AICPA CPA-Business CPA Exam Questions Instant Access

Question 1

Tim, Peter, and Rick want to form a limited liability company. What document must they file with the state?

AOperating Agreement.

BArticles of Incorporation.

CBylaws.

DArticles of Organization.

Answer : D

Choice 'd' is correct. The Articles of Organization must be filed with the secretary of state.

Choice 'a' is incorrect. An operating agreement is an agreement between the members containing provisions relating to management, profit sharing, transferring interests, etC. and does not need to be filed with the state.

Choices 'b' and 'c' are incorrect. Articles of incorporation and bylaws are documents relating to corporations, and they are not required to be filed with the state.

Question 2

Vested, Inc. made some changes in operations and provided the following information:

What percentage represents the return on investment for year 3?

A28.57%

B25%

C20.31%

D20%

Answer : B

Choice 'b' is correct. Return on investment is the ratio of operating income to average operating assets and is computed as follows based on Year 2 and Year 3 data:

Choice 'a' is incorrect per the above computation.

Choice 'c is incorrect. The year 3 return on investment is not computed by combining revenues, expenses, and assets for all year's presented.

Choice 'd' is incorrect. The year 3 return on investment is based on the average assets (($1,200,000 + $2,000,000)/2 = $1,600,000), not simply on the total assets at the end of year 3 ($2,000,000).

Question 3

The length of time required to recover the initial cash outlay of a capital project is determined by using the:

ADiscounted cash flow method.

BPayback method.

CNet present value method.

DAccounting rate of return method.

Answer : B

Choice 'b' is correct. The payback method measures the time required to recover the initial investment.

Choice 'a' is incorrect. Discounted cash flows are used for several methods of capital budgeting; this is a generic term.

Choice 'c' is incorrect. The NPV method does not measure the length of time required to recover the initial cash outlay.

Choice 'd' is incorrect. The accounting rate of return does not measure the time to recover the initial investment.

Question 4

James Webb is the general manager of the Industrial Product Division, and his performance is measured using the residual income method. Webb is reviewing the following forecasted information for his division for next year.

If the imputed interest charge is 15 percent and Webb wants to achieve a residual income target of $2 million, what will costs have to be in order to achieve the target?

A$10,800,000

B$23,620,000

C$25,150,000

D$25,690,000

Answer : C

Choice 'c' is correct. $25,150,000 costs to achieve residual income target of $2 million.

Choices 'a', 'b', and 'd' are incorrect, per the above calculation.

Question 5

Which of the following is incorrect with regard to government intervention in market operations?

AGovernment intervention may create a price different from the market price, thus causing either a surplus or a shortage.

BA price ceiling is a price that is established above the equilibrium price, which causes a surplus to develop.

CPrice floors are minimum prices established by law, such as minimum wages and agricultural price supports.

DRationing limits the availability of certain goods to a specified level, which lowers demand and prices for a given supply.

Answer : B

Choice 'b' is an incorrect statement and the correct choice. A price ceiling is a price that is established below the equilibrium price, which causes a shortage to develop. The statement in choice 'b' defines a price floor.

Choices 'a', 'c', and 'd' are correct statements.

Question 6

Heather, Erika, and Shelby are members in HES LLC. Heather dies. Absent an agreement to the contrary, what is the result?

AThe LLC must dissolve.

BThe LLC ceases to exist.

CThe LLC is dissolved unless the other members consent to continue.

DThe LLC continues as though nothing happened.

Answer : C

Choice 'c' is correct. Absent an agreement to the contrary, if a member of an LLC dies, the LLC is dissolved unless the other members consent to continue.

Choice 'a' is incorrect, because the LLC does not have to dissolve upon the death of a member.

Choice 'b' is incorrect, because the LLC does not cease to exist immediately.

Choice 'd' is incorrect, because the LLC does not continue unless the members consent to continue.

Question 7

Which one of the following financial instruments generally provides the largest source of short-term credit for small firms?

AInstallment loans.

BCommercial paper.

CTrade credit.

DBankers' acceptances.

Answer : C

Choice 'c' is correct. Trade credit generally provides the largest source of short-term credit for small firms.

Choices 'a', 'b', and 'd' are incorrect, per the above Explanation:.

AICPA CPA Business Environment and Concepts CPA-Business CPA Exam Questions