Question : 21) Judith Corp. has current assets worth $50,000 and current : 1222585

21) Judith Corp. has current assets worth $50,000 and current liabilities worth $75,000. Current assets include inventory of $10,000. Calculate acid test ratio.

A) 1.500

B) 0.533

C) 0.625

D) 0.667

22) Peaches Corp. has current assets worth $90,000 and current liabilities worth $75,000. Current assets include inventory of $10,000. Calculate the net working capital of the company.

A) $80,000

B) $65,000

C) $15,000

D) $5,000

23) Which of the following the correct formula for calculating acid test ratio?

A) Acid test ratio = (Current assets – Inventory) / Current liabilities

B) Acid test ratio = (Current assets – Interest expense) / Current liabilities

C) Acid test ratio = (Current assets – Current liabilities) / Current liabilities

D) Acid test ratio = Current assets / Current liabilities

24) Which of the following is Altman’s conventional Z-score model for publicly traded manufacturing firms?

A) Z = 0.717(X1) + 0.847(X2) + 3.107(X3) + 0.420(X4) + 0.998(X5)

B) Z = 1.4(X1) + 0.847(X2) + 3.3(X3) + 1.05(X4) + 0.998(X5)

C) Z = 6.65(X1) + 3.26(X2) + 6.72(X3) + 1.05(X4)

D) Z = 1.2(X1) + 1.4(X2) + 3.3(X3) + 0.6(X4) + 0.999(X5)

25) Arcket, Inc. is a publicly traded nonmanufacturing company. The following information is available from its financial statements:

A) 1.6084; Bankrupt

B) 2.312; Zone of ignorance

C) 1.40816; Zone of ignorance

D) 2.9108; Non-bankrupt

26) Which of the following is true of Altman’s Z-Score Boundaries?

A) If a publicly traded non-manufacturing firm has a Z-score of 1.81, it predicts bankruptcy.

B) If a publicly traded manufacturing firm has a Z-score of 2.60, it indicates non-bankruptcy.

C) If a publicly traded manufacturing firm has a Z-score of 1.42, the firm is in the zone of ignorance.

D) The zone of ignorance for privately held manufacturing firms is 1.23 to 2.90.

27) Which of the following is true of the application of ratio analysis?

A) These are as reliable as the source data.

B) Analysts should use simple rules of thumb when applying these.

C) These represent causes, not effects.

D) Accounting estimates in the data do not impact ratios.

28) Which of the following does a discrepancy in cash flow reconciliation indicate?

A) The cash outflow is greater than the cash inflow.

B) The cash flow statement reflects entries for intercompany cash flows and transactions.

C) Certain cash transactions are not accurately reflected in the income statement and balance sheet.

D) There was an unexpected surge of cash flow during the period.

29) The journal entry testing prescribed by SAS No. 99 identifies several common characteristics of fraudulent entries. Which of the following is one such characteristic?

A) an entry for credit sales to a buyer who does not pay his dues on time

B) an entry for repairs and maintenance of plant made every period

C) an entry for creating provisions for bad debts

D) an entry for asset made by the managing director of the company

30) Which of the following is a limitation of computer-assisted audit tools?

A) These tools cannot replace skilled forensic accountants, but rather allow them to focus their efforts on the highest-risk journal entries.

B) These tools cannot analyze 100% of the data, but rather can choose and analyze samples from the journal entry database.

C) The conclusions arrived at using these tools cannot be supported with substantial quantitative data.

D) The forensic accountant will have to manually review the general ledger even after using these tools.