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IIA CIA Exam
Certified Internal Auditor Exam (Page 58 )

Updated On: 12-Jan-2026
Page 58 of 342
PDF with 1702 Questions

Copper Co will report year-end total assets of

  1. US $800, 000
  2. US $890, 000
  3. US $950, 000
  4. US $1, 010, 000

Answer(s): B

Explanation:

The year-end total assets can be determined by summing all of the assets and deducting accumulated depreciationincluding the current year's depreciation). Total accumulated depreciation at the end of the second year is US $120, 000 [($600, 000 - 10 years) x 2 years]. Total assets equal US $890, 000$80, 000 cash + $100, 000 A/R + $230, 000 El + $600, 000 gross property, plant, and equipment- $120, 000 accumulated depreciation). 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.



The enterprise uses straight-line depreciation for financial reporting purposes, but uses accelerated depreciation for tax purposes. Which of the following account balances would be lower in the financial statements used for tax purposes than it would be in the general purpose financial statements?

  1. Accumulated depreciation.
  2. Cash.
  3. Retained earnings.
  4. Gross property, plant, and equipment.

Answer(s): C

Explanation:

Because the tax basis uses an accelerated method, depreciation expense and accumulated depreciation will be greater. Moreover, taxable income will be lower than financial net income. Consequently. tax-basis retained earnings will be less than that in the general purpose financial statements. 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.



IAS 34, interim Financial Reporting, provides guidelines for interim reporting stating that enterprises

  1. May use estimates based on sales margins for interim inventory valuation although a different method is used for annual reporting.
  2. Must determine income tax expense by applying progressive tax rates to income on a quarterly basis.
  3. May prorate extraordinary items over four quarters.
  4. Need not disclose basic and diluted earnings per share each quarter.

Answer(s): A

Explanation:

Essentially the same reporting methods should be used for interim and annual financial statements. However, the preparation of interim financial reports ordinarily requires a greater use of estimates. For example. IAS 34 states that complete inventory-taking and valuation may not be required at interim dates. Estimates based on sales margins may suffice. 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.



The management discussion and analysis section of a company's annual report typically contains

  1. A description of the company's primary business and segments.
  2. A discussion of the company's operating results.
  3. A discussion of the future prospects of the company.
  4. All of the answers are correct.

Answer(s): D

Explanation:

The MD&A section addresses capital resources, liquidity, and operating results. Management must also identify trends and discuss significant events and uncertainties_ Thus, the MD&A section typically includes a description of the company's primary business and segments. It reviews the operating results of the company, providing a breakdown of net sales and income by segment. It also contains prospective information on economic trends and market changes, and their potential effects on the company's future performance.



A company had US $30 million in total sales last year and expects US $40 million in total sales this year. Ten percent of each year's sales are on credit that will be paid the following year. The company anticipates the following expenses for this year:
· Depreciation of US $5 million.
· Labor, materials, taxes, and other expenses of US $51 million. Assume the company begins this year with a zero cash balance. At the end of this year, the company will have a cash deficit of

  1. US $8 million.
  2. US $12 million.
  3. US $15 million.
  4. US $17 million.

Answer(s): B

Explanation:

The cash inflows from last year's credit sales are estimated to be US $3, 000, 000$'', C1, 0C10, 0Ci0 _-: 10%). The cash inflows from this year's sales are expected to be US $36, 000, 000 x 90%), a total cash inflow of US $39, 000, 000 for the current year. Ignoring depreciation, which is a noncash expense, cash outflows are estimated at US $51, 000.000_ Hence, the net cash outflow is anticipated to be US $12.000, 000$39, 000, 000 - $51, 000.000).



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