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IIA CIA Exam
Certified Internal Auditor Exam (Page 68 )

Updated On: 12-Jan-2026
Page 68 of 342
PDF with 1702 Questions

If ending inventory is underestimated due to an error in the physical count of items on hand, the cost of goods sold for the period will be =List A> and net earnings will be =List B>.

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): C

Explanation:

Cost of goods sold equals beginning inventory, plus purchases, minus ending inventory. If ending inventory is underestimated, cost of goods sold will be overestimated for the period. If cost of goods sold is overestimated. profit for the period will be underestimated.



On March 26. Company Z contracted with a consultant for services to be performed during the period from March 26 through April 30 in exchange for 10.000 treasury shares. The exchange took place on April 30. The treasury shares were acquired in January and were recorded at cost when the market price was US $25 per share. The market price on March 26 was US $21.50 per share. It was US $23 per share on April 30. What should the per share amount recorded for the services have been?

  1. US $21 50
  2. US $22.25
  3. US $23.00
  4. US $25.00

Answer(s): A

Explanation:

A transaction is typically measured at the fair value of the consideration given up unless the fair value of the consideration received is more clearly evident No information is given about the value of the services, so the market price of the treasury shares must be used. This price was US $21_50 on March 26. the date of the agreement to trade the shares for services. Thus, the services to be received should have been measured on that date based on the price of the shares, or US $21.50 per share. Because no gain or loss is recognized on transactions in treasury shares, the entry is to debit services for US $21.500$21.50 x 10.000). debit retained earnings or share premium from treasury share transactions for US $3, 500 [[$25 - $21.50) 10, 000]. and credit treasury shares for US $25, 000$25 x 10, 000).



Under the share <List A>, the par value per outstanding share will <List B>. List A List B

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): D

Explanation:

A share split results in a lower par value per share because the total number of shares increases but the total par value of outstanding share does not change.



The share split proposal will <List A> earnings per share by <List B> than will the share

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): C

Explanation:

The share split will double the number of shares outstanding to 2, 000. The 10% share dividend will increase the number of outstanding shares to 1, 111 ) The higher number of shares in the split will result in a lower earnings per share than will result from the share dividend. An entity has issued 1.000 ordinary shares with a par value of US $1O. and its credit balance in retained earnings is US $5, 000. Two proposals are under consideration. The first is a share split giving each shareholder two new shares for each share formerly held. The second is to declare and distribute a 10% share dividend.



Early in its fiscal year, Starr purchased 1, 000 shares of Pack ordinary shares for US $54, 000. In the same transaction, Starr acquired 2, 000 detachable share purchase warrants. Two of the warrants are required to purchase one additional Pack ordinary share. The market price without the warrants was US $49 per share. The market price of the warrants was US $3.50 per warrant. Starr sold 50% of the warrants several weeks later. If the proceeds received by Starr equaled US $4, 000, it recognized a realized gain of

  1. US $3, 000
  2. US $625
  3. US $500
  4. US $0

Answer(s): B

Explanation:

The recipient of share purchase warrants should allocate the carrying amount of the shares owned between those shares and the rights based on their relative fair values. Thus, the amounts to be allocated to the ordinary shares and warrants are US $47, 250{($49 x 1, 000) - [($49 x 1, 000) +$3.50 x 2, 000)]} x $54, 000) and US $6, 750$54, 000 - $47, 250), respectively. The realized gain is therefore US $625 [$4, 000 - $6, 750 x 50%)]. An entity has issued 1.000 ordinary shares with a par value of US $10. and its credit balance in retained earnings is US $5, 000. Two proposals are under consideration. The first is a share split giving each shareholder Mro new shares for each share formerly held. The second is to declare and distribute a 10% share dividend.



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