IIA-CIA-PART3 practice questions 31–40

1. Question 31 · 336 in bank

   The percentage of sales method, rather than the percentage of receivables method, would be used to estimate uncollectible accounts if an organization seeks to:

   • AUse an aging schedule to more closely estimate uncollectible accounts.
   • BEliminate the need for an allowance for doubtful accounts.
   • CEmphasize the accuracy of the net realizable value of the receivables on the balance sheet.
   • DUse a method that approximates the matching principle.

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   Answer: D

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2. Question 32 · 336 in bank

   An organization uses the management-by-objectives method, whereby employee performance is based on defined goals. Which of the following statements is true regarding this approach?

   • AIt is particularly helpful to management when the organization is facing rapid change.
   • BIt is a more successful approach when adopted by mechanistic organizations.
   • CIt is more successful when goal-setting is performed not only by management, but by all team members, including lower-level staff.
   • DIt is particularly successful in environments that are prone to having poor employer-employee relations.

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   Answer: C

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3. Question 33 · 336 in bank

   In an analysis of alternative credit-management policies, which of the following components will cause the net present value of receivables on credit sales to increase, if everything else remains constant?

   • AA tougher collections policy that reduces the bad debt loss ratio.
   • BA higher cost per unit sold.
   • CA longer average collection period.
   • DAn increase in the cost of capital.

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   Answer: A

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4. Question 34 · 336 in bank

   An organization's account for office supplies on hand had a balance of $9,000 at the end of year one. During year two, the organization recorded an expense of $45,000 for purchasing office supplies. At the end of year two, a physical count determined that the organization has $11,500 in office supplies on hand. Based on this information, what would be recorded in the adjusting entry at the end of year two?

   • AA debit to office supplies on hand for $2,500
   • BA debit to office supplies on hand for $11,500
   • CA debit to office supplies on hand for $20,500
   • DA debit to office supplies on hand for $42,500

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   Answer: A

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5. Question 35 · 336 in bank

   Which of the following performance measures would be appropriate for evaluating an investment center, which has responsibility for its revenues, costs, and investment base, but would not be appropriate for evaluating cost, revenue, or profit centers?

   • AA flexible budget.
   • BVariance analysis.
   • CA contribution margin income statement by segment.
   • DResidual income.

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   Answer: D

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6. Question 36 · 336 in bank

   A capital investment project will have a higher net present value, everything else being equal, if it has:

   • AA higher initial investment level.
   • BA higher discount rate.
   • CCash inflows that are larger in the later years of the life of the project.
   • DCash inflows that are larger in the earlier years of the life of the project.

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   Answer: D

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7. Question 37 · 336 in bank

   An organization requires an average of 58 days to convert raw materials into finished products to sell. An average of 42 additional days is required to collect receivables. If the organization takes an average of 10 days to pay for the raw materials, how long is its total cash conversion cycle?

   • A26 days.
   • B90 days.
   • C100 days.
   • D110 days.

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   Answer: B

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8. Question 38 · 336 in bank

   An organization is projecting sales of 100,000 units, at a unit price of $12. Unit variable costs are $7. If fixed costs are $350,000, what is the projected total contribution margin?

   • A$350,000
   • B$500,000
   • C$850,000
   • D$1,200,000

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   Answer: B

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9. Question 39 · 336 in bank

   When applied to international economics, the theory of comparative advantage proposes that total worldwide output will be greatest when:

   • AEach nation's total imports approximately equal its total exports.
   • BEach good is produced by the nation that has the lowest opportunity cost for that good.
   • CGoods that contribute to a nation's balance-of-payments deficit are no longer imported.
   • DInternational trade is unrestricted and tariffs are not imposed.

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   Answer: B

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10. Question 40 · 336 in bank

    Which of the following statements is true regarding data backup?

    • ASystem backups should always be performed real time.
    • BBackups should be stored in a secured location onsite for easy access.
    • CThe tape rotation schedule affects how long data is retained.
    • DBackup media should be restored only in case of a hardware or software failure.

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    Answer: C

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IIA-CIA-PART3 practice, question 31. 336 questions available.