Final Examination Study Guide - University of Phoenix



ETH/557 Final Examination Study Guide

This study guide will prepare you for the Final Examination you will complete in Week Six. It contains practice questions, which are related to each week’s objectives. In addition, refer to each week’s readings and your student guide as study references for the Final Examination.

Week One: Economics

Objective: Distinguish between statements made from the perspective of positive and normative economics.

1. "Economics is concerned with using scarce productive resources efficiently in attempting to satisfy society's economic wants." This statement is

a. positive and correct

b. positive, but incorrect

c. normative, but incorrect

d. normative and correct

Objective: Explain the conditions necessary for market efficiency.

2. If an economy produces its most wanted goods and uses up-to-date production methods, it is

a. engaged in roundabout production

b. achieving both productive and allocative efficiency

c. achieving productive efficiency, but not allocative efficiency

d. not achieving productive efficiency

Objective: Explain the economizing problem and the models used in economics.

3. The economizing problem is one of deciding how to make the best use of

a. virtually unlimited resources to satisfy virtually unlimited wants

b. limited resources to satisfy virtually unlimited wants

c. unlimited resources to satisfy limited wants

d. limited resources to satisfy limited wants

4. The concept of economic efficiency is primarily concerned with

a. the limited wants-unlimited resources dilemma

b. considerations of equity in the distribution of wealth

c. obtaining the maximum output from available resources

d. the conservation of irreplaceable natural resources

Objective: Analyze the characteristics of the market system and how they operate.

5. If an economy is operating on its production possibilities curve, an increase in the production of capital goods

a. necessarily involves an increase in the division of labor

b. is in conflict with the concept of consumer sovereignty

c. necessitates production of fewer consumer goods

d. will impair future productive efficiency

Week Two: Price and Consumer Behavior

Objective: Analyze the interaction of supply, demand, and price ceilings on the market equilibrium price.

6. In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shifts in supply and demand?

a. Demand rises and supply rises

b. Supply falls and demand remains constant

c. Demand rises and supply falls

d. Supply rises and demand falls

Objective: Apply the concepts of elasticity to changes in product price, consumer income, and competitor price.

7. The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range

a. has declined

b. is of unit elasticity

c. is inelastic

d. is elastic

8. The concept of price elasticity of demand measures

a. the slope of the demand curve

b. the number of buyers in a market

c. the extent to which the demand curve shifts as the result of a price decline

d. the sensitivity of consumer purchases to price changes

Objective: Explain how the concepts of utility, income, and substitution predict consumer behavior when a price changes.

9. Suppose that Jean normally orders three tacos, but on seeing that their price has gone up, decides to buy only two. Jean's decision is best explained by

a. income and substitution effects

b. the law of supply

c. the principle of comparative advantage

d. the law of increasing opportunity costs

Objective:

10. Which of the following is correct? When the price of normal good Z falls

a. both income and substitution effects cause the consumer to buy more

b. both income and substitution effects cause the consumer to buy less

c. the income effect causes the consumer to buy less, but the substitution effect causes her to buy more

d. the income effect causes the consumer to buy more, but the substitution effect causes her to buy less

Week Three: Business Issues

Objective: Analyze ethical challenges in measuring performance.

11. When evaluating the performance of managers in revenue centers, performance metrics should be

based on

a. costs and revenues under their control

b. costs, revenues, and investments under their control

c. only revenues under their control

d. costs and investments under their control

12. At XYZ Corporation, transfer price is used as a performance measure, the selling department wants to be credited with the market price and the purchasing department wants to be charged the variable cost. This is acceptable under the transfer pricing method known as

a. market-based transfer price

b. dual rate transfer price

c. activity-based transfer price

d. cost-based transfer price

Objective: Explain the Agency Problem.

13. The framework that describes the potential conflict between owners and managers and managers and employees is known as

a. The Agency Theory

b. The Conflict Theory

c. The Management Theory

d. The Centralization Theory

14. When a salesperson makes a sale that is not beneficial to the organization but will allow the salesperson to earn a sales commission, is a general agency cost resulting from

a. monitoring costs

b. goal alignment costs

c. contracting costs

d. auditing costs

Objective: Explain the financial market events that lead to the 1993, 1934, and SOX acts.

15. The U.S. Public Company Reform and Investor Protection Act of 2002 is better known as

a. the Consumer Protection Code

b. the Sarbanes-Oxley Act

c. the Securities Exchange Act

d. the Private Securities Litigation Reform Act

Week Four: Ethical Situations I

Objective: Analyze ethical challenges in revenue recognition.

16. Premature revenue recognition occurs when

a. revenue is recorded before the warranty period has expired

b. sales credit is issued before the customer has returned the defective product

c. the expenses associated with the revenue have not been paid

d. the criteria for bill and hold has not been met

17. Which of the following is an example of unethical revenue recognition?

a. Including sales in the actual period when they occur.

b. Writing-off a debt from a company that has declared bankruptcy.

c. Recording fictitious revenues.

d. Extending your payment terms to vendors from 30 days to 35 days.

Objective: Analyze ethical challenges in debtor-creditor relationships.

18. The president of Pearls, Inc., a publicly traded corporation, owns a condo in Hawaii. Pearls, Inc. enters into a rental arrangement with the president for 5 years at 105% of the going rental rates. The rental payments are made monthly by Pearls, Inc. to the president. Pearls, Inc. is required to

a. disclose this related party transaction in the Notes to the Financial Statements

b. inform the IRS before any rental payments can be made to the president

c. conduct a credit and background check on the president

d. register the rental contract with the state authorities

Objective: Analyze ethical challenges in bankruptcy.

19. When firms do not record revenues with expenses in the same period, bankruptcy often results. A red flag associated with identifying this practice is

a. unusual decrease in the number of complex transactions, especially at the close of the period

b. unusual decrease in gross margin

c. unusual increase in number of days’ sales in receivables

d. unusual increase in the number of days’ purchases in accounts payable

20. The type of bankruptcy where a corporation works at a plan to reorganize and creditors are kept at bay is known as

a. Chapter 7

b. Chapter 11

c. Chapter 42

d. Chapter 8

Week Five: Ethical Situations II

Objective: Analyze ethical challenges in business contracts.

21. A reporter does a favorable review of a restaurant and in the opening paragraph informs the reader that the reporter has invested $50,000 into this restaurant. This is an example of what type of conflict of interest

a. a conflict of interest that has been fixed by disclosure

b. an irreconcilable conflict of interest

c. a conflict of interest that is covered by freedom of the press

d. a conflict of interest that is covered by free speech

22. Conflicts of interest that cannot be overcome by both parties are referred to as

a. disclosed

b. consented

c. irreconcilable

d. questionable

23. When a conflict of interest exists in a business contract, the first of four steps to be taken is to

a. determine the type of conflict

b. develop policies to avoid or to mitigate these conflicts in the future

c. take action

d. admit where there is a conflict

Objective: Analyze ethical challenges for information technology.

24. Two examples from the Institute of Business, Technology, and Ethics’ “Nine Good Reasons” to run a business ethically are

a. public acceptance and regulatory freedom

b. tax incentives and regulatory freedom

c. public safety and tax incentives

d. regulatory freedom and environmental constraints

25. In 1985, the Congressional Office of TechnologyAssessment identified five stages of lack of proper protection or vulnerability in the protection of e-mails. One of these stages is

a. the recipient deleting the e-mail without knowing it

b. when retained in the archives at the recipient’s location

c. the length of the e-mail may exceed the regulatory parameters

d. the inability to see if text was deleted prior to sending the e-mail

Week Six: Professional Standards

Objective: Identify professional standards and responsibilities for Certified Public Accountants.

26. Section 56 of the Principles of Professional Conduct of the AICPA states that

a. a member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities

b. members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism

c. a member should observe the profession’s technical and ethical standards, strive continually to improve competence and quality of services, and discharge professional responsibility to the best of the member’s ability

d. a member in public practice should be independent in fact and appearance when providing auditing and other attestation services

27. Section 53 of the Principles of Professional Conduct of the AICPA states that:

a. a member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities.

b. members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.

c. a member should observe the profession’s technical and ethical standards, strive continually to improve competence and quality of services, and discharge professional responsibility to the best of the member’s ability.

d. a member in public practice should be independent in fact and appearance when providing auditing and other attestation services.

Objective: Identify professional standards and responsibilities for Certified Public Accountants.

28. The AIPCA’s senior technical committee for compilations or reviews that consists of seven members is known as

a. the Audit Issues Task Force

b. the Attestation Standards Board

c. the Auditing Standards Board

d. the Audit Review Board

29. Within the AICPA Code of Professional Conduct, the standards for consulting services: professional competence, due professional care, planning and supervision, and sufficient relevant data are found in

a. Rule 201

b. Rule 53

c. Rule 303

d. Rule 102-2

30. CPA firms often provide valuation services for clients. The valuation service standards are written by

a. the AICPA Accounting and Review Services Committee

b. the AICPA Peer Review Committee

c. the National Association of State Board of Accountancy

d. the AICPA Consulting Services Executive Committee

Answer Key:

1. a

2. b

3. b

4. c

5. c

6. a

7. d

8. d

9. a

10. a

11. c

12. b

13. a

14. b

15. b

16. d

17. c

18. a

19. c

20. b

21. a

22. c

23. d

24. a

25. b

26. c

27. b

28. c

29. a

30. d

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