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Sample Questions

The following questions provide a reasonable cross section of the level of difficulty and the types of questions that you will encounter in ¢OIN Competition. If you have any comments or concerns, please contact Rizelle de Ocampo - Coordinator, at (416) 969-4203 or 1-800-387-0735 ext 203.

Please note that marks will not be deducted for wrong answers. All participants will be warned when there are five minutes remaining in the competition and when there is one minute remaining.

1. On January 1st ten years ago, Carson Products Limited (CPL) purchased a steel cutting machine for$100,000. At that time, the useful life was estimated to be 15 years, with no salvage value. On January 1st, of year 11, it was determined that the equipment was likely to have a useful life of 20 years, not 15. CPL uses the straight-line method of amortization.

Which one of the following amounts is the depreciation expense for year 11?

  1. a) $0 - the machine has been fully depreciated.
  2. b) $6,667.
  3. c) $3,333.
  4. d) $5,000.

 

2. Generally Accepted Accounting Principles (GAAP) require that inventory be recorded at the lower of cost and net realizable value.

Which one of the following statements provides the best support for this?

  1. a) The principle of conservatism suggests that a write-down is appropriate and allows the users of the financial statements to determine if the future sales will generate a profit.
  2. b) Financial statements should always be based on net realizable value, not historical cost, to provide useful information.
  3. c) Inventory will generally turnover in a year or less, so it is more useful to recognize the profit early.
  4. d) The cost principle allows for cost to be defined as the fair value to allow the current valuation of inventory to be used as a measurement basis since inventory is a current asset.

 

3. Which one of the following statements best describes the revenue recognition principle?

  1. a) The risks and rewards of ownership have passed to the purchaser, the bill has been sent to the purchaser, and the vendor has substantially performed their responsibilities.
  2. b) The risks and rewards of ownership have passed to the purchaser, collection is assured, the amount can be measured, and the purchaser has substantially performed their responsibilities.
  3. c) The risks and rewards of ownership have passed to the vendor, collection is assured, the amount can be measured, and the vendor has substantially performed their responsibilities.
  4. d) The risks and rewards of ownership have passed to the purchaser, collection is assured, the amount can be measured, and the vendor has substantially performed their responsibilities.

 

4. FIFO and Weighted Average Cost are two methods used to calculate inventory valuation. In times when prices are rising and purchase volume is constant, the use of the FIFO method as opposed to the Weighted Cost Average method will generally result in which one of the following?

  1. a) Lower cost of goods sold; higher inventory balances; lower net income.
  2. b) Lower cost of goods sold; higher inventory balances; higher net income.
  3. c) Higher cost of goods sold; higher inventory balances; higher net income.
  4. d) Higher cost of goods sold; lower inventory balances; lower net income.

 

5. The reconciliation of gift certificates on hand versus gift certificates sold/cash received is an application of which type of internal control?

  1. a) Documentation procedures.
  2. b) Physical controls.
  3. c) Establishment of Responsibility.
  4. d) Performance reviews.