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test 3 answers - SOLUTIONS FOR MULTIPLE-CHOICE QUESTIONS...

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SOLUTIONS FOR MULTIPLE-CHOICE QUESTIONS 9.20 a. Incorrect This is allowed by GAAP b. Incorrect This is allowed by GAAP c. Incorrect This is allowed by GAAP d. Correct Although standard costs are commonly used, they must not be materially different than one of the allowed methods. 9.21 a. Incorrect Raw materials and supplies purchased are linked through the acquisition and expenditure cycle. b. Incorrect Labor and costs are linked through the payroll cycle. c. Incorrect Cost of goods sold and reduction to finished goods inventory is linked through the revenue and collection cycle. d. Correct The finance and investment cycle is not directly linked to the production cycle, although it is indirectly linked through investments in property, plant, and equipment. 9.22 a. Incorrect This is what the company plans to sell, not produce. Some of the planned sales may come from existing inventory, and some of the production may be sold in future periods. b. Incorrect These reports indicate what was actually produced. c. Correct The production plan shows what is planned to be actually produced. d. Incorrect Shows what was actually purchased during the period. 9.23 c. Correct The job cost sheets indicate the cost used in determining the value of inventory produced 9.24 a. Incorrect This is a common practice that enhances efficiency. b. Incorrect See answer a. c. Correct The weakness is an improper combination of inventory custody and record keeping responsibilities. d. Incorrect See answer a. 9.25 a. Incorrect The most meaningful analytical procedures are performed at the most disaggregated level, in this case, the product level. b. Incorrect The most meaningful analytical procedures are performed at the most disaggregated level, in this case, the product level. c. Correct This is the most disaggregated level of the choices given. d. Incorrect The most meaningful analytical procedures are performed at the most disaggregated level, in this case, the product level. 9.26 a. Incorrect This might detect the theft but wouldn’t prevent it. b. Incorrect This wouldn’t necessarily detect the theft. c. Correct The separate space facilitates security, and the frequent counts enable company personnel to detect shortages in a timely manner. 9.27 a. Incorrect This step would not provide evidence whether the items are owned. b. Incorrect This step would not detect obsolescence. c. Incorrect Ensuring physical presence would require tracing from the listing to inventory tickets. d. Correct If the sample is from the inventory in the physical location, the tracing has the objective of auditing the completeness of the final inventory schedule. 9.28 a. Incorrect This would make the count lower than the perpetual records.
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b. Correct Unrecorded credit memos means that the returned inventory is not in the perpetual records, thus the recorded amount will be smaller than the amount on hand.
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