Deck 14: Other Business Processes

Question 1

The conversion process involves three common resources: material, direct labor and overhead. Which of the following is an example of material in that context?

A)Paper used to create a textbook
B)Tires used to manufacture a truck.
C)Both A and B.
D)Neither A nor B.

Answer 1

C

Question 2

CGI Corporation requires new employees to establish their payroll withholding information for its human resources process; CGI reports year-end information for tax purposes electronically to its employees. Which of the following pieces of information is both an input for the former and an output of the latter?

A)Employee identification data
B)Employer identification data
C)Hours worked
D)Total amount paid

Answer 2

A

Question 3

The purpose of the conversion process is to transform material, labor and overhead into a finished product. Which system would an organization that manufactures unique pieces of jewelry use for that purpose?

A)Job order
B)Process
C)Hybrid
D)Some other system

Answer 3

A

Question 4

Which of the following internal controls could be applied to processing payroll transactions in the human resources process?

A)Outsourcing
B)Use of information technology
C)Both A and B
D)Neither A nor B

Question 5

The purpose of the conversion process is to transform material, labor and overhead into a finished product. To accomplish that purpose, organizations can use one of three systems. Which of the following pairs includes examples of products that would use different systems?

A)Decks of playing cards, compact discs
B)Compact discs, made-to-order smoothies
C)Custom-built homes, original works of art
D)Plastic bottles, aluminum cans

Question 6

The purpose of an organization's conversion process is:

A)To transform raw materials into finished products.
B)To determine if the company should use process costing.
C)Both A and B.
D)Neither A nor B.

Question 7

Accounting information systems have five basic elements. Which of the following is an output of the human resources process?

A)A payroll check
B)A written performance evaluation
C)Both A and B
D)Neither A nor B

Question 8

Which of the following internal controls could be applied to the creation of Form W-2 in the human resources process?

A)Use of information technology
B)Internal audits
C)Both A and B
D)Neither A nor B

Question 9

The purpose of the conversion process is to transform material, labor and overhead into a finished product. Which system would an organization that manufactures decks of playing cards use for that purpose?

A)Job order
B)Process
C)Hybrid
D)Some other system

Question 10

Accounting information systems have five basic elements. Which of the following is an internal control associated with the human resources process?

A)Adequate supervision
B)Procedures manuals
C)Both A and B
D)Neither A nor B

Question 11

The purpose of the conversion process is to transform material, labor and overhead into a finished product. To accomplish that purpose, organizations can use one of three systems. Which of the following pairs includes examples of products that would use the same system?

A)Decks of playing cards, compact discs
B)Compact discs, made-to-order smoothies
C)Decks of playing cards, made-to-order smoothies
D)All of the pairs would use the same system.

Question 12

CGI Corporation uses a process costing system to manufacture its product. Which of the following internal controls should CGI use to ensure its human resources employees correctly apply federal laws related to employee performance evaluation?

A)Adequate supervision
B)Periodic training
C)Use of information technology
D)None of the above; since CGI uses a process costing system, it is not likely to have a human resources process.

Question 13

The conversion process involves three common resources: material, direct labor and overhead. Which of the following is an example of overhead in that context?

A)Depreciation on factory equipment
B)Chief financial officer's salary
C)Both A and B.
D)Neither A nor B.

Question 14

CGI Corporation uses a process costing system to manufacture its product. As part of the processing activities in its human resource process, which of the following would CGI use to record payroll costs of its factory workers?

A)Debit work in process, credit wages payable
B)Debit wages expense, credit wages payable
C)Debit wages payable, credit cash
D)Debit wages expense, credit retained earnings

Question 15

The purpose of the conversion process is to transform material, labor and overhead into a finished product. To accomplish that purpose, organizations can use one of three systems. Which of the following best pairs a system with products that would be appropriately manufactured using it?

A)Process: decks of playing cards, compact discs
B)Job: plastic bottles, aluminum cans
C)Process: custom-built homes, original works of art
D)Hybrid: decks of playing cards, made-to-order smoothies

Question 16

Accounting information systems have five basic elements. Which of the following would be associated with the human resource process?

A)Payroll transactions
B)Performance evaluations
C)Both A and B
D)Neither A nor B

Question 17

The purpose of the conversion process is to transform raw materials into finished products with:

A)Direct labor.
B)Overhead.
C)Both A and B.
D)Neither A nor B.

Question 18

The purpose of the conversion process is to transform material, labor and overhead into a finished product. To accomplish that purpose, organizations can use one of three systems. Which of the following pairs would be accounted for using a job costing system?

A)Decks of playing cards, compact discs
B)Plastic bottles, aluminum cans
C)Custom-built homes, original works of art
D)Decks of playing cards, made-to-order smoothies

Question 19

Accounting information systems have five generic elements. Which of the following includes two examples of the same element?

A)Form W-4, Form W-2
B)Form W-2, Form 1099
C)Form W-4, Form 1099
D)All of the above

Question 20

Accounting information systems have five basic elements. Within the context of the human resource process, "inputs" include:

A)Job applications.
B)Payroll-related data.
C)Both A and B.
D)Neither A nor B.

Question 21

On May 1, CGI Corporation declared cash dividends on its common stock. The divided was payable on May 15 to shareholders of record on May 5. Which of the following entries will CGI make on May 5 in its accounting information system?

A)Debit retained earnings, credit dividends payable
B)Debit dividends payable, credit cash
C)Debit retained earnings, credit cash
D)None of the above

Question 22

Which of the following transactions is commonly associated with the financing process?

A)Issuance of equity securities
B)Issuance of debt securities
C)Both A and B
D)Neither A nor B

Question 23

Which of the following best pairs a financing process risk with an internal control that will address the risk?

A)Poorly trained employees in the finance department, required annual training
B)Inability to make required payments on long-term debt, properly developed cash budget
C)Both A and B
D)Neither A nor B

Question 24

One of the transactions commonly associated with the financing process is the distribution of dividends. Information needed to process that transaction includes:

A)Shareholder identification data.
B)Type of dividend.
C)Both A and B.
D)Neither A nor B.

Question 25

CGI Corporation had 10,000 shares of $2 par common stock outstanding; the shares had been issued at $5 per share. At the end of March 2011, CGI declared a $3 cash dividend per share when the market price of the stock was $8 per share. Which of the following statements is most true?

A)The $3 cash dividend per share is determined by analyzing the difference between the issuance price and the market value of the stock.
B)The $3 cash dividend per share is determined by analyzing the difference between the issuance price and the par value of the stock.
C)CGI can process the dividend payment using only the information specified above.
D)None of the above statements is true.

Question 26

One of the transactions commonly associated with the financing process is the issuance of long-term debt. Which of the following pieces of information is least likely to be required to process such a transaction?

A)Coupon interest rate
B)Market interest rate
C)Lender identification data
D)Shareholder approval

Question 27

As part of the financing business process, corporations may need to account for an initial public offering. How many different forms of a prospectus are parts of the IPO based on the seven steps listed in the text?

A)Two
B)Three
C)Four
D)Some other number

Question 28

Factory workers at OMI Corporation are scheduled to work forty hours per week, but frequently work forty-five hours per week, leading to increased payroll costs for OMI. Which of the following statements is most true?

A)OMI is exposed to liquidity risk.
B)OMI should consider expanding its workforce as a form of internal control.
C)Both A and B are true.
D)Neither A nor B is true.

Question 29

CGI Corporation had 10,000 shares of $2 par common stock outstanding; the shares had been issued at $5 per share. At the end of March 2011, CGI declared a $3 cash dividend per share when the market price of the stock was $8 per share. After processing the dividend transaction, the balance in CGI's common stock account will be:

A)$20,000.
B)$30,000.
C)$50,000.
D)Some other amount.

Question 30

Which of the following best pairs a financing process risk with an internal control that will address the risk?

A)Sending a dividend check to the wrong shareholder, electronic database
B)Falling stock prices due to profit restatements, independent audits
C)Failure to receive IPO approval from the SEC, separation of duties
D)Inability to pay dividends because of a cash shortage, corporate line of credit

Question 31

The balance sheet of BYA Corporation reported bonds payable with a book value of $500,000 and total paid-in capital of $300,000. The balance sheet of LCA Corporation reported bonds payable with a book value of $600,000 and total paid-in capital of $250,000. Which of the following statements is most true?

A)BYA's exposure to liquidity risk is greater than LCA's exposure.
B)BYA's exposure to liquidity risk is less than LCA's exposure.
C)BYA and LCA have equal exposure to liquidity risk.
D)None of the above statements is true.

Question 32

Transactions associated with the financing process include all of the following except:

A)Purchase of treasury shares.
B)Issuance of equity securities.
C)Payroll for finance department employees.
D)Periodic repayments of debt.

Question 33

In manufacturing units of Product A27, Mike is supposed to use three pounds of raw material for each unit. But, due to poor quality in a recent batch of raw materials, he used an average of four pounds. Which of the following internal controls would prevent the problem in the future?

A)Closer inspection of deliveries
B)More frequent performance evaluations for Mike
C)Both A and B
D)Neither A nor B

Question 34

Separation of duties can promote strong internal control in the conversion process. Which three duties should be separated?

A)Physical custody, authorization and recordkeeping
B)Direct material, labor and overhead processing
C)Assets, liabilities and equity
D)Job order, process and hybrid

Question 35

In manufacturing units of Product A27, Mike is supposed to use three pounds of raw material for each unit. But, due to poor quality in a recent batch of raw materials, he used an average of four pounds. Mike's company is therefore exposed to ___ risk.

A)Hazard
B)Human error
C)Credit
D)Market

Question 36

CGI Corporation was preparing to issue long-term debt securities. They planned to pay 10% interest semi-annually, although investments of similar risk were paying 12% at the time. Which of the following terms best describes the 12% interest rate?

A)Coupon
B)Market
C)Relevant
D)Current

Question 37

Within the context of the financing process, separation of duties means:

A)The accounting department cannot issue dividend checks without the approval of the board of directors.
B)An accountant who prepares dividend checks cannot also prepare checks for repayment of long-term debt.
C)Both A and B are true.
D)Neither A nor B is true.

Question 38

On May 1, CGI Corporation declared cash dividends on its common stock. The divided was payable on May 15 to shareholders of record on May 5. On which date will CGI record a debit to retained earnings and a credit to cash?

A)May 1
B)May 5
C)May 15
D)None of the above

Question 39

DRH Corporation's conversion process is highly automated; computers and other forms of information technology are used to prepare raw materials for production and to move partially completed units through the factory. Which of the following statements is most true?

A)DRH is not exposed to human error risk.
B)DRH should use regular equipment inspections as a form of internal control.
C)Both A and B are true.
D)Neither A nor B is true.

Question 40

Adequate documentation can promote strong internal control in the conversion process. All of the following documents are used in the conversion process except:

A)Materials requisition.
B)Labor time ticket.
C)Materials move ticket.
D)Form W-2.

Question 41

Consider the following short case as you respond to the next question: When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to look for a replacement. The recruitment firm prepared several job announcements, then presented them to the board of directors. The board of directors approved one of the job announcements; the recruitment firm used it to advertise the position on the Internet and in relevant newspapers and professional publications. After receiving several applications, the recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of directors, with the assistance of the recruitment firm, went through three rounds of interviews, narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The board of directors then made the final choice for a new CEO.A systems flowchart of the case is likely to be divided into how many columns?

A)One, since all activities are associated with the human resource process.
B)Two or three, one of which may be "applicants"
C)Four or five, one of which would be "NTL shareholders"
D)More than five, since there were more than five applicants.

Question 42

Which flowcharting symbol would be used to represent each independent item below? a. Begin manufacturing process b. Complete initial public offering c. Electronic applicant files d. Evaluate product quality e. Issue debt? f. Issue Form W-2 g. Job cost sheet h. Manually assemble raw materials i. Manually file Form W-4 j. Payroll check

Question 43

Fill in the blanks below for common transactions processed in the conversion, human resource and financing business process.
A. __________________________________ b. __________________________________ c. __________________________________ d. __________________________________ e. __________________________________ f. __________________________________
A. raw material inventoryb. cost of goods soldc. salesd. retained earningse. cashf. wages expense

Question 44

NCD Corporation pays annual dividends to its shareholders. A REA model of that process is likely to include which of the following as internal agents?

A)Shareholders
B)Board of directors
C)Both A and B
D)Neither A nor B

Question 45

Consider the following short case as you respond to the next question: When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to look for a replacement. The recruitment firm prepared several job announcements, then presented them to the board of directors. The board of directors approved one of the job announcements; the recruitment firm used it to advertise the position on the Internet and in relevant newspapers and professional publications. After receiving several applications, the recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of directors, with the assistance of the recruitment firm, went through three rounds of interviews, narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The board of directors then made the final choice for a new CEO.A Level Zero data flow diagram of the case would include circles labeled with all of the following except:

A)Applicant database.
B)Hire recruitment firm.
C)Interview applicants.
D)All of the above would be labels for circles in the DFD.

Question 46

A systems flowchart of the financing process is likely to include which of the following column headings?

A)Debt and equity
B)Cash dividends and stock dividends
C)Both A and B
D)Neither A nor B

Question 47

Consider the following short case as you respond to the next question: When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to look for a replacement. The recruitment firm prepared several job announcements, then presented them to the board of directors. The board of directors approved one of the job announcements; the recruitment firm used it to advertise the position on the Internet and in relevant newspapers and professional publications. After receiving several applications, the recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of directors, with the assistance of the recruitment firm, went through three rounds of interviews, narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The board of directors then made the final choice for a new CEO.How would "shareholder presentation" be represented in a leveled set of DFDs of the case?

A)With a circle
B)With a rectangle
C)With a set of parallel lines
D)None of the above

Question 48

Create REA model cardinalities for each of the following independent situations. a. A department manager conducts weekly meetings with his staff. b. Each factory worker is required to attend group classes on safety in the workplace. c. Each employee in the finance department is evaluated annually by his / her immediate supervisor. d. A company's board of directors assembles a committee to investigate the IPO process. e. One employee in the human resources department screens application materials for prospective new employees.

Question 49

Consider the following set of flowcharting symbols along with the case as you respond to the next question: When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to look for a replacement. The recruitment firm prepared several job announcements, then presented them to the board of directors. The board of directors approved one of the job announcements; the recruitment firm used it to advertise the position on the Internet and in relevant newspapers and professional publications. After receiving several applications, the recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of directors, with the assistance of the recruitment firm, went through three rounds of interviews, narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The board of directors then made the final choice for a new CEO. If the "recruiting firm" column of a systems flowchart includes "receive applications," it could be depicted with any of the following except:

A)Symbol A
B)Symbol F
C)Symbol G
D)Symbol I

Question 50

Consider the following set of flowcharting symbols along with the case as you respond to the next question: When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to look for a replacement. The recruitment firm prepared several job announcements, then presented them to the board of directors. The board of directors approved one of the job announcements; the recruitment firm used it to advertise the position on the Internet and in relevant newspapers and professional publications. After receiving several applications, the recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of directors, with the assistance of the recruitment firm, went through three rounds of interviews, narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The board of directors then made the final choice for a new CEO. A systems flowchart of the case would represent the final decision of the board of directors with:

A)Symbol B or Symbol F.
B)Symbol B or Symbol G.
C)Symbol B or Symbol I.
D)Symbol G or Symbol I.

Question 51

Transactions commonly associated with the financing process include:
(a) issuance of capital stock for cash,
(b) declaration of cash dividends and
(c) issuance of long-term debt. In your own words, explain how each of those transactions affects each section of a corporate balance sheet. Focus your explanation at a conceptual level; do not explain the effects by indicating journal entries.

Question 52

Consider the following short case as you respond to the next question: When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to look for a replacement. The recruitment firm prepared several job announcements, then presented them to the board of directors. The board of directors approved one of the job announcements; the recruitment firm used it to advertise the position on the Internet and in relevant newspapers and professional publications. After receiving several applications, the recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of directors, with the assistance of the recruitment firm, went through three rounds of interviews, narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The board of directors then made the final choice for a new CEO.In a REA model of the case, the cardinalities between "applicant" and "interview applicant" would be:

A)Interview applicant (0,*) ---- (1,1) Applicant
B)Interview applicant (1,1) ---- (0,*) Applicant
C)Interview applicant (1,1) ---- (1,1) Applicant
D)Interview applicant (0,*) ---- (0,*) Applicant

Question 53

Consider the following set of flowcharting symbols along with the case as you respond to the next question: When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to look for a replacement. The recruitment firm prepared several job announcements, then presented them to the board of directors. The board of directors approved one of the job announcements; the recruitment firm used it to advertise the position on the Internet and in relevant newspapers and professional publications. After receiving several applications, the recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of directors, with the assistance of the recruitment firm, went through three rounds of interviews, narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The board of directors then made the final choice for a new CEO. If the "recruiting firm" column of a systems flowchart includes a predefined process labeled "receive applications," it is likely to be connected to:

A)Symbol H or Symbol J
B)Symbol H or Symbol I
C)Symbol I or Symbol J
D)Symbol A

Question 54

The text outlined seven steps companies should complete for an initial public offering. Complete the risk / control matrix below based on the indicated risks associated with an IPO.

Question 55

Some payroll forms include employee identification data. List three such forms commonly associated with the human resource business process.

Question 56

Indicate the effect (increase, decrease or no change) the indicated transaction would have on the specified ratio in each of the following independent situations.
A. decreaseb. increasec. decreased. increasee. no effect

Question 57

In a format specified by your instructor, document the following business process. If the specified format is a data flow diagram, create the Level Zero diagram only. When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to look for a replacement. The recruitment firm prepared several job announcements, then presented them to the board of directors. The board of directors approved one of the job announcements; the recruitment firm used it to advertise the position on the Internet and in relevant newspapers and professional publications. After receiving several applications, the recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of directors, with the assistance of the recruitment firm, went through three rounds of interviews, narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The board of directors then made the final choice for a new CEO.

Question 58

Olivia was a finalist for the CEO position at NTL Corporation. She wanted to focus her presentation on improving internal control in the company's financing process. Use the five elements of the COSO internal control framework to outline the main points of Olivia's presentation.

Question 59

The text discussed five business processes: sales / collection, acquisition / payment, conversion, financing and human resources. List and discuss two ways the processes are similar; list and discuss two ways they are different from one another.

Question 60

Consider the following set of flowcharting symbols along with the case as you respond to the next question: When the CEO of NTL Corporation resigned, the board of directors hired a recruitment firm to look for a replacement. The recruitment firm prepared several job announcements, then presented them to the board of directors. The board of directors approved one of the job announcements; the recruitment firm used it to advertise the position on the Internet and in relevant newspapers and professional publications. After receiving several applications, the recruitment firm selected a pool of ten to pass on to NTL's board of directors. The board of directors, with the assistance of the recruitment firm, went through three rounds of interviews, narrowing the pool from ten to three. Each of the three finalists prepared a presentation on the strategic future of NTL and delivered the presentation at a meeting of NTL shareholders. The board of directors then made the final choice for a new CEO. Which symbol is most likely to be used in a systems flowchart to represent the board of directors narrowing the pool?

A)Symbol B
B)Symbol F
C)Symbol G
D)Symbol I

Question 61

Create a narrative description of the REA model shown below.