CPA BEC Practice Test 1

In enterprise risk management, which of the following comments addresses a company’s commitment to core values according to the Committee of Sponsoring Organizations (COSO) of the Treadway Commission?

For a $20,000 promissory note there is a stated rate of 8% with interest payments to be paid semiannually. There is a loan origination fee of $100 and a documentary tax of $50 assessed by the state.

What is the annual percentage rate?

The cost of common stock for XYZ company is 9.4%, the cost of preferred stock is 7.8%, and the weighted interest rate on the company debt is 5%. Assume that the market value percentages of each component of the capital structure are 55% common stock, 20% preferred stock, and 25% debt. The corporate tax rate is 30%.

What is XYX company’s Weighted Average Cost of Capital (WAAC)?

Utilize the capital asset pricing model (CAPM) to calculate the rate of return for the below facts.

Beta = 1.15

Market Return – 15%

Risk Free Rate = 6%

XYZ Corp capital structure is defined below:

Debenture bonds = $15,000,000

Preferred Equity = $5,000,000

Common Equity = $44,000,000

The financial leverage of XYZ Corp. would increase as a result of:

True or False – A company wants to have a high quick ratio when doing financial analysis at year end?

ABC Corp. sells 5,000 widgets per year. The widgets are manufactured in groups of 1,000 and requires 4 weeks lead time for production. ABC Corp also maintains an absolute minimum safety stock of 800.

Assuming 50 week year, and constant demand, compute ABC Corp’s re-order point for widgets. 

Out of the following cases, which one would make a company reduce the amount of average inventory?

True or False: Process costing is a method of product costing that averages costs and applies them to a large number of homogeneous items?

Assume the following information:

Work-in-process, beginning balance = 300 units, 25% complete

Unites completed and transferred out = 500 units

Work in process, ending = 100 units, 40% complete

Compute the equivalent units of production using the FIFO method and the weighted average cost method.