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Expenditure Cycle

REQUIRED: Indicate the best answer choice for each of the following.

1.The expenditure cycle would include:
a. the purchase of another entity's stocks.
b. the purchase of treasury stock.
c. payroll transactions.
d. payments by check.
e. the purchase of another entity's bonds.

2.The specific audit objective that all purchases and cash disbursements made during the period were recorded relates to:
a. rights and obligations.
b. completeness.
c. existence or occurrence.
d. presentation and disclosure.
e. valuation or allocation.

3.The specific audit objective that the entity is liable for the payables resulting from the recorded purchase transactions relates to:
a. rights and obligations.
b. completeness.
c. existence or occurrence.
d. presentation and disclosure.
e. valuation or allocation.

4.The specific audit objective that all purchase transactions and cash disbursements are valued using GAAP and correctly journalized, summarized, and posted relates to:
a. rights and obligations.
b. completeness.
c. existence or occurrence.
d. presentation and disclosure.
e. valuation or allocation.

5.The specific audit objective that recorded purchases represent goods, services, and productive assets received during the period relates to:
a. rights and obligations.
b. completeness.
c. existence or occurrence.
d. presentation and disclosure.
e. valuation or allocation.

6.The specific objective accounts payable are legal obligations of the entity at the balance sheet date is derived from the:
a. existence or occurrence.
b. completeness.
c. rights and obligations.
d. presentation and disclosure.
e. valuation or allocation.

7.Recent trends in accounts payable include all of the following except:
a. increasing use of electronic invoicing.
b. improving efficiency, timeliness, and processes.
c. decreased use of imaging.
d. installing electronic payments.
e. cleaning up vendor files.

8.In assessing the risk of material misstatement the vendor who often offers price concessions or terms such that goods do not have to be paid for until the manufactured product is resold is the:
a. manufacturing of construction machinery and equipment.
b. computer manufacturing.
c. retail grocer.
d. hotel.
e. local school district.

9. Factors that may contribute to misstatements in the expenditure cycle assertions include all of the following except:
a. there is usually a high volume of transactions.
b. unauthorized purchases and cash disbursements may be made.
c. purchased assets may be appropriated.
d. there may be duplicate payment of vendor¿s invoices.
e. contentious accounting issues may arise concerning whether a cost should be capitalized or expensed.

10.Cost of Goods Sold divided by Accounts Receivable is the formula for:
a. accounts payable turn days.
b. cost of goods sold to accounts payable.
c. payables as a percentage of total assets.
d. current ratio.
e. quick ratio.

Solution Preview

1.The expenditure cycle would include:
a. the purchase of another entity's stocks.
b. the purchase of treasury stock.
c. payroll transactions.
d. payments by check.
e. the purchase of another entity's bonds.
c. payroll transactions; This is the only transaction that is an expense.

2.The specific audit objective that all purchases and cash disbursements made during the period were recorded relates to:
a. rights and obligations.
b. completeness.
c. existence or occurrence.
d. presentation and disclosure.
e. valuation or allocation.
b. completeness. "all purchases and cash disbursements made during the period were recorded"

3.The specific audit objective that the entity is liable for the payables resulting from the recorded purchase transactions relates to:
a. rights and obligations.
b. completeness.
c. existence or occurrence.
d. ...

Solution Summary

This posting answers questions relating to expenditure cycle. . It also explains why these answers are most appropriate.

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