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Topic: QUESTION OF THE DAY - MCQ’S ALL SECTIONS (

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AndrewCPA
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Posted: 25 Jan 2011 at 13:06 \| IP Logged

Correct Answer: D

Explanation: A firm's target or optimal capital structure is not consistent with maximum earnings per share. A firm's target or optimal capital structure minimizes the cost of capital, not the overall maximum earnings per share. A firm's target or optimal capital structure is not consistent with minimum cost of debt. A firm's target or optimal capital structure is concerned with minimizing the cost of debt and equity, not just debt. A firm's target or optimal capital structure is not consistent with minimum risk because the optimum capital structure minimizes cost, not risk.

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AndrewCPA
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Posted: 25 Jan 2011 at 19:40 \| IP Logged

Today’s question: AUD

When there is a significant change in accounting principle, an auditor's report should refer to the lack of consistency in:

A) The scope paragraph

B) An explanatory paragraph between the second paragraph and the opinion paragraph

C) The opinion paragraph

D) An explanatory paragraph following the opinion paragraph

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AndrewCPA
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Posted: 26 Jan 2011 at 13:18 \| IP Logged

Correct Answer: D

Explanation: When there has been a change in accounting principles or in the method of their application, the auditor should refer to the change in an explanatory paragraph (following the opinion paragraph) which identifies the nature of the change and refers the reader to the note in the financial statements that discusses the change. The other paragraphs in the auditor's report are not affected.

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AndrewCPA
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Posted: 26 Jan 2011 at 18:20 \| IP Logged

Today’s question: REG

On March 7, 2008, Wax Corp. contracted with Noll Wholesalers to supply Noll with specific electrical parts. Delivery was called for on June 3, 2008. On May 2, 2008, Wax notified Noll that it would not perform and that Noll should look elsewhere. Wax had received a larger and more lucrative contract on April 21, 2008, and its capacity was such that it could not fulfill both orders. The facts _________________

A) will prevent Wax from retracting its repudiation of the Noll contract.

B) are not sufficient to clearly establish an anticipatory repudiation.

C) will permit Noll to sue only after June 3, 2008, the latest performance date.

D) will permit Noll to sue immediately after May 2, 2008, even though the performance called for under the contract was not due until June 3, 2008.

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Andrew Lee, CPA
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AndrewCPA
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Posted: 27 Jan 2011 at 12:33 \| IP Logged

Correct Answer: D

Explanation: An anticipatory repudiation occurs when one side states they will not perform before the time of performance. The injured party can sue immediately or wait until the time of performance and then sue. Wax told Noll prior to the time of performance that Wax would not perform. Thus, Noll can sue immediately and need not wait until June 3. Wax may retract its repudiation as long as Noll hasn't canceled the contract or materially changed position.

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