Chapter 14 Other Business Processes Answer Key
Multiple Choice Questions
1.
The purpose of an organization's conversion process is:
A. To transform raw materials into finished products.
B. To determine if the company should use process costing.
C. Both to transform raw materials into finished products and to determine if the company
should use process costing.
D. Neither to transform raw materials into finished products nor to determine if the company
should use process costing.
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Learning Objective: 14-01 Explain its role and purpose.
Topic: Conversion process
2.
The purpose of the conversion process is to transform raw materials into finished products
with:
A. Direct labor.
B. Overhead.
C. Both direct labor and overhead.
D. Neither direct labor nor overhead.
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Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
3.
The conversion process involves three common resources: material, direct labor and
overhead. Which of the following is an example of material in that context?
A. Paper used to create a textbook.
B. Tires used to manufacture a truck.
C. Both paper used to create a textbook and tires used to manufacture a truck.
D. Neither paper used to create a textbook nor tires used to manufacture a truck.
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Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
4.
The conversion process involves three common resources: material, direct labor and
overhead. Which of the following is an example of overhead in that context?
A. Depreciation on factory equipment
B. Chief financial officer's salary
C. Both depreciation on factory equipment and chief financial officer's salary
D. Neither depreciation on factory equipment nor chief financial officer's salary
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Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
5.
The purpose of the conversion process is to transform material, labor and overhead into a
finished product. Which system would an organization that manufactures decks of playing
cards use for that purpose?
A. Job order
B. Process
C. Hybrid
D. Some other system
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Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
6.
The purpose of the conversion process is to transform material, labor and overhead into a
finished product. Which system would an organization that manufactures unique pieces of
jewelry use for that purpose?
A. Job order
B. Process
C. Hybrid
D. Some other system
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Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
7.
The purpose of the conversion process is to transform material, labor and overhead into a
finished product. To accomplish that purpose, organizations can use one of three systems.
Which of the following pairs includes examples of products that would use the same system?
A. Decks of playing cards, compact discs
B. Compact discs, made-to-order smoothies
C. Decks of playing cards, made-to-order smoothies
D. All of the pairs would use the same system.
Decks of playing cards and compact discs would use process costing; made-to-order
smoothies would use either job or hybrid costing.
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Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
8.
The purpose of the conversion process is to transform material, labor and overhead into a
finished product. To accomplish that purpose, organizations can use one of three systems.
Which of the following pairs includes examples of products that would use different systems?
A. Decks of playing cards, compact discs
B. Compact discs, made-to-order smoothies
C. Custom-built homes, original works of art
D. Plastic bottles, aluminum cans
Compact discs would use process costing; made-to-order smoothies would use either job or
hybrid costing. Decks of playing cards, plastic bottles and aluminum cans would all use
process costing. Custom-built homes and original works of art would use job costing.
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Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
9.
The purpose of the conversion process is to transform material, labor and overhead into a
finished product. To accomplish that purpose, organizations can use one of three systems.
Which of the following best pairs a system with products that would be appropriately
manufactured using it?
A. Process: decks of playing cards, compact discs
B. Job: plastic bottles, aluminum cans
C. Process: custom-built homes, original works of art
D. Hybrid: decks of playing cards, made-to-order smoothies
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Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
10.
The purpose of the conversion process is to transform material, labor and overhead into a
finished product. To accomplish that purpose, organizations can use one of three systems.
Which of the following pairs would be accounted for using a job costing system?
A. Decks of playing cards, compact discs
B. Plastic bottles, aluminum cans
C. Custom-built homes, original works of art
D. Decks of playing cards, made-to-order smoothies
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Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
11.
Accounting information systems have five basic elements. Within the context of the human
resource process, "inputs" include:
A. Job applications.
B. Payroll-related data.
C. Both job applications and payroll-related data.
D. Neither job applications nor payroll-related data.
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Learning Objective: 14-02 Explain how the generic structure of most AIS applies.
Topic: Human resource process
12.
Accounting information systems have five basic elements. Which of the following would be
associated with the human resource process?
A. Payroll transactions
B. Performance evaluations
C. Both payroll transactions and performance evaluations
D. Neither payroll transactions nor performance evaluations
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Learning Objective: 14-01 Explain its role and purpose.
Topic: Human resource process
13.
Accounting information systems have five basic elements. Which of the following is an output
of the human resources process?
A. A payroll check
B. A written performance evaluation
C. Both a payroll check and a written performance evaluation
D. Neither a payroll check nor a written performance evaluation
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Learning Objective: 14-02 Explain how the generic structure of most AIS applies.
Topic: Human resource process
14.
Accounting information systems have five basic elements. Which of the following is an internal
control associated with the human resources process?
A. Adequate supervision
B. Procedures manuals
C. Both adequate supervision and procedures manuals
D. Neither adequate supervision nor procedures manuals
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Learning Objective: 14-02 Explain how the generic structure of most AIS applies.
Topic: Human resource process
15.
CGI Corporation uses a process costing system to manufacture its product. As part of the
processing activities in its human resource process, which of the following would CGI use to
record payroll costs of its factory workers?
A. Debit work in process, credit wages payable
B. Debit wages expense, credit wages payable
C. Debit wages payable, credit cash
D. Debit wages expense, credit retained earnings
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Learning Objective: 14-03 Identify and process common transactions.
Topic: Human resource process
16.
CGI Corporation uses a process costing system to manufacture its product. Which of the
following internal controls should CGI use to ensure its human resources employees correctly
apply federal laws related to employee performance evaluation?
A. Adequate supervision
B. Periodic training
C. Use of information technology
D. None of these; since CGI uses a process costing system, it is not likely to have a human
resources process.
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Human resource process
17.
CGI Corporation requires new employees to establish their payroll withholding information for
its human resources process; CGI reports year-end information for tax purposes electronically
to its employees. Which of the following pieces of information is both an input for the former
and an output of the latter?
A. Employee identification data
B. Employer identification data
C. Hours worked
D. Total amount paid
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Learning Objective: 14-02 Explain how the generic structure of most AIS applies.
Topic: Human resource process
18.
Accounting information systems have five generic elements. Which of the following includes
two examples of the same element?
A. Form W-4, Form W-2
B. Form W-2, Form 1099
C. Form W-4, Form 1099
D. All of these
Both Form W-2 and Form 1099 are outputs. Form W-4 is an input.
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Learning Objective: 14-02 Explain how the generic structure of most AIS applies.
Topic: Human resource process
19.
Which of the following internal controls could be applied to the creation of Form W-2 in the
human resources process?
A. Use of information technology
B. Internal audits
C. Both use of information technology and internal audits
D. Neither use of information technology nor internal audits
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Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
20.
Which of the following internal controls could be applied to processing payroll transactions in
the human resources process?
A. Outsourcing
B. Use of information technology
C. Both outsourcing and use of information technology
D. Neither outsourcing nor use of information technology
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Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
21.
Which of the following transactions is commonly associated with the financing process?
A. Issuance of equity securities
B. Issuance of debt securities
C. Both issuance of equity securities and issuance of debt securities
D. Neither issuance of equity securities nor issuance of debt securities
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Learning Objective: 14-03 Identify and process common transactions.
Topic: Financing process
22.
Transactions associated with the financing process include all of the following except:
A. Purchase of treasury shares.
B. Issuance of equity securities.
C. Payroll for finance department employees.
D. Periodic repayments of debt.
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Learning Objective: 14-03 Identify and process common transactions.
Topic: Financing process
23.
One of the transactions commonly associated with the financing process is the distribution of
dividends. Information needed to process that transaction includes:
A. Shareholder identification data.
B. Type of dividend.
C. Both shareholder identification data and type of dividend.
D. Neither shareholder identification data nor type of dividend.
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Learning Objective: 14-03 Identify and process common transactions.
Topic: Financing process
24.
One of the transactions commonly associated with the financing process is the issuance of
long-term debt. Which of the following pieces of information is least likely to be required to
process such a transaction?
A. Coupon interest rate
B. Market interest rate
C. Lender identification data
D. Shareholder approval
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Learning Objective: 14-03 Identify and process common transactions.
Topic: Financing process
25.
On May 1, CGI Corporation declared cash dividends on its common stock. The dividend was
payable on May 15 to shareholders of record on May 5. Which of the following entries will CGI
make on May 5 in its accounting information system?
A. Debit retained earnings, credit dividends payable
B. Debit dividends payable, credit cash
C. Debit retained earnings, credit cash
D. None of these
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Learning Objective: 14-03 Identify and process common transactions.
Topic: Financing process
26.
On May 1, CGI Corporation declared cash dividends on its common stock. The dividend was
payable on May 15 to shareholders of record on May 5. On which date will CGI record a debit
to retained earnings and a credit to cash?
A. May 1
B. May 5
C. May 15
D. None of these
On May 1, CGI will debit retained earnings and credit dividends payable. On May 15, CGI will
debit dividends payable and credit cash. No entry is required on May 5.
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Learning Objective: 14-03 Identify and process common transactions.
Topic: Financing process
27.
As part of the financing business process, corporations may need to account for an initial
public offering. How many different forms of a prospectus are parts of the IPO based on the
seven steps listed in the text?
A. Two
B. Three
C. Four
D. Some other number
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Learning Objective: 14-01 Explain its role and purpose.
Topic: Financing process
28.
CGI Corporation was preparing to issue long-term debt securities. They planned to pay 10%
interest semi-annually, although investments of similar risk were paying 12% at the time.
Which of the following terms best describes the 12% interest rate?
A. Coupon
B. Market
C. Relevant
D. Current
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Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Financing process
29.
CGI Corporation had 10,000 shares of $2 par common stock outstanding; the shares had
been issued at $5 per share. At the end of March 2011, CGI declared a $3 cash dividend per
share when the market price of the stock was $8 per share. Which of the following statements
is most true?
A. The $3 cash dividend per share is determined by analyzing the difference between the
issuance price and the market value of the stock.
B. The $3 cash dividend per share is determined by analyzing the difference between the
issuance price and the par value of the stock.
C. CGI can process the dividend payment using only the information specified above.
D. None of these statements is true.
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Learning Objective: 14-03 Identify and process common transactions.
Topic: Financing process
30.
CGI Corporation had 10,000 shares of $2 par common stock outstanding; the shares had
been issued at $5 per share. At the end of March 2011, CGI declared a $3 cash dividend per
share when the market price of the stock was $8 per share. After processing the dividend
transaction, the balance in CGI's common stock account will be:
A. $20,000.
B. $30,000.
C. $50,000.
D. Some other amount.
The balance in the common stock account is the number of issues shares multiplied by the par
value per share.
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Learning Objective: 14-03 Identify and process common transactions.
Topic: Financing process
31.
Separation of duties can promote strong internal control in the conversion process. Which
three duties should be separated?
A. Physical custody, authorization and recordkeeping
B. Direct material, labor and overhead processing
C. Assets, liabilities and equity
D. Job order, process and hybrid
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Conversion process
32.
Adequate documentation can promote strong internal control in the conversion process. All of
the following documents are used in the conversion process except:
A. Materials requisition.
B. Labor time ticket.
C. Materials move ticket.
D. Form W-2.
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Conversion process
33.
In manufacturing units of Product A27, Mike is supposed to use three pounds of raw material
for each unit. But, due to poor quality in a recent batch of raw materials, he used an average
of four pounds. Mike's company is therefore exposed to ___ risk.
A. Hazard
B. Human error
C. Credit
D. Market
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Conversion process
34.
In manufacturing units of Product A27, Mike is supposed to use three pounds of raw material
for each unit. But, due to poor quality in a recent batch of raw materials, he used an average
of four pounds. Which of the following internal controls would prevent the problem in the
future?
A. Closer inspection of deliveries
B. More frequent performance evaluations for Mike
C. Both closer inspection of deliveries and more frequent performance evaluations for Mike
D. Neither closer inspection of deliveries nor more frequent performance evaluations for Mike
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Conversion process
35.
Factory workers at OMI Corporation are scheduled to work forty hours per week, but
frequently work forty-five hours per week, leading to increased payroll costs for OMI. Which of
the following statements is most true?
A. OMI is exposed to liquidity risk.
B. OMI should consider expanding its workforce as a form of internal control.
C. Both OMI is exposed to liquidity risk and OMI should consider expanding its workforce as a
form of internal control are true.
D. Neither OMI is exposed to liquidity risk nor OMI should consider expanding its workforce as
a form of internal control is true.
Expanding the workforce is a way to promote operating efficiency.
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Conversion process
36.
DRH Corporation's conversion process is highly automated; computers and other forms of
information technology are used to prepare raw materials for production and to move partially
completed units through the factory. Which of the following statements is most true?
A. DRH is not exposed to human error risk.
B. DRH should use regular equipment inspections as a form of internal control.
C. Both DRH is not exposed to human error risk and DRH should use regular equipment
inspections as a form of internal control are true.
D. Neither DRH is not exposed to human error risk nor DRH should use regular equipment
inspections as a form of internal control is true.
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Conversion process
37.
The balance sheet of BYA Corporation reported bonds payable with a book value of $500,000
and total paid-in capital of $300,000. The balance sheet of LCA Corporation reported bonds
payable with a book value of $600,000 and total paid-in capital of $250,000. Which of the
following statements is most true?
A. BYA's exposure to liquidity risk is greater than LCA's exposure.
B. BYA's exposure to liquidity risk is less than LCA's exposure.
C. BYA and LCA have equal exposure to liquidity risk.
D. None of these statements is true.
To assess liquidity risk, an analyst would also need information on each company's available
cash.
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Financing process
38.
Within the context of the financing process, separation of duties means:
A. The accounting department cannot issue dividend checks without the approval of the board
of directors.
B. An accountant who prepares dividend checks cannot also prepare checks for repayment of
long-term debt.
C. Both the accounting department cannot issue dividend checks without the approval of the
board of directors and an accountant who prepares dividend checks cannot also prepare
checks for repayment of long-term debt are true.
D. Neither the accounting department cannot issue dividend checks without the approval of
the board of directors nor an accountant who prepares dividend checks cannot also
prepare checks for repayment of long-term debt is true.
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Financing process
39.
Which of the following best pairs a financing process risk with an internal control that will
address the risk?
A. Sending a dividend check to the wrong shareholder, electronic database
B. Falling stock prices due to profit restatements, independent audits
C. Failure to receive IPO approval from the SEC, separation of duties
D. Inability to pay dividends because of a cash shortage, corporate line of credit
The mere presence of an electronic database does not prevent a corporation from sending a
dividend check to the wrong shareholder.
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Financing process
40.
Which of the following best pairs a financing process risk with an internal control that will
address the risk?
A. Poorly trained employees in the finance department, required annual training
B. Inability to make required payments on long-term debt, properly developed cash budget
C. Both poorly trained employees in the finance department, required annual training and
inability to make required payments on long-term debt, properly developed cash budget
D. Neither poorly trained employees in the finance department, required annual training nor
inability to make required payments on long-term debt, properly developed cash budget
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Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Financing process
41.
A systems flowchart of the financing process is likely to include which of the following column
headings?
A. Debt and equity
B. Cash dividends and stock dividends
C. Both debt and equity and cash dividends and stock dividends
D. Neither debt and equity nor cash dividends and stock dividends
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Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Financing process
42.
NCD Corporation pays annual dividends to its shareholders. A REA model of that process is
likely to include which of the following as internal agents?
A. Shareholders
B. Board of directors
C. Both shareholders and board of directors
D. Neither shareholders nor board of directors
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Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Financing process
43.
Consider the following short case as you respond to the question:
When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to
look for a replacement. The recruitment firm prepared several job announcements, then
presented them to the board of directors. The board of directors approved one of the job
announcements; the recruitment firm used it to advertise the position on the Internet and in
relevant newspapers and professional publications. After receiving several applications, the
recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of
directors, with the assistance of the recruitment firm, went through three rounds of interviews,
narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the
strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The
board of directors then made the final choice for a new CEO.
A systems flowchart of the case is likely to be divided into how many columns?
A. One, since all activities are associated with the human resource process.
B. Two or three, one of which may be "applicants"
C. Four or five, one of which would be "NTL shareholders"
D. More than five, since there were more than five applicants.
The columns would be: board of directors, recruitment firm, applicants. Since the only role of
NTL shareholders is to listen to the presentation, they would likely not have a column.
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Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
44.
Consider the following short case as you respond to the question:
When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to
look for a replacement. The recruitment firm prepared several job announcements, then
presented them to the board of directors. The board of directors approved one of the job
announcements; the recruitment firm used it to advertise the position on the Internet and in
relevant newspapers and professional publications. After receiving several applications, the
recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of
directors, with the assistance of the recruitment firm, went through three rounds of interviews,
narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the
strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The
board of directors then made the final choice for a new CEO.
In a REA model of the case, the cardinalities between "applicant" and "interview applicant"
would be:
A. Interview applicant (0,*) ---- (1,1) Applicant
B. Interview applicant (1,1) ---- (0,*) Applicant
C. Interview applicant (1,1) ---- (1,1) Applicant
D. Interview applicant (0,*) ---- (0,*) Applicant
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Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
45.
Consider the following short case as you respond to the question:
When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to
look for a replacement. The recruitment firm prepared several job announcements, then
presented them to the board of directors. The board of directors approved one of the job
announcements; the recruitment firm used it to advertise the position on the Internet and in
relevant newspapers and professional publications. After receiving several applications, the
recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of
directors, with the assistance of the recruitment firm, went through three rounds of interviews,
narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the
strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The
board of directors then made the final choice for a new CEO.
A Level Zero data flow diagram of the case would include circles labeled with all of the
following except:
A. Applicant database.
B. Hire recruitment firm.
C. Interview applicants.
D. All of these would be labels for circles in the DFD.
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Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
46.
Consider the following short case as you respond to the question:
When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to
look for a replacement. The recruitment firm prepared several job announcements, then
presented them to the board of directors. The board of directors approved one of the job
announcements; the recruitment firm used it to advertise the position on the Internet and in
relevant newspapers and professional publications. After receiving several applications, the
recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of
directors, with the assistance of the recruitment firm, went through three rounds of interviews,
narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the
strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The
board of directors then made the final choice for a new CEO.
How would "shareholder presentation" be represented in a leveled set of DFDs of the case?
A. With a circle
B. With a rectangle
C. With a set of parallel lines
D. None of these
The shareholder presentation is a data flow.
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
47.
Consider the following set of flowcharting symbols along with the case as you respond to the
question:
When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to
look for a replacement. The recruitment firm prepared several job announcements, then
presented them to the board of directors. The board of directors approved one of the job
announcements; the recruitment firm used it to advertise the position on the Internet and in
relevant newspapers and professional publications. After receiving several applications, the
recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of
directors, with the assistance of the recruitment firm, went through three rounds of interviews,
narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the
strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The
board of directors then made the final choice for a new CEO.
Which symbol is most likely to be used in a systems flowchart to represent the board of
directors narrowing the pool?
A. Symbol B
B. Symbol F
C. Symbol G
D. Symbol I
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
48.
Consider the following set of flowcharting symbols along with the case as you respond to the
question:
When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to
look for a replacement. The recruitment firm prepared several job announcements, then
presented them to the board of directors. The board of directors approved one of the job
announcements; the recruitment firm used it to advertise the position on the Internet and in
relevant newspapers and professional publications. After receiving several applications, the
recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of
directors, with the assistance of the recruitment firm, went through three rounds of interviews,
narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the
strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The
board of directors then made the final choice for a new CEO.
If the "recruiting firm" column of a systems flowchart includes "receive applications," it could be
depicted with any of the following except:
A. Symbol A
B. Symbol F
C. Symbol G
D. Symbol I
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
49.
Consider the following set of flowcharting symbols along with the case as you respond to the
question:
When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to
look for a replacement. The recruitment firm prepared several job announcements, then
presented them to the board of directors. The board of directors approved one of the job
announcements; the recruitment firm used it to advertise the position on the Internet and in
relevant newspapers and professional publications. After receiving several applications, the
recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of
directors, with the assistance of the recruitment firm, went through three rounds of interviews,
narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the
strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The
board of directors then made the final choice for a new CEO.
If the "recruiting firm" column of a systems flowchart includes a predefined process labeled
"receive applications," it is likely to be connected to:
A. Symbol H or Symbol J
B. Symbol H or Symbol I
C. Symbol I or Symbol J
D. Symbol A
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
50.
Consider the following set of flowcharting symbols along with the case as you respond to the
question:
When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to
look for a replacement. The recruitment firm prepared several job announcements, then
presented them to the board of directors. The board of directors approved one of the job
announcements; the recruitment firm used it to advertise the position on the Internet and in
relevant newspapers and professional publications. After receiving several applications, the
recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of
directors, with the assistance of the recruitment firm, went through three rounds of interviews,
narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the
strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The
board of directors then made the final choice for a new CEO.
A systems flowchart of the case would represent the final decision of the board of directors
with:
A. Symbol B or Symbol F.
B. Symbol B or Symbol G.
C. Symbol B or Symbol I.
D. Symbol G or Symbol I.
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
51.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as soft
drink cans, oil cans and many others. MCC has adopted a functional organization structure
that includes departments for accounting, marketing, manufacturing, human resources and
information systems. Some clients have standing repeat purchase orders for a stated number
of cans; MCC processes those orders monthly and ships the cans via common carrier.
Dedicated sales staff members work with such clients, while other sales staff members are
responsible for soliciting new clients. Considering the perspective of both MCC and its repeat
customers, which of the following business processes is not included in the narrative?
A. acquisition/payment
B. conversion
C. financing
D. sales/collection
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 14-01 Explain its role and purpose.
Topic: Financing process
52.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as soft
drink cans, oil cans and many others. MCC has adopted a functional organization structure
that includes departments for accounting, marketing, manufacturing, human resources and
information systems. One part of MCC's manufacturing department produces generic cans,
while another part of the department customizes them for specific clients. MCC's system is
therefore best described as:
A. process costing
B. job costing
C. hybrid costing
D. view-driven costing
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
53.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as soft
drink cans, oil cans and many others. MCC has adopted a functional organization structure
that includes departments for accounting, marketing, manufacturing, human resources and
information systems. Which of the following departments deal with primary activities in Porter's
value chain?
A. accounting and human resources
B. marketing and manufacturing
C. accounting and marketing
D. human resources and manufacturing
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-07 Explain how each process is related to Porter's value chain.
Topic: Conversion process
54.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as soft
drink cans, oil cans and many others. MCC has adopted a functional organization structure
that includes departments for accounting, marketing, manufacturing, human resources and
information systems. Which of the following departments deal with support activities in Porter's
value chain?
A. information systems and human resources
B. marketing and manufacturing
C. information systems and marketing
D. human resources and manufacturing
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-07 Explain how each process is related to Porter's value chain.
Topic: Human resource process
55.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as soft
drink cans, oil cans and many others. MCC has adopted a functional organization structure
that includes departments for accounting, marketing, manufacturing, human resources and
information systems. Which of the following appropriately pairs a document with one of MCC's
business processes?
A. production cost report, conversion
B. Form 940, human resources
C. Both production cost report, conversion and Form 940, human resources
D. Neither production cost report, conversion nor Form 940, human resources
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 14-02 Explain how the generic structure of most AIS applies.
Topic: Conversion process
Topic: Human resource process
56.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as soft
drink cans, oil cans and many others. MCC has adopted a functional organization structure
that includes departments for accounting, marketing, manufacturing, human resources and
information systems. Which of the following pairs of documents are associated with the same
business process?
A. labor time ticket, payroll register
B. production cost report, Form W-2
C. labor time ticket, production cost report
D. Each pair of documents is associated with the same business process.
Conversion process: labor time ticket, production cost report. Human resource process:
payroll register, Form W-2.
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 14-02 Explain how the generic structure of most AIS applies.
Topic: Conversion process
Topic: Human resource process
57.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as soft
drink cans, oil cans and many others. MCC has adopted a functional organization structure
that includes departments for accounting, marketing, manufacturing, human resources and
information systems. The corporation has recently decided to complete its IPO. Which of the
following statements is most true?
A. If MCC has an in-house legal staff as part of its human resources department, it does not
need to hire an outside attorney for the IPO.
B. If MCC's accounting manager and chief financial officer are licensed CPAs, it does not
need to hire an outside accounting firm for the IPO.
C. Both if MCC has an in-house legal staff as part of its human resources department, it does
not need to hire an outside attorney for the IPO and if MCC's accounting manager and
chief financial officer are licensed CPAs, it does not need to hire an outside accounting firm
for the IPO are true.
D. Neither if MCC has an in-house legal staff as part of its human resources department, it
does not need to hire an outside attorney for the IPO nor if MCC's accounting manager
and chief financial officer are licensed CPAs, it does not need to hire an outside accounting
firm for the IPO is true.
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Financing process
58.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as soft
drink cans, oil cans and many others. MCC has adopted a functional organization structure
that includes departments for accounting, marketing, manufacturing, human resources and
information systems. MCC's manufacturing department is subdivided into fabrication and
finishing; the fabrication function manufactures generic cans, while the finishing function
customizes those cans for specific customers. If a journal entry in MCC's accounting
information system includes a credit to "work in process—finishing," the corresponding debit is
likely to be:
A. work in process—fabrication
B. cost of goods sold
C. finished goods
D. cash
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-03 Identify and process common transactions.
Topic: Conversion process
59.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as soft
drink cans, oil cans and many others. MCC has adopted a functional organization structure
that includes departments for accounting, marketing, manufacturing, human resources and
information systems. MCC has recently decided to complete its IPO. Which of the following
tables would appear in MCC's relational database after the IPO, but not before it?
A. Cash table
B. Shareholders table
C. Issue long-term debt table
D. Investment bank table
AACSB: Technology
AICPA: FN Leveraging Technology
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-02 Explain how the generic structure of most AIS applies.
Topic: Financing process
60.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as soft
drink cans, oil cans and many others. MCC has adopted a functional organization structure
that includes departments for accounting, marketing, manufacturing, human resources and
information systems. Which of the following internal controls is unique to the business process
indicated?
A. adequate supervision, human resources
B. annual operating budgets, financing
C. Both adequate supervision, human resources and annual operating budgets, financing
D. Neither adequate supervision, human resources nor annual operating budgets, financing
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Financing process
Topic: Human resource process
Matching Questions
61.
Match each risk exposure on the left with the most appropriate internal control on the right.
Each item on the left has only one best answer. Each item on the right should only be used
once.
1. mistakes in IPO
documents
2. cash embezzlement or
larceny
adherence to a cash budget 3
documentation of proper storage
conditions 5
3. inability to make
payments on long-term
debt
4. inability to hire well
qualified workers
regularly scheduled audits of
payroll and other information systems 9
market research on current salary
and benefit levels 4
thorough, specific performance
5. raw material spoilage
6. lawsuit for unfair
termination
7. factory equipment
breakdowns
8. too little cash on hand
for pension obligations
9. logic bomb left by
terminated employee
10. mistakes made by
factory workers
evaluations 6
internal auditors trained in fraud
examination 2
independent review prior to SEC
submission 1
regularly scheduled preventive
maintenance 7
required training on manufacturing
procedures 10
carefully planned investment of
employer and employee contributions 8
AACSB: Analytical Thinking
AICPA: FN Risk Analysis
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Conversion process
Topic: Financing process
Topic: Human resource process
Essay Questions
62.
Which of the following business processes is most closely associated with each of the items
below: (a) conversion process, (b) financing process, (c) human resource process?
1. Americans with Disabilities Act
2. Capital stock
3. Direct material
4. Dividends
5. Form W-2
6. Hiring employees
7. Initial public offering
8. Optimal capital structure
9. Process costing
10. Thorough background checks
1. C
2. B
3. A
4. B
5. C
6. C
7. B
8. B
9. A
10. C
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 14-06 Appropriately use terminology common to each process.
Topic: Conversion process
Topic: Financing process
Topic: Human resource process
63.
Indicate the document described in each of the following items.
1) Accumulates labor data in the conversion process
2) Computes payroll data for all employees for a given pay period
3) Establishes payroll withholding status
4) Reports amounts paid to an independent contractor
5) Reports amounts withheld by employer to IRS
6) Reports employer's federal unemployment taxes
7) Reports year-end information for tax purposes
8) Requests raw material from the warehouse for production
9) Summarizes cost and quantity information in a process costing system
10) Summarizes costs in a job costing system
1) labor time ticket
2) payroll register
3) Form W-4
4) Form 1099
5) Form 941
6) Form 940
7) Form W-2
8) materials requisition
9) production cost report
10) job cost sheet
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 14-02 Explain how the generic structure of most AIS applies.
Topic: Conversion process
Topic: Financing process
Topic: Human resource process
64.
Fill in the blanks below for common transactions processed in the conversion, human resource
and financing business process.
a. __________________________________ b. __________________________________ c.
__________________________________ d. __________________________________ e.
__________________________________ f. __________________________________
a. Raw material inventory
b. Cost of goods sold
c. Sales
d. Retained earnings
e. Cash
f. Wages expense
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-03 Identify and process common transactions.
Topic: Conversion process
Topic: Financing process
Topic: Human resource process
65.
Indicate the effect (increase, decrease or no change) the indicated transaction would have on
the specified ratio in each of the following independent situations.
a. decrease
b. no change
c. decrease
d. increase
e. no change
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 14-03 Identify and process common transactions.
Topic: Conversion process
Topic: Financing process
Topic: Human resource process
66.
Which flowcharting symbol would be used to represent each independent item below? a.
Begin manufacturing process b. Complete initial public offering c. Electronic applicant files d.
Evaluate product quality e. Issue debt? f. Issue Form W-2 g. Job cost sheet h. Manually
assemble raw materials i. Manually file Form W-4 j. Payroll check
a. terminator
b. predefined or generic process
c. database (cylinder)
d. predefined or generic process
e. decision
f. predefined or generic process
g. document
h. manual process
i. file (upside down triangle)
j. document
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Conversion process
Topic: Financing process
Topic: Human resource process
67.
Create REA model cardinalities for each of the following independent situations. a. A
department manager conducts weekly meetings with his staff. b. Each factory worker is
required to attend group classes on safety in the workplace. c. Each employee in the finance
department is evaluated annually by his/her immediate supervisor. d. A company's board of
directors assembles a committee to investigate the IPO process. e. One employee in the
human resources department screens application materials for prospective new employees.
a) Conduct meetings (0,*) ---- (1,*) Staff
b) Attend class (1,*) ---- (1,*) Factory worker
c) Evaluate employees (1,*) ---- (1,1) Employee
d) Assemble committee (0,*) ---- (1,*) Employees
e) Screen materials (0,*) ---- (1,1) Human resource employee
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Conversion process
Topic: Financing process
Topic: Human resource process
68.
The text outlined seven steps companies should complete for an initial public offering.
Complete the risk/control matrix below based on the indicated risks associated with an IPO.
AACSB: Analytical Thinking
AICPA: FN Risk Analysis
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Financing process
69.
Prepare a REA model of the following business process. When the CEO of NTL Corporation
resigned, the board of directors hired a recruitment firm to look for a replacement. The
recruitment firm prepared several job announcements, then presented them to the board of
directors. The board of directors approved one of the job announcements; the recruitment firm
used it to advertise the position on the Internet and in relevant newspapers and professional
publications. After receiving several applications, the recruitment firm selected a pool of ten to
pass on to NTL's board of directors. The board of directors, with the assistance of the
recruitment firm, went through three rounds of interviews, narrowing the pool from ten to three.
Each of the three finalists prepared a presentation on the strategic future of NTL and delivered
the presentation at a meeting of NTL shareholders. The board of directors then made the final
choice for a new CEO.
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Human resource process
Short Answer Questions
70.
Some payroll forms include employee identification data. List three such forms commonly
associated with the human resource business process.
Form W-4
Form W-2
Payroll register
Form 941
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 14-02 Explain how the generic structure of most AIS applies.
Topic: Human resource process
71.
Transactions commonly associated with the financing process include: (a) issuance of capital
stock for cash, (b) declaration of cash dividends and (c) issuance of long-term debt. In your
own words, explain how each of those transactions affects each section of a corporate
balance sheet. Focus your explanation at a conceptual level; do not explain the effects by
indicating journal entries.
(a) Increases both assets and equity
(b) Increases liabilities and reduces equity
(c) Increases assets and liabilities
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-03 Identify and process common transactions.
Topic: Financing process
72.
Olivia was a finalist for the CEO position at NTL Corporation. She wanted to focus her
presentation on improving internal control in the company's financing process. Use the five
elements of the COSO internal control framework to outline the main points of Olivia's
presentation.
Control environment: Top management must demonstrate the importance of internal control.
Risk assessment: The company identifies risks, such as lower market prices for its stock.
Control activities: The company identifies controls to mitigate the risks, such as monitoring the
market price.
Information and communication: The company disseminates information about the overall
internal control plan to various stakeholder groups.
Monitoring: A specific individual/group takes on the responsibility for monitoring the overall
internal control plan's effectiveness.
AACSB: Analytical Thinking
AICPA: FN Risk Analysis
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-04 Design and critique internal controls based on common risk exposures.
Topic: Financing process
73.
The text discussed five business processes: sales/collection, acquisition/payment, conversion,
financing and human resources. List and discuss two ways the processes are similar; list and
discuss two ways they are different from one another.
The five processes are similar in that they all are represented in Porter's value chain;
additionally, each process encompasses all five parts of the generic structure of AIS.
The five processes are different in that they all have different goals and purposes; additionally,
some of them are associated with primary value chain activities while others are associated
with support activities.
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 14-01 Explain its role and purpose.
Topic: Conversion process
Topic: Financing process
Topic: Human resource process
74.
Create a narrative description of the REA model shown below.
Employees purchase raw materials, then inspect the raw materials. Although each transaction
involves a single employee, not all employees participate in every transaction. Further, raw
materials are inspected on a sampling basis only.
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Conversion process
75.
Create specifications (table names and field names) for all database tables indicated by the
REA model below.
Raw material inventory table
Inventory ID
Inventory description
"As of" date for beginning inventory
Beginning inventory quantity
Beginning inventory cost per unit
Purchases table
Purchase order number
Purchase date
[Employee ID]
[Vendor ID]
Inspection table
Inspection transaction number
Inspection date
[Purchase order number]
[Employee ID]
Employee table
Employee ID
Employee last name
Employee first name
Employee job title
Employee address
Employee city
Employee state
Employee ZIP code
Employee area code
Employee phone number
Purchases/raw material inventory table
[Purchase order number]
[Inventory ID]
Quantity purchased
Cost per unit
Inspection/raw material inventory table
[Inspection transaction number]
[Inventory ID]
[Employee ID]
Raw material condition
AACSB: Technology
AICPA: FN Leveraging Technology
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 14-05 Develop and interpret process-related systems documentation.
Topic: Conversion process