11. Company A had an exclusive contract to provide material to Company B for three years. Company A was to provide $750,000 of raw material each year. After one year, Company B canceled the contract. Company A sued Company B for breach of contract and won the case. Company A hired a forensic accountant to compute the damages. Company As profit margin was 35% and net income averaged 15% of sales. What was the amount of damages that Company A would claim?
$112,500 $225,000 $262,500 $1,500,000
| 12. What must a plaintiff prove in order to win damages? | Tort and defendant liability Breach of contract and proof of damages Defendant liability and breach of contract Defendant liability and proof of damages |
| 13. A forensic accountant is working on an insurance case involving company losses sustained in a fire. The forensic accountant has determined that if the accident had not happened, the company would have earned $525,000 more in revenue. What loss approach is the forensic accountant using? | Income approach Net revenue approach Yardstick method Incremental revenue method |
| 14. A forensic accountant is working on a money laundering case. Which of the following is a step in investigating money laundering? | Restraining orders will be used early in the investigation in order to make sure the suspect does not sell the assets Graphics software will be used to document the suspects activities Once illegal funds have been combined with legal funds, the forensic accountants work is over The suspects banks will not be contacted so that the investigation remains confidential |
| 15. A forensic accountant is computing commerical damages for a loss sustained by a client. What is the accepted method in use to calculate the loss? | Calculate incremental revenues and expenses Determine opportunity costs involving revenues and expenses Ignore sunk costs as they relate to expenses Incorporate the fair value of assets |
| 16. An employee who was fired by a company successfully won a wrongful discharge lawsuit against the company, the court awarded the employee $25,000 in back pay, $50,000 for pain and suffering, and $5,000 for special damages. What was the amount of restitution damages? | $5,000 $25,000 $50,000 $80,000 |
| 17. A forensic accountant is working on a fraud case for a client. This client has a 15% profit margin. The fraud loss caused by the employee was $300,000. Administrative expenses are $50,000. What additional revenue does the client have to generate in order to recover from the fraud? | $45,000 $300,000 $1,200,000 $2,000,000 |
| 18. A forensic accountant is determining the incremental costs involved in a fraud case at a manufacturing company. In determining the cost behavior of variable costs, which method would the forensic accountant employ? | Present value method Flexible cost method Benchmark method High-low method |
| 19. Which method of calculating commercial damages uses estimates of future earnings over a specific length of time? | Internal rate of return method Incremental earnings method Payback period method Cash flow method |
| 20. Which item will not be part of a valuation report? Tort and defendant liability Breach of contract and proof of damages Defendant liability and breach of contract Defendant liability and proof of damages | |
