Cisco
CompTIA
ISC
EC-Council
EXIN
Fortinet
ITIL
Juniper
Microsoft
VMware
Avaya
SAP
Google
NVIDIA
Salesforce
Amazon
Palo Alto Networks
ISC2
Splunk
ServiceNow
All Vendors
  2. Home
  3. Exams
  4. IIA
  5. CIA

IIA CIA Exam
Certified Internal Auditor Exam (Page 57 )

Updated On: 12-Jan-2026
Page 57 of 342
PDF with 1702 Questions

The entity had sales for the period of

  1. US $891, 667
  2. US $1, 100, 000
  3. US $1, 188, 890
  4. US $1, 466, 667

Answer(s): C

Explanation:

Gross profit equals 30% of sales. Thus, dividing gross profit by 30% yields sales. Gross profit equals profit before interest and taxPBIT) plus administrative expensegiven as US $40, 000) and depreciationUS $500, 000 fixed assets 10 years = US $50, 000). Interest equals 10% of the long-term debt, or US $100, 000 x 10%). Profit before tax equals US $166, 667 [$100, 000 profit -1.0 ­ 40% tax rate)]. Hence, PBIT must equal US $266, 667$166, 667 + $100, 000), and gross profit must be US $356, 667$266, 667 PBIT+ $40, 000 administrative expense + $50, 000 depreciation). Sales is therefore US $1, 118, 890$356, 667 gross profit - 30% gross profit rate). At the end of the accounting period, an entity has the partially completed financial statements shown as follows.



Whenever an entity must use net realizable value rather than cost to value an inventory item, the inventory account is reduced and the account "expense due to decline of inventory to net realizable value" is increased. The balance of this account is reflected as a separate item on the

  1. Balance sheet as a deduction from inventory.
  2. Income statement as an extraordinary loss.
  3. Income statement as a deduction from gross profit on sales.
  4. Income statement as an operating expense.

Answer(s): C

Explanation:

If a separate expense account is not used, the ending inventory will be reduced directly and the result will be an increase in cost of goods sold. No separate disclosure of the inventory write down will appear in the income statement_ The effect is to hide the loss in cost of goods sold. If the separate expense account is used, it appears on the income statement as a deduction from gross profitsales - cost of goods sold). One advantage is that cost of goods sold is not misstated. At the end of the accounting period, an entity has the partially completed financial statements shown as follows.



At the end of September, a entity has outstanding accounts receivable of US $350 on third-quarter credit sales, composed as follows.

The percentage of receivables in the 31-to-5O-day age group at the end of September is

  1. 22.86%
  2. 28.57%
  3. 48.57%
  4. 71.43%

Answer(s): C

Explanation:

Receivables from August sales still outstanding at the end of September are in the 31 to- 60-day age group. This group represents 48.57% of total receivables [US $170 -$100 + $170+ $80)].
An entity sells goods on an installment basis. The table below includes information about the level of installment sales, the cost of the goods sold on installment, and the cash receipts on installment sales for Year 1 through Year 3. All cash receipt amounts shown are net of any interest charges.



Actual and projected sales of an entity for September and October are a'-, follows:

All credit sales are collected in the month following the month in which the sale is made. The September 30 cash balance is US $23, 000. Cash disbursements in October are projected to be US $94, 000. To maintain a minimum cash balance of US $15, 000 on October 31, the entity will need to borrow

  1. US $0
  2. US $6, 000
  3. US $11, 000
  4. US $16, 000

Answer(s): B

Explanation:

This entity will collect US $80, 000$50, 000 from September credit sales + $30, 000 from October cash sales) in October. To reach its targeted cash balance on October 31, it will have to borrow US $6, 000.



Which adjusting entry should be used at year-end to account for interest expense on the long-term debt?

  1. Interest expense US $100, 000
    Interest payable US $100, 000
  2. Interest expense US $50, 000
    Cash US $50, 000
  3. Interest payable US $100, 000
    Interest expense US $100, 000
  4. Interest expense US $50, 000
    Interest payable US $50, 000

Answer(s): D

Explanation:

The debt was issued on July 1 and has been outstanding for only 6 months. Interest expense equals the face amount of the debt multiplied by the interest rate and the fraction
of the year the debt was outstanding [US $1.000.000 x 10% x6 - 12) = US $50, 000]. Because interest is payable on July 1. 6 months' interest is accrued and expensed in the current period. The payable is also recognized in the current p-riod. Thus, the adjusting entry should be
Interest expense US $50, 000
Interest payable US $50.000
Copper Co. had the pre-closing trial balance at December 31 shown below. Additional information: The balance of opening inventory was US $140, 000. The long-term debt pays interest at a rate of 10% per annum, payable every 12 months. The debt was issued on July 1 of the current year and originally had 5 years to maturity. The assets classified as property, plant, and equipment have a 10-year estimated useful life and were 1 year old at the start of the current year Straight-line depreciation is used.



Viewing page 57 of 342
Viewing questions 281 - 285 out of 1702 questions



Post your Comments and Discuss IIA CIA exam prep with other Community members:

Join the CIA Discussion