentified five interrelated components of internal control. Since then,a sixth category has been identified, which is84) Which of the following necessary controls would address apotential misstatement arising from a voucher being paid twice?85) An effective accounting system should identify and record onlythe valid transaction of the entity that occurred in the current period,which relates to the86) One of the six steps involved in performing analytical proceduresincludes the following:87) In a normal audit, the relationship between the level of materialityused to plan the engagement and the level of materiality used toevaluate evidence is that88) Use of auditor judgment or of a risk matrix is necessary inrevising planned detection risk whenever89) In the audit risk model, audit sampling applies to

90) Audit sampling is involved whenever an auditor91) How can long-term assets best be tested for ownership?92) How can long-term assets best be tested for current present value?93) Because of the effects of circulation, some audit evidence is morereliable than other evidence. Which of the following is generallyconsidered to be most reliable?94) Which of the following accounts in a merchandising company isaffected by both the revenue cycle and another cycle?95) The auditor’s strategy in performing test counts during theinventory observation is to96) Which one of the following analytical procedures may indicatepossible inventory obsolescence problems when ratios are large?97) The control of all funds during the count of cash on hand is meantprimarily to prevent98) Whether the entity maintains effective controls to providereasonable assurance that private customer information obtainedbecause of e-commerce is protected is defined as99) A lawyer’s refusal to respond to a letter of audit inquiry normallyrequires the auditor to100) Which of the following is a tort?