Free CIA Practice Test & Exam Questions (Page 45 )

QUESTION: 928

If the entity's raw materials inventory as of r.~. 'ITiber 31 of the current yearending inventory) was miscounted and the true figure was higher than US $ one effect on the year-end financial statements would be that

Profit is overstated.
Cost of goods said is overstated.
Working capital is overstated.
Cost of goods produced is understated.

Answer(s): B

Explanation:

If the ending inventory of raw materials is understated, r materials used is overstated, cost of goods produced is overstated, and cost of goods sold is overstated.

Show Answer Next Question

QUESTION: 927

The cost of go is sold for the current year ended December 31 would be

US $1.480J 11 i0
US $1, 000, 111 .0
US $1.01o. 1 11 i0
US $1.0.50.000

Answer(s): A

Explanation:

An entity had the following opening and closing inventory balances during the current year:

The following transactions and events occurred during the current year US $300, 000 of raw materials were purchased, of which US $20, 000 were returned because of defects. US $600, 000 of direct labor costs were incurred. US $750, 000 of production overhead costs were incurred.

Show Answer Next Question

QUESTION: 926

The following information is available for an entity for the quarter ended March 31. of the current year:

The gross profit margin is normally 200 of sales. What is the estimated cost of the merchandise inventory at March 31. of the current year?

US $20, 000
US $40, 000
US $60.000
US $180, 000

Answer(s): C

Explanation:

The gross profit margin percentage is given as 20% of sales. Hence, cost of goods sold must have been US $160, 000 [$:4110, 000 sales x1_0 - 2)]. The estimated cost of the inventory at March 31 is computed as follows:

The following transactions and events occurred during the current year:
US $300, 000 of raw materials were purchased, of which US $20, 000 were returned because of defects. US $600, 000 of direct labor costs were incurred. US $750, 000 of production overhead costs were incurred.