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IIA CIA Exam
Certified Internal Auditor Exam (Page 23 )

Updated On: 12-Jan-2026
Page 23 of 342
PDF with 1702 Questions

The entity has an accounts receivable balance of

  1. US $12
  2. US $26
  3. US $36
  4. US $66

Answer(s): B

Explanation:

Total assets equal total liabilities and equity. Hence, if total assets equal US $100. total liabilities and equity must equal US $100, and current liabilities must equal US $30 $100
- $40 - $30). Because the quick ratio equals the quick assets cash + accounts receivable) divided by current liabilities, the quip-k assets must equal US $36 $30 x 1.2 quick ratio), and the accounts receivable balance is US $26 $36 I- $10 cash). An entity has a current ratio of 14, a quick, or acid test, ratio of 12, and the following partial summary balance sheet:



The entity has a fixed assets balance of

  1. US $0
  2. US $16
  3. US $58
  4. US $64

Answer(s): C

Explanation:

Total assets given as US $100) equals the sum of cash given as US $10), accounts receivable US $26), inventory, and fixed assets. Inventory can be determined because it is included in current, but not quick, assets, and the current and quick ratios are known. Current assets equal US $42 1.4 current ratio x $30 current liabilities), and the quick assets equal US $36 1 2 quick ratio = $30 current liabilities). Thus, inventory, which is
the only difference in this question between current and quick assets, equals US $6 $42 - $36). Fixed assets must then equal US $58 $100 total assets - $10 cash - $26 accounts receivable - $6 inventory).



A manufacturing company employs variable costing for internal reporting and analysis purposes. However, it converts its records to absorption costing for external reporting. The Accounting Department always reconciles the M o operating income figures to assure that no errors have occurred in the conversion. The fixed manufacturing overhead cost per unit was based on the planned level of production of 480.000 units. Financial data for the year are presented below:

The difference between the operating income calculated under the variable costing method and the operating income calculated under the absorption costing method would be

  1. US $57, 600
  2. US $60, 000
  3. US $90, 000
  4. US $120, 000

Answer(s): B

Explanation:

The difference between variable costing and absorption costing is that the former treats fix d manufacturing overhead as a period cost. The latter method treats it as a product cost Given that sales exceeded production, both methods expense all fixed manufacturing overhead incurred during the year. However, 10.000 units 510.000 sales
- 500.000 production) manufactured in a prior period were also sold. Thy_ ·e units presumably were recorded at US $10 under variable costing and US $16 under absorption costing. Consequently. absorption costing operating income is US $60.000 10.000 units $6) less than that under variable costing.



During its first year of operations, a company produced 275.000 units and sold 250.000 units The following costs were incurred during the year:

The differences between operating profit calculated on the absorption-costing basis and on the variable-costing basis is that absorption-costing operating profit is

  1. US $200, 000 greater.
  2. US $22iJ, 000 greater.
  3. US $325.000 greater.
  4. US $62.500 0 less.

Answer(s): A

Explanation:

Absorption-costing operating profit will exceed variable-costing operating income because production exceeds sales, resulting in a deferral of fixed manufacturing overhead in the inventory calculated using the absorption method. The difference of US $200, 000 is equal to the fixed manufacturing overhead per unit US $2, 200, 000 - 275, 000 = US $8.00) times the difference between production and sales 275, 000 - 250, 000 = 25, 000, which is the inventory change in units).



What is the total contribution to corporate profits generated by Division A before allocation of central corporate expenses?

  1. US $18, 000
  2. US $20, 000
  3. US $30, 000
  4. US $90, 000

Answer(s): C

Explanation:

Division As total contribution to corporate pr: ruits includes everything except the central corporate expense allocation. Thus, the total contribution is US $31'_1, 000 $150, 000 sales * $10, 000 other revenue - $30, 000 direct materials - $20, 000 direct labor- $5, 001'_i variable overhead - $25, 000 fixed overhead - $15, 000 variable S '.A e i n-, e - $35, 000 fixed c .-, :{-pease).
A and B. are autonomous divisions of a corporation. They have no beginning or ending inventories, and the number of units produced is equal to the number of un1Ls sold. Following is financial information relating to the two divisions:



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