The correct answer for each question is indicated by a

1 CORRECT

Inventory should be recorded when A) B) C) The company has title to it. When it is received. When the related revenue is recognized.

When it is shipped from the vendor. D) Feedback: Correct. Inventory is recorded when title is obtained.

2 INCORRECT

The overall production authorization starts with a A) B) C) Purchase order. Production plan. Sales forecast.

Bill of materials. D) Feedback: Incorrect. Goods would be ordered after production is authorized.

3 INCORRECT

Which of the following is not recognized by GAAP as appropriate for determining inventory cost? A) B) C) FIFO LIFO Weighted average

Standard costs. D) Feedback: Incorrect. This is recognized by GAAP.

4 CORRECT

The source of authorization for preparation of materials requisitions is A) B) C) Bill of materials. Purchase order. Production plan.

Sales forecast. D) Feedback: Correct. This determines what materials will be needed in production.

5 INCORRECT

Comparing material usage reports to raw material stores issue slips is a control to help insure which ASB transaction assertion?

A) B) C)

Occurrence. Completeness. Rights and obligations.

Valuation or accuracy. D) Feedback: Correct. Comparing the report to source documents verifies occurrence of the issues.

6 INCORRECT

Responsibility for the physical inventory count lies with the A) B) C) Vendor. Auditor. Client.

Inventory specialist. D) Feedback: Incorrect. The client is responsible for the count.

7 INCORRECT

Client's inventory instructions should include all the following except A) B) C) Names of client personnel responsible for the count. Instructions for recording accurate descriptions. Instructions for auditors' test counts.

Plans for controlling movement of goods. D) Feedback: Incorrect. This should be in the instructions.

8 INCORRECT

Tracing a test count to the inventory compilations provides evidence for which ASB balance assertion? A) B) C) Existence. Completeness. Valuation.

Presentation and disclosure. D) Feedback: Incorrect. Tracing from the compilation to the count would provide evidence for existence.

9 CORRECT

Hiring and firing employees is a function that should be performed by A) Human Resources The employee's supervisor.

B) C) Payroll accounting.

Cost accounting. D) Feedback: Correct. The supervisor may recommend hiring or firing, but Human Resources should handle the actual transaction to prevent paying unauthorized or fictitious employees.

10 CORRECT

The record where the employee's income taxes payable are recorded is the A) B) C) Payroll register. Labor cost analysis. Clearing account.

Personnel files. D) Feedback: Correct. The suspense account is debited for the gross payroll, and taxes and wages payable are credited.