IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 931:

  N-Air Corporation uses a joint process to produce three products: A, B, and C, all derived from one input. The company can sell these . products at the point of split-off (end of the joint process) or process them further. The joint production costs during October were $10,000. N-Air allocates joint costs to the products in proportion to the relative physical volume of output. Additional information is presented in the opposite column.

  

  Assuming that all products were sold at the split-off point during October, the gross profit from the production process would be

  A. $13,000
  B. $10,000
  C. $8,625
  D. $3,000
  D. $3,000

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  Explanation

• Question 932:

  The accounting rate of return

  A. Is synonymous with the internal rate of return.
  B. Focuses on income as opposed to cash flows.
  C. Is inconsistent with the divisional performance measure known as return on investment.
  D. Recognizes the time value of money.
  B. Focuses on income as opposed to cash flows.

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  Explanation

  The accounting rate of return (also called the unadjusted rate of return or book value rate of return) is calculated by dividing the increase in accounting net income by the required investment. Sometimes the denominator is the average investment rather than the initial investment. This method ignores the time value of money and focuses on income as opposed to cash flows.

• Question 933:

  A proposed investment is not expected to have any salvage value at the end of its 5-year life. Because of realistic depreciation practices, the net carrying amount and the salvage value are equal at the end of each year. For present value purposes, cash flows are assumed to occur at the end of each year. The company uses a 12% after-tax target rate of return.

  

  The net present value is

  A. $304,060
  B. $212,320
  C. $(70,000)
  D. $712,320
  B. $212,320

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  Explanation

• Question 934:

  Which of the following is most like an evolutionary process that causes structural change in an industry?

  A. Protection of proprietary knowledge.
  B. Barriers to entry.
  C. Innovation,
  D. Lack of buyer sophistication.
  C. Innovation,

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  Explanation

  According to Porter, the focus of the anatsis of industry evolution should be on evolutionary processes that create structural change in an industry. They operate to move an industry from its initial structure to its potential structure. The nature of that structure and the speed at which it will be achieved are junkie to be known. They depend on numerous factors that are hard to predict, such as innovations in technology, products, processes, and arketing_resources and skills of firms; favor LeorunfavoraLe random events, and judgments about investments.

• Question 935:

  Harper and her band want to put on a concert They have looked at two venues, a small one and a large one. and have compiled the blowing information:

  

  Harper owers the local music store $1 ,000 for equipment. If she intends to use the profit from the concert to pay back the debt, how many tickets must she sell?

  A. 300 small or 429 large
  B. 375 small or 429 large
  C. 375smallor500large
  D. 300 small or 500 large
  C. 375smallor500large

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  Explanation

• Question 936:

  An investor is currently holding income bonds, debentures, subordinated debentures, and first-mortgage bonds. Which of these securities traditionally is considered to have the least risk?

  A. Income bonds.
  B. Debentures.
  C. Subordinated debentures.
  D. First-mortgage bonds.
  D. First-mortgage bonds.

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  Explanation

  A mortgage bond is secured with specific fixed assets, usually real property. Thus, under the rights enumerated in the bond indenture, creditors will be able to receive payments from liquidation of the property in case of default. In a bankruptcy proceeding, these amounts are paid before any transfers are made to other creditors, including those preferences. Hence, mortgage bonds are less risky than the others listed.

• Question 937:

  A firm averages $4000 in sales per day and is paid, on an average1 within 30 days of the sale. After they receive their invoice, 55% of the customers pay by check, while the remaining 45% pay by credit card. Approximately how much would the company show in accounts receivable on its balance sheet on any given date?

  A. $4000
  B. $120.000
  C. $48,000
  D. $54000
  B. $120.000

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  Explanation

  If sales are $4000 per day, and customers pay in 30 days1 30 days of sales are outstanding, $120,000. Whether customers pay by credit card or cash, collection requires

• Question 938:

  Henderson, Inc. has purchased a new fleet of trucks to deliver its merchandise. The trucks have a useful life of 8 years and cost a total of $500.000. Henderson expects its net increase in after-tax cash flow to be $150,000 in Year 1, $175,000 in Year 2, $125,000 in Year 3, and $100,000 in each of the remaining years. Ignoring the time value of money, how long will it take Henderson to recover the amount of investment?

  A. 3. 5 years.
  B. 4. 0 years.
  C. 4. 2 years.
  D. 5 years.
  A. 3. 5 years.

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  Explanation

  The payback period for an investment, ignoring the time value of money, can be found by accumulating each year's net cash flows until the initial investment is recovered. The amount accumulated after 3 years is $450,000. Thus, 50% ofYear4 cash flows is needed to recover the initial investment. The payback period is 3. 5 years.

• Question 939:

  Tonya, Inc. has a cost of capital of 15% and is considering the acquisition of a new machine that costs $800,000 and has a useful life of 5 years. Tonya projects that earnings and cash flow will increase as follows:

  

  Interest rate factors at 15% are as follows:

  

  The net present value of this investment is

  A. $(128,000)
  B. $200,000
  C. $37,200
  D. $400,000
  C. $37,200

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  Explanation

• Question 940:

  Upmarket stretching mat reflect

  A. A search for greater profit margins
  B. A way to provide lower-priced products
  C. A middle market firm's move into the upmarket and the downmarket
  D. A way to add products within the firm's current range
  A. A search for greater profit margins

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  Explanation

  Upmarket stretching may reflect a search for growth, greater profit margins; or positioning as a full product line seller