Question 1

DRH Corporation's conversion process is highly automated; computers and other forms of information technology are used to prepare raw materials for production and to move partially completed units through the factory.Which of the following statements is most true?

Accepted Answer

While the conversion process may be highly automated, there is still a risk of human error in programming or maintenance of the equipment. Regular inspections of the equipment would serve as an internal control to identify any issues or potential risks. Therefore, option B is the most true statement. Option A is not true as there is always a risk of human error in any process. Option C is not entirely true as there is still a risk of human error, but regular equipment inspections would be a valid form of internal control. Option D is incorrect as both statements have some level of truth.

Question 2

On May 1, CGI Corporation declared cash dividends on its common stock.The dividend was payable on May 15 to shareholders of record on May 5.On which date will CGI record a debit to retained earnings and a credit to cash?

Accepted Answer

The answer of On May 1, CGI Corporation declared cash...

Question 3

As part of the financing business process, corporations may need to account for an initial public offering.How many different forms of a prospectus are parts of the IPO based on the seven steps listed in the text?

Accepted Answer

The answer of As part of the financing business process,...

Question 4

In manufacturing units of Product A27, Mike is supposed to use three pounds of raw material for each unit.But, due to poor quality in a recent batch of raw materials, he used an average of four pounds.Mike's company is therefore exposed to ___ risk.

Accepted Answer

The situation described is an example of human error, as Mike made a mistake by using too much raw material due to the poor quality in the recent batch. This could result in increased costs and potential loss for the company. The other options (hazard, credit, and market) do not apply in this scenario.

Question 5

CGI Corporation had 10,000 shares of $2 par common stock outstanding; the shares had been issued at $5 per share.At the end of March 2011, CGI declared a $3 cash dividend per share when the market price of the stock was $8 per share.After processing the dividend transaction, the balance in CGI's common stock account will be:

Accepted Answer

The balance in CGI's common stock account remains unchanged by the declaration and payment of a cash dividend. The account reflects the par value of the shares issued, which is 10,000 shares at $2 par, totaling $20,000. Cash dividends affect retained earnings and the cash account, not the common stock account.

Question 6

CGI Corporation had 10,000 shares of $2 par common stock outstanding; the shares had been issued at $5 per share.At the end of March 2011, CGI declared a $3 cash dividend per share when the market price of the stock was $8 per share.Which of the following statements is most true?

Accepted Answer

The $3 cash dividend per share is not determined by the differences between issuance price, par value, or market value. Dividend amounts are decided by the company's board of directors based on profitability, cash reserves, and strategic considerations, none of which are detailed in the provided information.

Question 7

In manufacturing units of Product A27, Mike is supposed to use three pounds of raw material for each unit.But, due to poor quality in a recent batch of raw materials, he used an average of four pounds.Which of the following internal controls would prevent the problem in the future?

Accepted Answer

Closer inspection of deliveries would ensure that poor quality raw materials are not delivered to the manufacturing unit and hence prevent future problems like the one faced by Mike. More frequent performance evaluations for Mike may not necessarily prevent the problem, as using incorrect amounts of raw materials could be due to human error or oversight rather than a lack of skill or competence.

Question 8

Which of the following best pairs a financing process risk with an internal control that will address the risk?

Accepted Answer

Both options A and B correctly pair a financing process risk with an appropriate internal control. A) addresses the risk of errors or inefficiencies due to poorly trained employees with the solution of required annual training. B) addresses the risk of defaulting on debt payments due to poor cash management with the solution of developing a proper cash budget.

Question 9

CGI Corporation was preparing to issue long-term debt securities.They planned to pay 10% interest semi-annually, although investments of similar risk were paying 12% at the time.Which of the following terms best describes the 12% interest rate?

Accepted Answer

The 12% interest rate represents the market rate, which is the interest rate available in the marketplace for similar investments of similar risk. This rate is relevant to the issuer of the debt securities in determining an appropriate interest rate to attract investors.

Question 10

The balance sheet of BYA Corporation reported bonds payable with a book value of $500,000 and total paid-in capital of $300,000.The balance sheet of LCA Corporation reported bonds payable with a book value of $600,000 and total paid-in capital of $250,000.Which of the following statements is most true?

Accepted Answer

The answer of The balance sheet of BYA Corporation reported...

Question 11

Separation of duties can promote strong internal control in the conversion process.Which three duties should be separated?

Accepted Answer

Separation of duties in the conversion process should involve physical custody, authorization, and recordkeeping. This means the person who has physical access to the assets should be different from the one who authorizes the transaction and the recording of the transaction. By separating these duties, it is harder for fraudulent activities to occur as it requires collusion between multiple individuals. The other options listed are not relevant to the conversion process.

Question 12

Which of the following transactions is commonly associated with the financing process?

Accepted Answer

Both issuance of equity securities and issuance of debt securities are commonly associated with the financing process. Issuance of equity securities involves selling ownership shares of the company, while issuance of debt securities involves borrowing money that must be repaid with interest. Both methods allow companies to raise funds to finance their operations or expansion plans.

Question 13

On May 1, CGI Corporation declared cash dividends on its common stock.The dividend was payable on May 15 to shareholders of record on May 5.Which of the following entries will CGI make on May 5 in its accounting information system?

Accepted Answer

On May 5, the record date, CGI Corporation would not make any accounting entries. The record date simply identifies who will receive the dividend, but no accounting transaction occurs on this date. The entries for declaring the dividend (debit retained earnings, credit dividends payable) would have been made on the declaration date (May 1), and the entry to distribute the dividend (debit dividends payable, credit cash) would be made on the payment date (May 15).

Question 14

One of the transactions commonly associated with the financing process is the distribution of dividends.Information needed to process that transaction includes:

Accepted Answer

To process the distribution of dividends, both shareholder identification data and type of dividend are needed. Shareholder identification data is necessary to ensure that dividends are distributed to the correct shareholders, while the type of dividend (cash or stock) determines how much each shareholder will receive.

Question 15

Transactions associated with the financing process include all of the following except:

Accepted Answer

Transactions associated with the financing process typically involve actions that affect the equity and debt of a company, such as the issuance of equity securities (B), the purchase of treasury shares (A), and the repayment of debt (D). Payroll for finance department employees (C) is considered an operating expense, not a financing activity.

Question 16

One of the transactions commonly associated with the financing process is the issuance of long-term debt.Which of the following pieces of information is least likely to be required to process such a transaction?

Accepted Answer

Shareholder approval is not typically required for the issuance of long-term debt. The coupon interest rate, market interest rate, and lender identification data are all essential pieces of information needed to process the transaction.

Question 17

Within the context of the financing process, separation of duties means:

Accepted Answer

The answer of Within the context of the financing process,...

Question 18

Factory workers at OMI Corporation are scheduled to work forty hours per week, but frequently work forty-five hours per week, leading to increased payroll costs for OMI.Which of the following statements is most true?

Accepted Answer

By paying employees for five extra hours per week, OMI is incurring increased payroll costs, which could lead to liquidity risk if the company does not have enough cash on hand to cover these expenses. On the other hand, expanding the workforce could provide a form of internal control, as there would be more employees available to cover the necessary workload without exceeding scheduled hours. Therefore, both options are true.

Question 19

Adequate documentation can promote strong internal control in the conversion process.All of the following documents are used in the conversion process except:

Accepted Answer

Form W-2 is a tax form used to report wages and taxes withheld from an employee's paycheck to the Internal Revenue Service (IRS). It is not related to the conversion process. The other three options (materials requisition, labor time ticket, and materials move ticket) are commonly used documents in the conversion process to track the use of materials, labor, and movement of materials during the manufacturing process.

Question 20

Which of the following best pairs a financing process risk with an internal control that will address the risk?

Accepted Answer

A corporate line of credit can provide the necessary funds to pay dividends when there is a cash shortage, addressing the risk of being unable to pay dividends.

Quiz 13: Other Business Processes

DRH Corporation's conversion process is highly automated; computers and other forms of information technology are used to prepare raw materials for production and to move partially completed units through the factory.Which of the following statements is most true?

On May 1, CGI Corporation declared cash dividends on its common stock.The dividend was payable on May 15 to shareholders of record on May 5.On which date will CGI record a debit to retained earnings and a credit to cash?

As part of the financing business process, corporations may need to account for an initial public offering.How many different forms of a prospectus are parts of the IPO based on the seven steps listed in the text?

In manufacturing units of Product A27, Mike is supposed to use three pounds of raw material for each unit.But, due to poor quality in a recent batch of raw materials, he used an average of four pounds.Mike's company is therefore exposed to ___ risk.

CGI Corporation had 10,000 shares of $2 par common stock outstanding; the shares had been issued at $5 per share.At the end of March 2011, CGI declared a $3 cash dividend per share when the market price of the stock was $8 per share.Which of the following statements is most true?

In manufacturing units of Product A27, Mike is supposed to use three pounds of raw material for each unit.But, due to poor quality in a recent batch of raw materials, he used an average of four pounds.Which of the following internal controls would prevent the problem in the future?

Which of the following best pairs a financing process risk with an internal control that will address the risk?

CGI Corporation was preparing to issue long-term debt securities.They planned to pay 10% interest semi-annually, although investments of similar risk were paying 12% at the time.Which of the following terms best describes the 12% interest rate?

Separation of duties can promote strong internal control in the conversion process.Which three duties should be separated?

Which of the following transactions is commonly associated with the financing process?

On May 1, CGI Corporation declared cash dividends on its common stock.The dividend was payable on May 15 to shareholders of record on May 5.Which of the following entries will CGI make on May 5 in its accounting information system?

One of the transactions commonly associated with the financing process is the distribution of dividends.Information needed to process that transaction includes:

Transactions associated with the financing process include all of the following except:

One of the transactions commonly associated with the financing process is the issuance of long-term debt.Which of the following pieces of information is least likely to be required to process such a transaction?

Within the context of the financing process, separation of duties means:

Factory workers at OMI Corporation are scheduled to work forty hours per week, but frequently work forty-five hours per week, leading to increased payroll costs for OMI.Which of the following statements is most true?

Adequate documentation can promote strong internal control in the conversion process.All of the following documents are used in the conversion process except:

Which of the following best pairs a financing process risk with an internal control that will address the risk?