CIS September 2013 Exam Diet
Examination Paper 1.1:
Financial Accounting and Financial Statement
Analysis
Economics and Financial Markets
Quantitative Analysis and Statistics
Level 1
MULTI CHOICE QUESTIONS
Financial Accounting and Financial Statement Analysis (1 - 34)
1.
Which of the following best describes the role of providing information about the
performance and financial position of companies so that users can make informed
economic decision?
A. Auditing.
B. Financial reporting.
C. Financial statement analysis.
D. Income statement.
2.
Emeka Ventures bought a van paying by cheques, N500,000. How will this
transaction be recorded in the company's books?
A. Credit the Cash Account and Debit the Capital Account.
B. Credit the Cash Account and Debit the Capital Account.
C. Debit the Van Account and Credit the Bank Account.
D. Credit the Van Account and Debit the Bank Account.
3.
Flames Plc purchased an asset for N3,000,000 with an estimated residual value of
N600,000. What is the depreciation charge for the first year using straight line
basis if its useful life is 6 years?
A. N600,000
B. N400,000
C. N500,000
D. N300,000
4.
Flakes Company has fixed assets of N13,000, current assets of N7,000 and
stakeholders' equity of N12,000. What is the amount of its liabilities?
A. N12,000
B. N20,000
C. N8,000
D. N32,000
5.
Which of the following accounts that appears on the adjusted trial balance will be
used in preparing the income statement?
A. Unearned revenue.
B. Revenue.
C. Contributed capital.
D. Supplies.
6.
An impairment loss is _________
A. The amount by which the recoverable amount of an asset exceeds its
carrying amount.
B. The amount by which the recoverable amount of an asset exceeds its written
down value.
C. The amount by which the carrying amount of an asset exceeds its
recoverable amount.
D. The amount by which the carrying amount of an asset exceed its market
value.
7.
A resource controlled by an entity as a result of past events from which future
economic benefits are expected to flow to the entity is _________
A. Equity.
B. Asset.
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C. Liability.
D. Statement of financial position.
8.
The following information is available from the most recent financial statements
of the XYZ Limited:
N
Total Assets
800,000
Net Income
120,000
Average Total Liabilities
400,000
Sales Revenue
1,500,000
Total Liabilities
500,000
Average Total Assets
700,000
What is the Net Profit Margin ratio?
A. 12.5%
B. 15%
C. 8%
D. 17.1%
9.
A non-current asset should be classified as held for sale only if _________
A. Its carrying amount will be recovered principally through a sale transaction
rather than through continuing use.
B. Its carrying amount will be recovered wholly through a sale transaction rather
than through continuing use.
C. Its carrying amount will be recovered principally through a continuing use
rather than through a sale transaction.
D. Its carrying amount will be recovered wholly through a continuing use rather
than through a sale transaction.
10. Which of the following methods is disallowed by IAS2 for valuation of inventory?
A. Last-In, First-out.
B. First-In, First-out.
C. Weighted Average method.
D. None of the above.
11. The amount of capital stated at incorporation of a company in the memorandum
of association is the _________
A. Issued share capital.
B. Authorized share capital.
C. Reserved capital.
D. Called up capital.
12. Which of the following statements is the most appropriate regarding posting?
A. Posting must be done after the financial statements are prepared.
B. Postings may be done at any time but must be completed before financial
statements are prepared.
C. Posting must be done immediately after the transaction is recorded in the
journal.
D. Posting must be done at the end of each week.
13. What does the abbreviation “GAAP” stands for?
A. Globally accepted accounting practice.
B. Generally accepted accounting practice.
C. Globally accepted accounting principles.
D. Generally accepted accounting principles.
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14. The accounting records for Red Corp. show credit card discounts of N500, sales
returns and allowances of N400, sales revenue of N25,000 and sales discounts of
N300? What is the net sales?
A. N25,000
B. N24,000
C. N24,100
D. N23,800
15. The accounting records of the National Corp. show the following:
Selling, general and administrative expenses
Sales discounts
Cost of goods sold
Sales
Income tax
Interest and other expenses
N
10,000
1,000
70,000
100,000
5,000
7,000
What is the gross profit for the National Ltd?
A. N18,000
B. N19,000
C. N29,000
D. N30,000
16. Carrying value of inventories reflects _________
A. Original cost.
B. Current Value.
C. Lower of original cost or net realizable value.
D. Historical cost.
17. The major difference between direct and indirect approach of preparing cash flow
statement is in deriving cash flow from __________ activities.
A. Operating.
B. Investing.
C. Financing.
D. (A) and (B) above.
18. Enterprise Co. overestimated its bad debts for the year 2012. As a result, its
________
A. Net income will be overstated.
B. Stockholders equity will be overstated.
C. Current assets will be understated.
D. Liabilities will be overstated.
19. The following information is available from the accounting records of the Bright
Company:
N
Beginning balance of fixed assets
100,000
Net sales revenue
360,000
Ending balance of fixed assets
120,000
Net income
36,000
What is Bright Company’s fixed assets turnover ratio?
A. 0.10 times.
B. 3 times.
C. 3.27 times.
D. 10 times.
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20. Which of the following describes the ability of a business organization to access
cash quickly and easily?
A. Profitability.
B. Liquidity.
C. Gearing.
D. All of the above.
21. The following information comes from the accounting records of Fola Enterprises:
Net income
Current liabilities
Interest expense
Income tax expense
Current assets
N
20,000
30,000
4,000
10,000
40,000
What is the current ratio?
A. 0.50
B. 0.75
C. 1.33
D. 2.00
22. A conceptual framework for financial reporting is __________
A. A set of items which make up an entity’s financial statements.
B. A set of regulations which govern financial reporting.
C. A set of principles which underpin financial reporting.
D. A set of financial reporting standards.
23. A financial instrument is __________
A. A type of contract.
B. A type of asset.
C. A type liability.
D. A type of asset or liability.
24. Intangible non-current assets would include ________
A. Building.
B. Machinery.
C. Trademarks.
D. Equipment.
25. Networking capital (NWC) is calculated as ________
A. Total assets – total liabilities.
B. Current assets + current liabilities.
C. Current assets – current liabilities.
D. None of the above.
26. A journal does all of the following except __________
A. Summarizes all of the transactions that affect one account in a “T-account”.
B. Records all purchases and sales of assets of a company.
C. Records each day’s transactions.
D. Records all the revenues and expenses of a company.
27. The Bull Co. Ltd purchased N500 of supplies for cash. As a result of this
transaction __________
A. Current assets are increased by N500
B. Total assets are increased by N500
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C. Current assets are decreased by N500
D. Current assets remain the same.
28. Which of the following is not a limitation of ratio analysis?
A. Data on comparable firms are difficult to acquire.
B. Determining the target or comparison value for a ratio requires judgment.
C. Different accounting treatments require the analyst to adjust the data
before comparing firms.
D. None of the above.
29. Dream Ltd’s purchases during the year were N100,000. The balance sheet
shows an average accounts payable balance of N12,000. What is Dream Ltd
payable payment period?
A. 37 days.
B. 44 days.
C. 52 days.
D. 50 days.
30. Crown Ltd has a net profit margin of 12%, total asset turnover of 1.2 times
and a financial leverage multiplier of 1.2 times. What is the ROE?
A. 12%
B. 14.2%
C. 17.3%
D. 10.5%
31. Which accounting concept requires revenue to be recognized when they are
measured and expenses when they are incurred?
A. Accrual.
B. Cash.
C. Matching.
D. GAAP.
32. In order for a provision to be recognized in an entity’s financial statements, it
is necessary that _________
A. The entity has a present obligation.
B. The entity has a legal enforceable obligation.
C. The entity has a constructive obligation.
D. It is possible that an outflow of economic benefits will be required.
33. Which of the following best describes how ordinary repairs and maintenance
are treated?
A. Capitalized costs.
B. Contra assets accounts.
C. Operating expenses.
D. Other expenses and losses.
34. The Gosek Co. has the following information available from its accounting
records:
Shares outstanding, 1/1/2012
Shares outstanding, 31/12/2012
Net income for 2012
Shareholders' equity 1/1/2012
Shareholders' equity, 31/12/2012
10,000
14,000
N56,000
N115,000
N140,000
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What is the earnings per share for the Gosek Co. for the year 2012?
A. N0.40
B. N4.00
C. N4.67
D. N5.60
Economics and Financial Markets (35 - 67)
35. As economists, we refer to the doctrine that holds that government should leave
economic affairs primarily to the market as _________
A. Capitalism.
B. Laissez-faire.
C. Neutralism.
D. Communism.
36. Both fiscal and monetary policies are aimed at microeconomic stabilization. Fiscal
policy involves the use of _________ while monetary policy involves the use of
_________
A. Changes in taxation and government spending; price and profit controls.
B. Price and profit controls; taxation and government spending.
C. Changes in taxation and government spending; changes in the supply of
money and interest rates.
D. Changes in the supply of money and interest rates; changes in taxation and
government spending.
37. The practice of charging different price to different buyers is called __________
A. Total revenue.
B. Price discrimination.
C. Price elasticity.
D. An increase in demand.
38. A market structure in which a small number of firms compete is best termed
________
A. Oligopoly.
B. Perfect competition.
C. Monopolistic competition.
D. Free market.
39. Marginal utility refers to _________
A. The additional product produced as the firm adds one additional unit of an
input.
B. The additional utility that a consumer derives from consuming one additional
unit of a good.
C. The amount of utility divided by the number of units produced.
D. All of the above.
40. Which of the following statements is true for a profit maximizing monopolist?
A. P > MR = MC
B. P = MR = MC
C. P > MR > MC
D. MR < MC < P
41. The production function shows ___________
A. The level of utility at each level of consumption.
B. The quantity produced at each price.
C. The maximum output that can be produced with a given quantity of inputs.
D. The different possible bundles of two goods that can be produced.
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42. In the long run, a profit maximizing firm will choose to exit a market when
_________
A. Fixed costs exceed total costs.
B. Total revenue from production is less than total costs.
C. Average fixed cost is rising.
D. Marginal cost exceeds marginal revenue at the current level of production.
43. Given the following information:
Revenue
Cash expenses
Economic depreciation
Accounting depreciation
Normal profit
Forgone interest
N200,000
N100,000
N15,000
N20,000
N30,000
N12,000
What is the firm's economic profit?
A. N38,000
B. N43,000
C. N73,000
D. N23,000
44. If UAC raises the price of a slice of gala from N3.00 to N3.25, the quantity
demanded decreases from 1,500 per week to 1,300 per week. The demand for
gala is ________ and the total revenue received ________
A. Elastic; decreases.
B. Inelastic; decreases.
C. Elastic; increases.
D. Inelastic; decreases.
45. A firm that is a price taker faces a perfectly ___________
A. Elastic supply curve.
B. Inelastic demand curve.
C. Elastic demand curve.
D. Inelastic supply curve.
46. Consumer surplus is ___________
A. The quantity of a good consumers get but did not have to pay for.
B. The amount a consumer has to pay less the amount the consumer was willing
to pay.
C. The total value of a good to a consumer.
D. The amount the consumer was willing to pay less the amount the consumer
actually paid.
47. If marginal cost per unit is greater than average total cost per unit, increasing
output will most likely cause:
A. Marginal cost to decrease.
B. Average variable cost to increase.
C. Average fixed cost to increase.
D. None of the above.
48. What do economists call a tax that causes higher-income individuals to pay a
higher percentage of their income as tax than lower-income individuals?
A. Progressive.
B. Horizontal.
C. Proportional.
D. Regressive.
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49. __________ occurs when prices decline.
A. Inflation.
B. Hyperinflation.
C. Deflation.
D. Economic growth.
50. M1
A.
B.
C.
D.
consists of __________
Coins.
Paper currency.
Checking accounts.
All of the above.
51. If the nominal interest rate is 6.3 percent and the inflation rate is 7.2 percent,
then the real interest rate equals __________
A. 0.9 percent.
B. Minus 0.9 percent.
C. 13.5 percent.
D. Minus 13.5 percent.
52. The monetary approach to the balance of payments _________
A. Focuses on the importance of the current account balance.
B. Views exchange rate variation as the sole adjustment mechanism.
C. Highlights the role of financial assets in balance of payments adjustment.
D. Implies that the price level and exchange rate can both be determined by
the central bank.
53. Which of the following is not a leakage?
A. Savings.
B. Taxes.
C. Government expenditure.
D. Imports.
54. Shifts in aggregate demand will __________
A. Occur because consumers, business or governments change total spending
relative to the economy’s productive capacity.
B. Necessarily increase GDP.
C. (A) and (B) above.
D. None of the above.
55. The ______________ of a decision is the value of the good or service forgone.
A. Efficiency.
B. Economics.
C. Scarcity.
D. Opportunity cost.
56. Unemployment resulting from changes in the pattern of demand or supply in the
economy is called ___________ unemployment.
A. Structural.
B. Regional.
C. Technological.
D. Demand-deficient.
57. Exchange rates that are determined by the unregulated forces of supply and
demand are ___________
A. Fixed exchange rates.
B. Managed exchange rates.
C. Floating exchange rates.
D. Pegged exchange rates.
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58. If interest rate decreases, business investment expenditures are likely to
________ and consumer durable expenditures are likely to ________
A. Increase, increase.
B. Increase, decrease.
C. Decrease, increase.
D. Decrease, decrease.
59. The main reason that people hold money “to buy things” is ___________
A. Speculative motive.
B. Precautionary motive.
C. Transactions motive.
D. Profit motive.
60. Which of the following indicates the negative slope of the indifference curve?
A. Marginal rate of substitution.
B. Axiom of transitivity.
C. Budget schedule.
D. Consumer equilibrium.
61. The Phillips curve will ___________ if inflationary expectations increase.
A. Shift to the left.
B. Become vertical.
C. Shift to the right.
D. Become upwarding sloping.
62. Which of the following statements is true in the short run under the Keynesian
macroeconomics?
A. APC is less than the MPC.
B. APC is equal to MPC.
C. MPC is greater than APC.
D. MPC is less than APC.
63. Real flow means _________
A. The physical (volume) of goods and services.
B. The money value of goods and services.
C. The financial flow from the traditional sector to the modern sector.
D. The flow of all financial resources in the economy.
64. The presumption that the average consumer will always maintain the utility
maximization position in his spending is referred to as __________
A. Cardinal utility.
B. Consumer equilibrium.
C. Consumer rationality.
D. Diminishing marginal utility.
65. As long as marginal cost is lower than average cost, average cost will be
________
A. Rising.
B. Negative.
C. Falling.
D. Constant.
66. GDP =
A. C + I + G
B. C + G + X
C. C + I + G + X
D. None of the above.
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67. What does negative cross-elasticity of demand imply?
A. Goods are supplements.
B. Goods are substitutes.
C. Goods are complements.
D. Goods are composites.
Quantitative Analysis and Statistics (68 - 100)
68. A series of equal annual payments extending over a specified number of years is
called ___________
A. Present value.
B. Sinking fund.
C. Annuity.
D. Principal.
69. The probability that a component is good is 0.85, what is the probability that 12
out of 15 components are good?
A. 0.02
B. 0.22
C. 0.15
D. 0.85
70. Type II error in hypothesis testing is committed when ___________
A. True null hypothesis is rejected
B. False null hypothesis is rejected
C. False null hypothesis is accepted
D. True null hypothesis is accepted.
71. What is the sum accrued when N5,000 is invested at a continuous rate of 2% for
3 years?
A. N6,023.00
B. N5,632.60
C. N5,306.04
D. N6,509.20
72. Which of these is a non-probability sampling method?
A. Systematic sampling.
B. Quota sampling.
C. Cluster sampling.
D. Stratified random sampling.
73. What is the region that satisfies all the constraints simultaneously in linear
programming?
A. Objective function.
B. Decision variables.
C. Critical region.
D. Feasible region.
74. Which of the following set of statistical tools is used for further mathematical
work?
A. The median and standard deviation.
B. The mean and mode.
C. The mean and standard deviation.
D. The mode and standard deviation.
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75. A scholarship award paid to Busola in seven installments are given as: 15,000;
17,000; 11,000; 12,000; x, 12,000; 14,000. If the mean of the installments paid
is N13,000, what is x?
A. 12
B. 13
C. 10
D. 14
76. At maximum profit, the marginal revenue is __________
A. Greater than the marginal cost.
B. Less than average cost.
C. Equal to the marginal cost.
D. Less than marginal cost.
77. If A and B are two events with Pr(A) = 0.30, Pr(B) = 0.78 and Pr(A B) = 0.16,
what is Pr(AB)?
A. 0.84
B. 0.92
C. 0.48
D. 0.38
78. Which of the following is not a measure of central tendency?
A. Mean.
B. Mode.
C. Range.
D. Median.
79. Correlation Coefficient is ____________
A. More than -1 but less than +1
B. At least -1 but less than +1
C. At least -1 and at most +1
D. More than -1 and at most +1
80. The Poisson distribution can be used to approximate the Binomial distribution
when number of trials (n) and the probability of success (p) respectively which of
the following characteristics?
A. n is very large and q = 1-p is close to zero.
B. n is very large and q = 1-P is close to one.
C. n is very small and q = 1-p is close to one.
D. n is very small and q = 1-p is close to zero.
81. If A =
and B =
, then what is AB – BA?
A.
B.
C.
D.
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82. Forecasting outside the range of values of the variables used in a regression line
is called ________
A. Coefficient.
B. Intrapolation.
C. Extrapolation.
D. Determination.
83. A project is acceptable when its IRR is __________
A. Less than NPV.
B. Greater than cost of capital.
C. Less than cost of capital.
D. Greater than NPV.
84. What is a square matrix in which all the elements in the matrix are zeros except
the leading diagonal which has elements other than zeros and ones?
A. Identity matrix.
B. Singular matrix.
C. Zero matrix.
D. Diagonal matrix.
85. Using the information given below, what is the median age of the distribution?
Y
F
20
3
A.
B.
C.
D.
25
27.5
30
25.5
25
5
30
2
35
1
40
2
45
3
86. Which of the following is referred to as ‘compromise index’?
A. Laspeyre’s index.
B. Paasche’s index.
C. Fisher’s ideal index.
D. Marshal-Edgeworth index.
87. A set of distribution that has its arithmetic mean equal to the median and equal
to the mode is said to have ________
A. Positive skewness.
B. Kurtosis distribution.
C. Negative skewness.
D. Symmetric distribution.
88. The graphical methods of solving Linear programming problems can only be used
for problems with __________
A. Two constraints.
B. More than two decision variables.
C. Only two decision variables.
D. More than two constraints.
89. Security C has expected return of 12% and standard deviation of 20%. Security D
has expected return of 15% and standard deviation of 27%. If the two securities
have a correlation coefficient of 0.7, what is their covariance?
A. 0.038
B. 0.070
C. 0.018
D. 0.013
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90. What is the variance of a Poison Distribution if the mean is 8?
A. 8
B. 16
C. 4
D. 12
91. What is the mean and standard deviation of the following stock prices of a quoted
company in Nigeria?
N230 N300 N600 N250 N325 N200 N300
Mean (N)
A. 140
B. 315
C. 315
D. 140
Standard Deviation (N)
262.20
262.20
133.20
133.20
92. The total cost in Naira of manufacturing q units of a certain article is given by:
C(q) = 70q2 + 20q + 500
What is the marginal cost when 50 units have been produced?
A. N8,020
B. N7,020
C. N14,000
D. N7,520
93. Probabilities are needed under conditions of __________
A. Certainty.
B. Both risk and uncertainty.
C. Affirmation.
D. Both risk and certainty.
94. What is the IRR if the NPV at 25% is N1,496 and NPV at 30% is -N4,343 ?
A.
B.
C.
D.
28.7%
27.6%
26.3%
25.0%
95. Flames Autos Limited wants to replace one of its machine that conveys produce to
and fro Ikorodu. The cost of the machine is N60,000 and it will generate cash
inflow of N20,000; N27,000; N25,000; N20,000; and N22,000 respectively at the
end of the first five years. If the cost of capital is 10% per annum, which of the
following is closest to the Net Present Value (NPV)?
A. N27,500
B. N17,500
C. N26,579
D. N16,500
96. Which of the following is not true of simulation? It is used ___________
A. To examine various options of performance.
B. To study complex problem of real life.
C. To imitate a real world situation.
D. To obtain more accurate results.
97. A research analyst is set to determine the relationship between a dependent
variable and an independent variable, which of these two variables can validly be
used to predict the other?
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A.
B.
C.
D.
The dependent variable is used to predict the independent variable.
The independent variable is used to predict the dependent variable.
Both of them are used to predict each other.
None of the above.
98. What is the expected return of the three stock portfolios described below?
A.
B.
C.
D.
Common
Stock
Market
Value
Expected
Return
Ando Inc.
95,000
12.00%
Bee Co.
32,000
8.75%
Cool Inc.
65,000
17.70%
18.45%
12.82%
13.38%
15.27%
Use the following information to answer questions 99 to 100:
Onyema has decided to be paying a N100,000 per annum into a retirement savings
account over his remaining working years. He has 10 years until retirement and
payment would be made in arrears while the interest rate is expected to remain
constant at 5%.
99. What is the amount Onyema would have on retirement?
A. N1,000,800
B. N1,157,800
C. N1,162,889
D. N1,257,800
100. What is the present value of the amount saved by Onyema?
A. N1,000,800
B. N880,800
C. N772,200
D. N680,800
Total = 100 marks
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