Chapter 19 - Chapter 19 Multiple-Choice Questions 1. easy a...

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Chapter 19 Multiple-Choice Questions 1. easy Which of the following accounts is associated with a transaction cycle other than acquisition and payment? a a. Common stock. b. Property, plant and equipment. c. Accrued property taxes. d. Income tax expense. 2. Property, plant, and equipment are assets that: easy a. have expected lives of more than one year. d b. are used in the business. c. are not acquired for resale. d. meet all of the requirements stated above. 3. easy Which of the following expenses is not typically evaluated as part of the audit of the acquisition and payment cycle? c a. Depreciation expense. b. Insurance expense. c. Bad debts expense. d. Property tax expense. 4. Debits to manufacturing equipment arise from which cycle(s)? easy a. Sales and collection c b. Payroll c. Acquisition and disbursement d. Inventory and warehousing 5. easy It should ordinarily be unnecessary to examine supporting documentation for each addition to property, plant, and equipment, but it is customary to verify: d a. all large transactions. b. all unusual transactions. c. a representative sample of typical additions. d. all three of the above. 6. The auditor must know the client’s capitalization policies to determine whether acquisitions are: easy d Recorded in accordance with GAAP Treated consistently with those of the preceding year Necessary a. Yes Yes Yes b. Yes No No c. No No No d. Yes Yes No 7. To be capitalized as part of property, plant and equipment, assets must: easy a. have expected useful lives of more than one year. d b. not be acquired for resale. c. be useful in multiple productive capacities within the organization. d. a and b, but not c. 8. The primary accounting record for manufacturing equipment and other fixed assets is the: Arens/Elder/Beasley
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easy a. depreciation ledger. b b. fixed asset master file. c. asset inventory. d. equipment roster. 9. Which of the following statements about the audit of fixed assets is not correct? easy b a. The primary accounting record for manufacturing equipment and other property, plant and equipment is generally a fixed asset master file. b. Manufacturing equipment and current assets are normally audited in the same fashion regardless of the activity within a particular account. c. The emphasis on auditing fixed assets is on verification of current-period acquisitions. d. Failure to record the acquisition of a fixed asset affects the income statement until the assets is fully depreciated. 10. easy During the audit of prepaid insurance, the auditor should keep in mind that the amount in insurance expense is based on: d a. the beginning balance in prepaid insurance. b. the payment of premiums during the year.
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Chapter 19 - Chapter 19 Multiple-Choice Questions 1. easy a...

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