Past CPA Board on MAS
PART I. Basic Consideration in MAS and Consulting Practice
1. Which of the following statement is True?
a. Adequate training and experience in both the analytical approach
and process in the particular undertaking are requisites for the CPA
to be involved in a management service engagement.
b. A CPA with MBA and Ph D Degrees is automatically qualified to
render management services.
c. Competence as a standard in the rendition of management services
by a CPA may be equated to having excellent scholarly preparation
to include the usual baccalaureate degree, an MBA and other post
graduate studies.
d. A CPA by virtue of having the necessary academic preparation and
by hurdling the licensure examinations required to have a CPA
license can readily render management services to the public.
2. Which of the following statement is False?
a. CPAs provide management services to go around the ethical
constraints as mandated by the accountancy act.
b. Businesses hire management consultants to help define specific
problems and develop solutions.
c. Included in the practice of consulting is the provision of confidential
service in which the identity of the client is concealed.
d. CPAs performing management services may be considered to be in
the practice of management consulting.
3. Mr. Rey Carlos, a CPA firm’s partner in-charge of quality assurance and
review is arguing with Mr. Rueben Fortuna, the consulting partner
regarding the question on independence as Mr. Fortuna is presently
rendering consulting services to T. Ang & Nga Company, an audit client of
the firm. Related to this issue of independence, all of the following
statements are not valid except:
a. Independence is not sacrifice for as long as the auditor/consultant is
correct in his decisions for the client.
b. A CPA who renders both audit and consulting services to a client, by
virtue of his competence/expertise and extensive knowledge of the
client’s business is in the best position to render decisions for the
client and should do so.
c. The client is the ultimate decision maker and the auditor and/or
consultant should not make decisions for the client.
d. It is up to professional judgment and discretion of the
auditor/consultant to render decision for the client for as long as his
professional fees are commensurate to the benefits that the client
will derive from the engagement.
4. A Certified Public Accountant’s scope of management services is broad
and covers all of the following except:
a. Change management engagement
b. Computerization engagements
c. Audit engagements
d. Re-engineering jobs
5. Which of the following statements is not acceptable?
a. A CPA represents 3 major players in the industry in rationalizing the
industry’s incentives before the government public hearings.
b. A CPA shares with a new and substantial client information
regarding another client belonging to the same industry.
c. A CPA provides consulting services to an existing audit client.
d. A CPA offers and provides consulting services to 2 major competing
clients.
6. The following characterize management advisory services except
b. A CPA with MBA Ph D degrees is automatically qualified to render
management services.
c. Competence as a standard in the rendition of management services
by a CPA may be equated to having excellent scholarly preparation
to include the usual baccalaureate degree, and MBA and other post
graduate studies.
d. A Certified Public Accountant by virtue of having the necessary
academic preparation and by hurdling the licensure examinations
required to have a CPA license can readily render management
services to the public.
9. Which of the following will not impair the independence of a CPA in the
rendition of Management Services?
a. The CPA performs decision-making services for his client.
b. The CPA perform services wherein he is in effect, acting as an
employee of the client.
c. The CPA loses his objectivity and acts in a manner as if he is
advocating fir the interest of his client.
d. The CPA does not extend his services beyond the presentation of
recommendation or giving of advice.
PART II. Accounting Information System
10. An activity that is not considered part of the systems design phase is
a. File record layout
b. Document flowcharting
c. Specification of format and content of report
d. Systems survey
11. The main components of the Central Processing Unit (CPU) of a
computer include only
a. Control, arithmetic and logic, and memory
b. Input, processing and output
c. Software, register and primary memory
d. Memory, processing and register
12. How is an Accounting Information System (AIS) distinguished from a
management Information System (MIS)?
a. An AIS maybe either manual or computer-based and MIS is
computer-based.
b. An AIS is a subsystem within an MIS.
c. An AIS is controlled oriented and MIS is used exclusively for
planning.
d. An AIS deals with financial information and MIS handles all other
information.
13. Feedback, feed forward and preventive are important types of control
systems and procedures for accounting information systems. Which of the
following is in the correct order of feedback, feed forward and preventive
control systems?
a. Inventory control, capital budgeting and cash budgeting.
b. Cost accounting variances, separation of duties and cash planning.
c. Cash budgeting, capital budgeting and hiring qualified employees.
d. Cost accounting variances, cash budgeting and organizational
independence.
14. Bench Corp. operates in several regions, with each region performing
its data processing in a region data center. The corporate Management
Information System staff has developed a database management system to
handle customer service and billing. The Director of MIS recommended that
the new system be implemented in the Region 4 to ascertain if the system
operates in a satisfactory manner. This type of conversion is called a
a. Crash conversion
b. Parallel conversion
c. Pilot conversion
d. Direct conversion
used by all executives at the highest levels within the organization. All of
the following statements apply to EIS except:
a. It is likely to be one of the most widely used and the largest of the
information subsystems in a business organization.
b. It provides top executives with immediate and easy access to
information in ahighly interactive format.
c. It provides information in a highly aggregated form.
d. It helps executives monitor business conditions in general and
assist in strategic planning to control and operate the entity.
19. The concept of timeliness of data availability is most relevant to
a. Computerized system
b. Packaged software
c. On-line systems
d. Microsystems
20. To control purchasing and accounts payable, an information system
must include certain source documents. For a manufacturing concern like
fruit processors, Inc., these documents should include
a. Purchase requisitions, purchase orders, receiving reports and
suppliers invoices.
b. Purchase orders, receiving reports and inventory reports of goods
needed.
c. Purchase requisitions, purchase orders, inventory reports of goods
needed and supplier’s invoices.
d. Purchase orders, receiving reports and supplier’s invoices.
III. MANAGEMENT ACCOUNTING CONCEPTS AND RESPONSIBILITY
ACCOUNTING
21. Controllership has attained special recognition in corporate
management as business expand in complexity and reach and as the
controller exerts influence for to take organization’s goals. Controllership
and treasurership constitute corporate finance. These are among corporate
finance’s traditional functions.
1. Tax management
2. Finance reporting and interpretation
3. Credit management
4. Sourcing and investing funds
5. Reporting to government regulatory agencies
6. Risk management
7. Economic appraisal
8. Planning for control
Which of the following are the functions of the controller?
a. All eight items
b. Items 1, 2, 5, 7 and 8 only
c. Items 1, 2, 3, 4, 5, 7 and 8 only
d. Items 2, 3, 5, 7 and 8 only
22. To distinguish between management accounting and financial
accounting, the following statements are correct except:
a. Management accounting in view of its various integrated recipients
should have a separate data recording and retrieval system from
financial accounting.
b. Financial accounting is bound by Generally Accepted Accounting
Principles (GAAP), and management accounting need not be in
conformity with GAAP.
c. Financial accounting can be regarded as the process while
management accounting can be regarded as the product of that
process.
b. The income statement amount should be converted to an average for
the year.
c. Both amounts should be converted to market value.
d. Comparisons with industry ratios are not meaningful.
26. On December 31, 19x0 the Balance Sheet of Belle Co. disclosed total
assets of P8, 000,000, current liabilities of P1, 500,000 and long-term debt
of P2, 400, 000. Common stock outstanding amounted to 500,000 shares,
while 100,000 shares of P10 par value preferred stock were outstanding.
The retained earnings account indicated a deficit balance of P2, 000, 000.
Belle’s book value per share of common stock as of December 31, 19x0 is
a. P16.00
b. P6.20
c. P12.20
d. P8.20
27. How are dividends per share for common stock used in the calculation
of the following?
Dividend per-share Earnings
Payout ratio per share
a. Denominator denominator
b. Denominator Not used
c. Numerator Not used
d. Numerator Numerator
28. During 19x5, Reuel Company purchased P1, 920, 000 of inventory. The
cost of goods sold for 19x5 was P1, 800, 000 and the ending invenotyr at
December 31, 19x5 was P360, 000. What was the inventory turn-over for
19x5?
a. 5.0 b. 5.3 c. 6.0 d. 6.4
V. COST-VOLUME-PROFIT ANALYSIS
The following data apply to items 29-33
Lara Company produces a single product. It sold 25, 000 units last year
with the following results:
Sales P625, 000
Variable Costs P375, 000
Fixed Costs 150, 000 525, 000
Net Income before taxes 100, 000
Income Taxes (45%) 45, 000
Net Income P 55, 000
In an attempt to improve its product, Lara is considering replacing a
component part in its product that has a cost of P2.50 with a new and
better part costing P4.50 per unit in the coming year. A new machine would
also be needed to increase plant capacity. The machine would cost P18,
000 with a useful life of 6 years and no salvage value. The company uses
straight line depreciation on all plant assets.
29. What was Lara Company’s break-even point in number of units last
year?
a. 6, 000 b. 15, 000 c. 21, 000 d. 18, 000
30. How many units of product would Lara Company have had to sell in the
last year to earn P77, 000 in net income after taxes?
a. 29, 000 b. 23, 000 c. 22, 700 d. 29, 300
31. If Lara Company holds the sales price constant and makes the
suggested changes, how many units of product must be sold in the coming
year to break-even?
a. 15, 300 b. 18, 750 c. 19, 125 d. 21, 000
c. An overstatement of assets, net income and owner’s equity.
d. An overstatement of assets and of net income and an
understatement of owner’s equity.
IX. DECENTRALIZED OPERATIONS AND TRANSFER PRICING
37. Beta Market has 3 stores: P, Q and R. During 19x8, Store P had a
contribution margin of P24, 000 and a contribution margin ratio of 30%.
Store Q had variable costs of P48, 000 and a contribution margin ratio of
40%. Store R had variable costs of P84, 000 which represented 70% of
sales in the store. For 19x8, Star Market’s total sales were
a. P320, 000
b. P360, 000
c. P440, 000
d. P280, 000
38. Khi Company has two divisions J and K. During 19x2, the contribution
margin in J was P30, 000. The contribution margin ration in K during 19x2
was 40%, its sales were P125, 000 and its segment margin was P32, 000.
The common fixed expenses in the company were P40, 000 and the
company’s net income for the year was P18, 000. The segment margin for
Division J for 19x2 was
a. P26, 000
b. P32, 000
c. P8, 000
d. P58, 000
X. USING COST DATA FOR DECISION MAKING
39. Picnic Items, Inc. manufactures coolers that contain a freezable ice bag.
For an annual volume of 10, 000 units, fixed manufacturing costs of P500,
000 are incurred. Variable costs per unit amounts are:
Direct materials P80
Direct Labor 15
Variable Factory Overhead 20
Bags Corporation offered to supply the assembled ice bag for P40 with a
minimum order of 5, 000 units. If picnic accepts the offer it will be able to
reduce variable labor and overhead costs by 50%. The direct materials for
the freezable ice bag will cost Picnic P20 if it will produce it. Considering
Bags Corporation offer, Picnic should
a. Buy the freezable ice bag due to P150, 000 advantaged.
b. Produce the freezable ice bag due to P225, 000 advantaged.
c. Produce the freezable ice bag due to P25, 000 advantaged.
d. Buy the freezable ice bag due to P50, 000 advantaged.
XI. QUANTITATIVE METHODS
40. A small company makes only two products with the following two
production constraints representing two machines and their maximum
availability:
2 X + 3 Y < 18
2 X + Y < 10
Where: X = the units of the first product
Where: Y = the units of the second product
If the profit equation is Z = P4 X + P2 Y, the maximum possible profit is
a. P20
b. P21
c. P18
d. P24
XII. WORKING CAPITAL MANAGEMENT
a. Purchase from West Co., pay in 15 days and borrow any money
needed from the bank.
b. Purchase from West Co., pay in 30 days and borrow any money
needed from the bank.
c. Purchase from South Inc., pay in 60 days and borrow any money
needed from the bank.
d. Purchase from North Corp. and pay in 30 days.
XIII. CASH AND SHORT TERM INVESTMENT MANAGEMENT
44. Ken Lumber Company obtained short term bank loan for P1, 000, 000.00
at an annual interest rate of 12%. As a condition of the loan Ken is required
to maintain a compensating balance of P200, 000.00 in its checking
account. The checking account earns interest at an annual rate of 6%. Ken
would otherwise maintain only P100, 000.00 in its checking account for
transactional purposes. Ken’s effective interest cost of the loan is
a. 12%
b. 14%
c. 13.50%
d. 12.67%
MAY 2009 CPA
Board Exam
45. Fabella Company budgeted sales on account of P120, 000 for July,
P211, 000 for August and P198, 000 for September. Collection experience
indicates that 60% of the budgeted sales will be collected the amount after
the sale, 36% the second month, and 4% will be uncollectible. The cash
receipts from accounts receivable that should be budgeted for September
would be
a. P169, 800
b. P147, 960
c. P197, 880
d. P194, 760
XIV. RECEIVABLES MANAGEMENT
46. Changing a firm’s credit terms from 2/20, net/60 to 2/10, net/30 will
generally
a. Increase the average collection period and increase sales
b. Increase the average collection period and reduce sales
c. Reduce the average collection period and increase sales
d. Reduce the average collection period and reduce sales.
47. If a firm purchases raw materials from its supplier on a 2/10, net/60 cash
discount basis, the equivalent annual interest rate (using a 360-day year) of
foregoing the cash discount and making payment on the 60 th day is
a. 14.7%
b. 73.5%
c. 12.2%
d. Some amount other than those given above
48. If a firm’s credit terms require payment within 45 days but allow a
discount of 2% if paid within 15 days (using a 360-day year), the
approximate cost/benefit of the trade credit terms is
a. 2%
b. 16%
c. 48%
d. 24%
49. When a company offers credit terms of 2/10, net/30, the annual interest
cost, based on a 360-day year, is
a. 24.0%
b. 24.5%
c. 35.3%
XVI. CAPITAL BUDGETING
Questions 52 and 53 are based on the following data:
Allo foundation, a tax exempt organization, invested P200, 000 in a fiveyear project at the
beginning of 19x5. Allo estimates that the annual cash
savings from this project will amount to P65, 000. The P200, 000 of assets
will be depreciated over their five-year life on the straight line basis. On
investments of this type, Allo’s desired rate of return is 12%.
52. The net present value of the project is
a. P34, 325
b. P36, 400
c. P90, 000
d. P125, 000
MAY 2009 CPA
Board Exam
53. Allo’s time-adjusted rate of return on this project is
a. Less than 12%
b. Less than 14%, but more than 12%
c. Less than 16%, but more than 14%
d. More than 16%
54. Under the time-adjusted rate of return capital budgeting technique, it is
assumed that cash flows are reinvested at the
a. Cost of capital
b. Hurdle rate of return
c. Rate earned by the investment
d. There is no assumption about reinvestment of cash flows
55. Rano Co. has the opportunity to invest in a two-year project which is
expected to produce cash flow from operation, net of income taxes, of
P100, 000 in the first year and P200, 000 in the second year. Rano has a
cost of capital of 20%. For this project, Rano should be willing to invest
immediately a maximum of
a. P283, 300
b. P249, 900
c. P222, 100
d. P208, 200
MAY 2009 CPA
Board Exam
56. The net present value capital budgeting technique can be used when
cash flows from period to period are:
Uniform Uneven
a. No Yes
b. No No
c. Yes No
d. Yes Yes
57. It is assumed that cash flows are reinvested at the rate actually earned
by the investment in which of the following capital budgeting techniques?
Time-adjusted rate of return Net present value
a. Yes Yes
b. Yes No
c. No No
d. No Yes
58. If income tax considerations are ignored, how is straight line depreciation expense used in
the following capital budgeting techniques?
Time-adjusted rate of return Net present value
a. Excluded Excluded
b. Excluded Included
c. Included Excluded
d. Included Included
59. The payback capital budgeting technique considers:
Income over entire Time value
Life of project of money
a. No No
b. No Yes
c. Yes Yes
d. Yes No
Questions 60 and 61 are based on the following
Consideration is being given to the possible purchase of a P30, 000 machine for Alo, which is
expected to result in a decrease of P12, 000 per year in cash operating expenses. This machine,
which has no residual value, has an estimated useful life of five years and will be depreciated on
astraight-line basis. (Ignore income taxes)
60. For the new machine, the simple rate of return based on initial investment would be
a. 12%
b. 20%
c. 30%
d. 40%
61. If income taxes are ignore, the payback period for the new machine would be
a. 1.67 years
b. 2.50 years
c. 4.17 years
d. 5.00 years
62. For 19x9, Nelson Industries increased earnings before interest and taxes by 17%. During the
same period, net income after tax increased by 42%. The degree of financial leverage that
existed during 19x9 isa. 1.70b. 4.20c. 2.47d. 5.90XVIII. PROJECT FEASIBILITY STUDY63.
Which of the following is not an activity covered by feasibility study?a. Activity based
accounting of the endeavor leading to a conclusionb. Collection of datac. Evaluation and
analysis of data collectedd. Formulation of recommendation64. Among the following major
parts of a project feasibility study, which grouping is considered critical?a. Management,
financial and social returnsb. Technical. Financial and environmental aspectsc. Economic
benefits, management, financiald. Marketing, engineering or technical and financial
62. For 19x9, Nelson Industries increased earnings before interest and taxes by 17%. During the
same period, net income after tax increased by 42%. The degree of financial leverage that
existed during 19x9 is
a. 1.70
b. 4.20
c. 2.47
d. 5.90
XVIII. PROJECT FEASIBILITY STUDY
63. Which of the following is not an activity covered by feasibility study?
a. Activity based accounting of the endeavor leading to a conclusion
b. Collection of data
c. Evaluation and analysis of data collected
d. Formulation of recommendation
64. Among the following major parts of a project feasibility study, which grouping is considered
critical?
a. Management, financial and social returns
b. Technical. Financial and environmental aspects
c. Economic benefits, management, financial
d. Marketing, engineering or technical and financial
65. The statements below about project feasibility studies are the true except:
a. Any change which can materially alter the assumptions used in the preparation of the forecast
will render it useless
b. It is important for government agencies in order to determine entitlement to government
incentives
c. It also covers the social desirability aspects of a proposed undertaking
d. Since data gathering is a basic step in its preparation, all the necessary and required
information will always be available.
66. In a project feasibility study, which of the following is true?
a. The study is not affected by any significant change in actual business conditions as compared
to the assumptions used in making the forecast
b. The study is based on available information and opinions of the party involved in the
preparation of the study.
c. (a) and (b)
d. None of the above
1. A
2. A
3. C
4. C
5. B
6. C
7. A
8. A
9. D
10. D
11. A
12. B
13. D
14. C
15. A
16. B
17. D
18. A
19. C
20. A
21. B
22. A
23. B
24. D
25. A
26. B
27. C
28. C
29. B
30. A
31. C
32. A
33. D
34. D
35. D
36. C
37. D
38. A
39. C
40. A
41. B
42. C
43. A
44. D
45. A
46. D
47. A
48. D
49. D
50. D
51. B
52. A
53. D
54. C
55. C
56. D
57. B
58. A
59. A
60. B
61. B
62. C
63. A
64. D
65. D
66. B