CIS September 2012 Exam Diet
Examination Paper 1.1:
Financial Accounting and Financial Statement
Analysis
Economics and Financial Markets
Quantitative Analysis and Statistics
Level 1
Financial Accounting and Financial Statement Analysis (1 - 34)
1.
XYZ Limited has a debt to equity ratio of 1.5 as compared to 1.3 industry average. It
means that the firm has:
A. Higher liquidity.
B. Higher financial risk.
C. Higher profitability.
D. Higher capital employed.
2.
According to International Financial Reporting Standards (IFRS), which of the
following statements is correct?
A. Capital expenditure on Research must be capitalized and depreciated as normal.
B. Dividends proposed after the year end must not be accrued in the accounts.
C. Contingent liabilities should always be provided in the accounts.
D. Land should be depreciated over 50 years.
3.
Which of the following lists comprises the qualitative characteristics that financial
information should possess according to the IASB's Framework for the Preparation
and Presentation of Financial Statements?
A. Relevance, reliability, comparability, understandability.
B. Relevance, reliability, prudence, understandability.
C. Relevance, reliability, going concern, prudence.
D. Reliability, prudence, going concern, understandability.
4.
A company made a profit of N250,000 for the year after charging depreciation of
N28,000. During the year it paid off a loan of N50,000, made payments for noncurrent assets totaling N90,000, issued shares for N100,000 and had an increase in
inventories of N18,000. What will be the increase in cash and bank balances at the
end of the year?
A. N256,000
B. N192,000
C. N220,000
D. N260,000
5.
ABC Limited has a current ratio of 1.5:1 and net current assets of N5,000,000.
Determine the Current Assets.
A. N5,000,000
B. N10,000,000
C. N15,000,000
D. N25,000,000
6.
Which of the items listed below could appear in a company’s statement of cash
flows?
7.
I.
II.
III.
IV.
V.
Dividends received.
Bonus issue.
Irrecoverable debts.
Proceeds of a sale of a non-current asset.
Surplus on the revaluation of a non-current asset.
A.
B.
C.
D.
I, II and IV only.
I, II and III only.
I and IV only.
II and V only.
Which of the following criteria must be met if a provision is to be recognized in the
financial statements?
I. The entity has a possible obligation arising out of a past event or transaction.
II. It is possible that an outflow of economic resources will be required to settle the
obligation.
III. A reliable estimate of the obligation can be made.
A.
B.
C.
D.
I and III only.
II and III only.
III only.
All of the above.
8.
Accounting Ratios are important tools used by:
A. Managers.
B. Researchers.
C. Investors.
D. All of the above.
9.
Which of the following sentences BEST describes the difference between capital and
revenue expenditure?
A. Capital expenditure is always where a business acquires a new non-current
asset, whereas revenue expenditure is when it pays for rates.
B. Revenue expenditure is shown in the income statement, whereas capital
expenditure is shown in the balance sheet.
C. Capital expenditure must be depreciated, whereas revenue expenditure isn’t.
D. Capital expenditure relates to expenses that will benefit the business on a
continuing basis, whereas revenue expenditure is used in the period when it is
incurred.
10. Which of the following statement is not true of a bonus issue?
A. Bonus issue basically has the same impact on the company as right issue.
B. Bonus issue does not have any impact on the company’s cash flow.
C. Bonus issue amounts to capitalization of reserves.
D. Bonus issue is made to the existing shareholders only.
11. Kunle undervalued his inventory at 1 July 2010 by N15,000,000 and overvalued his
inventory at 30 June 2011 by N6,200,000. As a result, his profit for the year ended
30 June 2011 was:
A. Understated by N8,800,000
B. Overstated by N8,800,000
C. Understated by N21,200,000
D. Overstated by N21,200,000
12. If a firm has "goodwill" recorded on its balance sheet, which of the of the following
must have happened? It must have ____________
A. Participated in a benefit for a charitable cause.
B. Participated in a company-wide fund raising drive for a charity.
C. Acquired another firm.
D. None of the above.
13. In
A.
B.
C.
D.
ratio analysis, comparability problems arise because:
Firms may use different generally accepted accounting principles.
Inflation may affect firms differently due to accounting conventions used.
Financial analysts do not know how to compare financial statements.
(A) and (B) above.
14. Edet Farm Supplies has an 8 percent return on total assets of N300,000 and a net
profit margin of 5 percent. What are its sales?
A. N3,750,000
B. N480,000
C. N300,000
D. N1,500,000
15. Which of the following statements best describes the purpose of financial accounting
in a limited liability company?
A. To assist in the day-to-day management of the company.
B. To enable the business to pay the correct amount of tax.
C. To ensure that the business pays the correct dividend.
D. To help the directors discharge their obligations to the shareholders.
16. A company sells goods on credit valued at N25,000 to a customer. At what point in
the sales cycle should this sale be recognized in the accounts?
A. When the customer's order is received.
B. When the goods are ready for dispatch to the customer.
C. When the goods are sent, accepted and invoiced.
D. When the customer pays.
17. A business has the following transactions recorded in its sales ledger for 2011:
Debtors at 1 January 2011
Sales in 2011
Receipts from debtors
Credit notes raised in 2011
N'000
25
345
318
23
Which is the correct figure for debtors at 31 December, 2011?
A. N29,000
B. N27,000
C. N52,000
D. N75,000
18. Which of the following statements is correct in relation to a trial balance?
A. It shows the financial position of a business.
B. All the balances in the trial balance will be summarized on the business balance
sheet.
C. It is a list of balances and forms the starting point for the preparation of the
business accounts.
D. It is part of the published accounts of a business.
19. A business has the following items in its trial balance:
Trade debtors
Prepayments
Bank overdraft
Trade creditors
Fixed assets
Closing stock
N'000
25
10
5
8
15
8
Which of the following is the correct figure for the working capital of the business?
A. N42,000
B. N45,000
C. N50,000
D. N30,000
20. A business has the following items extracted from its trial balance:
Opening stock
Purchases
Sales
Expenses
N'000
10
25
40
10
In addition, its closing stock is valued at N15,000. What is the correct figure for the
business gross profit?
A. N20,000
B. N10,000
C. N15,000
D. N0
21. Which of the following explains what is meant when an external auditor's report
notes that financial statements are 'fairly presented'?
A. The financial statements are accurate.
B. All items have been reviewed by the auditor.
C. The financial statements are free from material misstatement.
D. No fraud has occurred during the accounting period.
22. What is defined by the statement below?
“A resource controlled by an entity as a result of past events and from which future
economic benefits are expected to flow to the entity”.
A. Income.
B. An expense.
C. A liability.
D. An asset.
23. How are the elements of the accounting equation affected when a charge is made for
depreciation?
Assets
Liabilities
Capital
A. Reduced
Unchanged
Reduced
B. Reduced
Reduced
Unchanged
C. Unchanged
Reduced
Increased
D. Increased
Increased
Unchanged
24. A company depreciates non-current assets on the reducing balance basis at a rate of
25% per annum. At 1 May 2009, the company's non-current assets had a cost value
of N680,500 and had accumulated depreciation of N285,900. In the year to 30 April
2010 new assets which cost N32,800 were acquired. All assets are depreciated for a
full year, irrespective of the date of acquisition.
What is the depreciation charge for the year to 30 April 2010?
A. N98,650
B. N106,850
C. N178,325
D. N249,800
25. How should goodwill be dealt with in financial statements?
A. Only purchased goodwill should be recognized.
B. Only internally generated goodwill should be recognized.
C. Both types of goodwill should be recognized.
D. Neither type of goodwill should be recognized.
26. On its balance sheet at 31 October 2011, Kano Trading Limited has reported the
following reserves:
Retained profits
Revaluation reserve
Share premium
N'000
1,800
3,100
2,300
What is the maximum amount which the company may legally distribute to
shareholders?
A. N1,800,000
B. N4,900,000
C. N5,400,000
D. N7,200,000
27. An
A.
B.
C.
D.
ordinary share dividend is:
Part of the company’s profits used to reward shareholders for their investment.
Interest on money lent to the company by its shareholders.
An expense of running the company.
The Directors remuneration.
28. Which of the following ratios gives information on the amount of profits reinvested in
the firm over the years?
A. Sales/total assets.
B. Retained earnings/total assets.
C. Debt/equity.
D. Debt/total assets.
29. When Roberts’ balance was extracted, the total of the debit balances was N208,462
and the total of the credit balances was N208,642. He opened a suspense account
while he checked the entries. He then found that:
I. A cash sale for N50 was debited to the cash account, but no entry was made in
the sales account.
II. The opening inventory figure of N1,200 was omitted from the trial balance.
When Robert corrects these errors what is the balance on his suspense account?
A. N1,070 debit.
B. N1,330 credit.
C. N1,280 debit.
D. N970 credit.
30. After preparing his draft accounts, Abdulahi discovered that he had incorrectly
classified an item of revenue expenditure as capital expenditure.
When the error is corrected, how will his net profit and capital be affected?
Net profit
Capital
A. Increased
Reduced
B. Reduced
Increased
C. Increased
Increased
D. Reduced
Reduced
31. At 31 May 2010, Bella’s capital balance was N144,867. During the year to 31 May
2011, her profit was N25,764. At 31 May 2011 her capital balance was N153,153.
What were Bella’s drawings for year to 31 May 2011?
A. N8,286
B. N17,478
C. N34,050
D. N70,814
32. Which of the following provides a snapshot of the financial condition of the firm at a
particular time?
A. The balance sheet.
B. The income statement.
C. The statement of cash flows.
D. All of the above provide.
33. Which basic accounting concept prohibits firms from frequently changing their
method of valuing inventory?
A. Consistency.
B. Conservatism.
C. Historical cost.
D. Disclosure.
34. The International Accounting Standards Council (IASC) is the supervisory body for
the regulatory framework of accounting. Its objective is to:
I. Develop single set of high quality accounting standards.
II. Promote use and application of accounting standards.
III. Bring the convergence of national and international accounting standards.
A.
B.
C.
D.
I and II only.
III only.
All of the above.
None of the above.
Economics and Financial Markets (35 - 67)
35. The change in total product divided by the change in resource input defines:
A. Total cost.
B. Average cost.
C. Average product.
D. Marginal product.
36. The demand curve for pure monopolist is:
A. Perfectly price elastic.
B. Perfectly price inelastic.
C. Down sloping.
D. Up sloping.
37. Which of the following constitutes an obstacle to collusion among oligopolists?
A. A general business recession.
B. A small number of firms in the industry.
C. A homogeneous product.
D. The patent laws.
38. The reason for the law of demand can best be explained in terms of:
A. Supply.
B. Complementary goods.
C. The rationing function of prices.
D. Diminishing marginal utility.
39. If you know that the equation relating consumption (C) to income (Y) is C = N75,000
+ 0.2Y, then:
A. Consumption is inversely related to income.
B. Consumption is the independent variable and income is the dependent variable.
C. If income is N150,000 then consumption is N105,000
D. If consumption is N300,000 then income is N100,000
40. The maximization of profit tends to be the driving force in the economic decision
making of:
A. Entrepreneurs.
B. Workers.
C. Consumers.
D. Legislators.
41. The chief determinant of the price elasticity of supply of a product is:
A. The number of good substitutes the product has.
B. The length of time the sellers have to adjust to a change in price.
C. Whether the product is a luxury or a necessity.
D. Whether the product is a durable or a nondurable good.
42. Which of the following is not an essential assumption of marginal-utility-theory of
consumer behavior?
A. The consumer has a small income.
B. The consumer is rational.
C. Goods and services are not free.
D. Goods and services yield decreasing amounts of marginal utility as the consumer
buys more of them.
43. If gross private domestic investment is greater than depreciation, the economy will
most likely be:
A. Static.
B. Expanding.
C. Declining.
D. Experiencing inflation.
44. Why do governments often intervene in international trade?
A. To expand a nation’s production possibilities.
B. To improve the position of multinational corporations.
C. To protect domestic industries from foreign competition.
D. To increase revenue from tariff duties and excise taxes.
45. The annual charge which estimates the amount of capital equipment used up in each
year’s production is called:
A. Indirect business taxes.
B. Inventory reduction.
C. Depreciation.
D. Investment.
46. The aggregate demand curve will tend to be increased by:
A. A decrease in the price level.
B. An increase in the price level.
C. An increase in the excess capacity of factories.
D. Depreciation in the value of the Naira.
47. If the government wishes to increase the level of real Gross Domestic Product (GDP),
it might reduce:
A. Taxes.
B. Its purchases of goods and services.
C. Transfer payments.
D. The size of the budget deficit.
48. An
A.
B.
C.
D.
increase in the rate of interest would increase:
The opportunity cost of holding money.
The transactions demand for money.
The asset demand for money.
The price of bonds.
49. The money-creating potential of the banking system is reduced when:
A. Bankers choose to hold excess reserves.
B. Borrowers choose to hold none of the funds they have borrowed in currency.
C. The central bank lowers the required reserve ratio.
D. Bankers borrow from the Central Bank.
50. Which of the following is more likely to be affected by changes in the rate of interest?
A. Consumer spending.
B. Investment spending.
C. Government spending.
D. The exports of the economy.
51. If the economy is stuck in a recession, an appropriate policy for the Central Bank
might be to:
A. Increase the reserve requirement ratio.
B. Reduce the amount of currency in circulation.
C. Reduce excess reserves.
D. Buy bonds.
52. All
A.
B.
C.
D.
of the following are determinants of demand except:
Tastes and preferences.
Quantity supplied.
Income.
Price of related goods.
53. “Consumer surplus” is defined as the difference between:
A. The total amount spent on a good and the total cost of producing it.
B. The total willingness to pay for a good and the amount actually spent.
C. The total willingness to pay for a good and the total cost of producing it.
D. The total amount spent in a good and sold.
54. The difference between Gross Domestic Product (GDP) and national income is:
A. Equal to the difference between exports and imports.
B. Equal to the difference between government purchases and investment.
C. The sum of depreciation and indirect business taxes.
D. The value of inventories accumulated during the year.
55. When government sets the price of a good and that price is below the equilibrium
price, the result will be:
A. A surplus of the good.
B. A shortage of the good.
C. An increase in the demand for the good.
D. A decrease in the supply of the good.
56. When the income of a consumer is N2,000, the price of X is N50, the price of Y is
N20, and the quantity of X is measured horizontally, the slope of the budget is?
A. 0.4
B. 2.5
C. 4
D. 10
57. If a business’ total economic cost of producing N10,000 units of a product is
N750,000 and this output is sold to consumers for N1,000,000, then the firm would
earn?
A. A normal profit of N750,000
B. An economic profit of N750,000
C. An economic profit of N250,000
D. A normal profit of N1,750,000
58. The IS-LM model is a theoretical construct that integrates:
A. Labour market and money market.
B. Labour market and bond market.
C. Commodity market and bond market.
D. Commodity market and money market.
59. If personal consumption expenditures were 80% of income and personal taxes were
8% of income, then personal savings would be:
A. 8% of income.
B. 10% of income.
C. 12% of income.
D. 88% of income.
60. From a time perspective, the demand for most products is:
A. Less elastic in the short run and unit elastic in the long run.
B. Less elastic in the long run and unit elastic in the short run.
C. More elastic in the short run than in the long run.
D. More elastic in the long run than in the short run.
61. Why does the short-run marginal-cost curve eventually increase for the typical firm?
A. Diseconomies of scale.
B. Minimum efficient scale.
C. The law of diminishing returns.
D. Economic profit eventually decreases.
62. A barrier to entry that significantly contributes to the establishment of monopoly
would be:
A. Economies of scale.
B. Price-taking behavior.
C. Technological progress.
D. X-inefficiency.
63. Suppose the government reduces its budget deficit and assuming the supply of credit
does not change, which of the following will occur as a result?
A. The nominal interest rate will rise.
B. The nominal interest rate will fall.
C. Demand for credit will increase.
D. There will be a shortage of credit at the original equilibrium interest rate.
64. Which of the followings is not considered to be a beneficial service performed by
financial intermediaries?
A. The costs of matching borrowers and lenders are reduced.
B. The risks of lending are reduced.
C. The possibility of loan defaults is eliminated.
D. Financial intermediation encourages increased savings.
65. The use of government spending and taxes to effect aggregate demand and
aggregate supply is called:
A. Monetary policy.
B. Fiscal policy.
C. Expenditure policy.
D. Functional finance.
66. The traditional Phillips curve shows the:
A. Inverse relationship between the rate of inflation and the unemployment rate.
B. Inverse relationship between the nominal and the real wage.
C. Direct relationship between unemployment and the demand-pull inflation.
D. Trade-off between the short run and the long run.
67. Implicit costs comprise:
A. Entirely of fixed costs.
B. Entirely of variable costs.
C. Payment of resources which are hired from others.
D. Opportunity cost of self employed resources.
Quantitative Analysis and Statistics (68 - 100)
68. How many years will it take a Principal of N25,000 to earn N15,000 in Interest at 1.0
per cent Simple Interest per month?
A. 3 years.
B. 5 years.
C. 2 years.
D. 4 years.
69. What is the present value of N20,000 received in 5 years’ time at a discount rate of
10%?
A. N12,420
B. N14,220
C. N10,240
D. N12,042
70. The ratio of the increment of y between any two points on a line to the increase of x
between the same two points is called ___________
A. Differentiation.
B. Gradient.
C. Integration.
D. Tangent.
71. When a dealer sells a second-hand car for N81,000 and makes a profit of 8%. How
much did the car cost?
A. N75,000
B. N85,520
C. N74,520
D. N87,480
72. Which characteristic movement of time series would you associate with the global
economic recession of the present time?
A. Secular trend.
B. Seasonal variation.
C. Cyclical variation.
D. Irregular variation.
73. Which of the following represents “the standard deviation of the sample mean”?
I.
II.
III.
IV.
Sampling error.
Sampling distribution of the mean.
Standard error.
Sample statistic.
A.
B.
C.
D.
I and III only.
II and IV only.
I only.
III only.
74. A Building Contractor employs three categories of Labourers: Men, Women and Boys,
and pays them daily wages of N3,000, N2,000 and N1,000 respectively. Suppose he
employs 200 Men, 120 Women and 50 Boys, what is the average wage per Labourer?
A. N2,405
B. N2,500
C. N3,400
D. N4,300
75. The Board of Directors of a Company consists of 3 Stockbrokers, 3 Accountants and
2 Bankers. A Planning Sub-Committee of 3 is to be chosen at random from the
Board. What is the probability that all the 3 members of the Sub-Committee are
Stockbrokers?
A. 1/36
B. 3/56
C. 5/36
D. 1/56
76. Which of the following is not an assumption underlying Linear Programming Model?
A. Non-linearity of objective function.
B. Non-relativity constraints.
C. Certainty assumption.
D. Proportionality of input and output.
77. The equation of the line of regression giving cassava yield in tons (Y), X years after
2000 is given by:
Y= 2.70 + 0.31X
Predict the expected yield for 2013:
A. 5.30 tons.
B. 6.73 tons.
C. 7.50 tons.
D. 8.37 tons.
78. A price index or price indices which use(s) quantity in the base year as weight is
called:
I.
II.
III.
IV.
Laspeyres Price Index.
Paasche Price Index.
Fishers-Ideal Price Index.
Marshal-Edge worth’s Price Index.
A.
B.
C.
D.
I only.
II only.
I and III only.
II and IV only.
79. Generally, what type of correlation would you expect from the variables “dividend per
share and market price per share”?
A. Inverse correlation.
B. Zero correlation.
C. Direct correlation.
D. Negative correlation.
80. A parameter is a characteristic measure of a:
I.
II.
III.
IV.
Sample.
Statistic.
Population.
Proportion.
A.
B.
C.
D.
I and III only.
II only.
III only.
I and IV only.
81. In a random sample of 600 Okada riders, 270 were found without Licence to operate.
What is the standard error of proportion?
A. 0.0203
B. 0.1230
C. 0.0302
D. 0.2130
82. Which of the following statements is not a property of Markov Chains?
A. It is concerned with probability of being in various states at any given time.
B. The probability for moving from one state to another does not depend on
previous occurrence.
C. The long run probability of being in a particular state is constant over time.
D. There is unlimited number of possible states.
Use the information to answer questions 83 and 84:
Given a matrix M =
6
3
4
1
83. Find the Determinant of M:
A. 6
B. -9
C. -6
D. 7
84. Find the inverse of M:
A.
6
2
/3
3
-1
-1 /6
1
/2
2
B.
C.
1
2
/3
D.
-9
7
/34
-1
½
1
/6
6
3
Use the information below to solve questions 85 and 86:
The probabilities that 0, 1, 2 or 3 orders will be made daily at a particular Website are
0.6, 0.2, 0.1 and 0.1 respectively.
85. What is the mean of the number of daily orders?
A. 0.7
B. 0.9
C. 2
D. 3
86. What is the standard deviation of the number of daily orders?
A. 0.880
B. 1.005
C. 1.010
D. 1.550
87. Find the probability of exactly two successes for a binomial random variable with
n=10 and p =0.5.
A. 0.11
B. 0.44
C. 0.945
D. 0.55
88. If a mutual fund bought for N200,000 three years ago was worth N251,200 two
years ago, N191,200 last year, and N169,200 today, what would be the best
estimate of its annual geometric rate of return?
A. -3.3%
B. -5.4%
C. -9.8%
D. -7.0%
89. Given the following revenue function:
R = 400q – 4q2
What is the maximum revenue possible?
A. N10,000
B. N20,000
C. N30,000
D. N40,000
90. What is the present value of the following series at 10%?
Year
Cash flow
A.
B.
C.
D.
0
-2000
1
800
2
600
3
700
4
1000
N90
N305
N432
N621
91. Which of the following statements is correct?
A. When the value of one variable is related to the value of another, they are said
to be correlated.
B. Coefficient of correlation measures the degree of correlation between two
variables.
C. Coefficient of determination measures the extent to which movements in y are
associated with movements in x.
D. All of the above.
92. Which of the following statements regarding the differences between arithmetic and
geometric means is incorrect?
A. The arithmetic mean of a portfolio provides a much more accurate interpretation
of a portfolio's historic performance than a geometric mean would.
B. The geometric mean of a portfolio's return can never be greater than its
arithmetic mean.
C. The geometric mean of a portfolio provides a much less accurate interpretation
of a portfolio's expected performance than an arithmetic mean would.
D. None of the above.
93. Should a company accept a project that has an IRR of 14% and an NPV of N2.8
million if the cost of capital is 12%?
A. Yes, based only on the NPV.
B. Yes, based on the NPV and IRR.
C. Yes, based only on the IRR.
D. No, based on both the NPV and IRR.
94. How long will it take to double your original investment in a bond mutual fund if the
expected rate of return is 8% compounded semi-annually?
A. 17.7 years.
B. 12.5 years.
C. 9.0 years.
D. 8.8 years.
95. Which of the following is least likely an example of a discrete random variable?
A. The number of stocks a person owns.
B. The time spent by a portfolio manager with a client.
C. The number of days it rains in a month in Lagos.
D. The number of visits someone makes to the Stock Exchange.
96. A simple random sample is a sample drawn in such a way that each member of the
population has:
A. An equal chance of being selected in the sample.
B. A 1% chance of being included in the sample.
C. A 100% chance of being included in the sample.
D. Some chance of being selected in the sample.
97.
Which of the following test statistics should be used to determine whether there is a
significant difference between the observed and the expected frequencies obtained
from a distribution?
A. Normal test.
B. T-test.
C. X2 – test.
D. F – test.
98.
What is the range of these numbers: 45, 27, 30, 6, 28, 19, 57, 38 and 45 ?
A. 48
B. 50
C. 49
D. 51
99.
In a lucky dip, a stock is picked at random from a list containing 10 Conglomerates
stocks, 30 Insurance stocks, 20 Oil & Gas stocks and 15 Banking stocks. What is the
probability that it is a Banking or Conglomerates stock?
A. 1/3
B. 2/3
C. 1/4
D. 3/4
100. Which of the following is not a measure of variability?
A. Median.
B. Variance.
C. Standard deviation.
D. Range.
Total = 100 marks
END OF PAPER