Chapter 8 Solutions

Chapter 8 Solutions - SOLUTIONS FOR MULTIPLE-CHOICE...

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SOLUTIONS FOR MULTIPLE-CHOICE QUESTIONS 8.23 a. Incorrect Cash disbursements are an important part of the cycle b. Incorrect Although similar to sales because they are shipped out, purchase returns are considered part of the Acquisition and Expenditure cycle because they affect accounts payable. c. Correct Although similar to purchases because they require a receiving report, sales returns are considered part of the Revenue and Collection cycle because they affect accounts receivable. d. Incorrect Prepaid Insurance is one of the many accounts in the Acquisition and Expenditure Cycle. 8.24 a. Correct Cost of Goods Sold should be matched with Sales by using inventory to record cost of goods not yet sold. b. Incorrect Research and Development is a period expense that is recorded as incurred. c. Incorrect Depreciation is normally also a period expense, except in the unusual situation where units-of-production depreciation is used. d. Incorrect Sales are recorded when earned. 8.25 a. Incorrect overstates net income in the period of capitalization b. Incorrect overstates net income. c. Correct This has no effect on net income. It overstates cash and payables. 8.26 a. Correct The completeness assertion is very important in the audit of liabilities. b. Incorrect This would restrict a company's ability to do business. c. Incorrect Auditors are normally not concerned with who the client's vendors are. d. Incorrect Competitive bids are normally required for only large purchases.
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8.27 a. Incorrect These duties should be separated. b.
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Chapter 8 Solutions - SOLUTIONS FOR MULTIPLE-CHOICE...

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