Question 1

Brick Co. has considerable excess manufacturing capacity. A special order's cost sheet includes the following applied manufacturing overhead costs: fixed, $18,000; variable, $43,000. The fixed costs include a normal $3,600 allocation for in-house design costs although no in-house design will be done. Instead, the job will require the use of external designers costing $4,500. What is the total amount to be included in the calculation to determine the minimum acceptable price for the special order?

Options :

A : $46,600

B : $47,500

C : $61,000

D : $61,900

Answer: B

Question 2

At 30 June 20X5 a company’s allowance for receivables was $39,000. At 30 June 20X6 trade receivables totalled $517,000. It was decided to write off debts totalling $37,000 and to adjust the allowance for receivables to the equivalent of 5% of the trade receivables based on past events. What figure should appear in the statement of profit or loss for the year ended 30 June 20X6 for receivables expense?

Options :

A : $61,000

B : $52,000

C : $22,000

D : $37,000

Answer: C

Question 3

Identify the correct statement regarding analytical procedures used in a review conducted at the conclusion of an audit.

Options :

A : The ultimate purpose of analytical procedures used in a review conducted at the conclusion of the audit is to uncover fraud schemes that may have been missed previously during the audit.

B : Typically, a junior member of the engagement team will perform the analytical procedures applied at the conclusion of the audit because less precision is required.

C : If review analytical procedures suggest the presence of misstated account balances, the auditor may have to perform additional substantive tests of details to satisfactorily complete the audit.

D : Analytical procedures used in the review near the conclusion of the audit are not required.

Answer: C

Question 4

Trinket Corporation is being sued by its distributor, International, for nonpayment of debts. International will be able to hold Jasper Crumb, a shareholder of Trinket, personally liable for the company's debts if:

Options :

A : Trinket Corporation is overcapitalized.

B : The shareholder-s personal assets are materially commingled with Trinket-s assets.

C : Trinket-s articles of incorporation allow for more than one class of stock.

D : Trinket has four shareholders, including Jasper Crumb.

Answer: B

Question 5

Prior to the financial year end of 31 July 20X9, Cannon Co has received a claim of $100,000 from a supplier for providing poor quality goods which have damaged the supplier’s plant and equipment. Cannon Co’s lawyers have stated that there is a 20% chance that Cannon will successfully defend the claim. Which of the following is the correct accounting treatment for the claim in the financial statements for the year ended 31 July 20X9?

Options :

A : Cannon should neither provide for nor disclose the claim

B : Cannon should disclose a contingent liability of $100,000

C : Cannon should provide for the expected cost of the claim of $100,000

D : Cannon should provide for an expected cost of $20,000

Answer: C

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