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cut-off testing of purchase transactions

auditing depreciation expense

24-36

Cut-off Testing of Purchase Transactions For each of the following three scenarios, state whether the inventory acquired by the client should be included (YES) or excluded (NO) in it's 12/31/17 Inventory G/L balance. 24. Apple Ine, received 200 units of computer keyboards, FOB shipping point, costing S10 each on January 24, 2018. The goods were shipped on December 21, 2017 25. Red's River Tours ordered 5 kayaks on December 23, 2017 at $500 per kayak and FOB destination point terms. The kayaks were received on January 30, 2018 26. Wendy's Wine Shop received 100 cases of wine on January 10, 2018 at a unit costs of $100 per case and with FOB shipping point terms. The goods were shipped to Wendy's Wine Shop from the wineries on January 3, 2018. Auditing Depreciation Expense: ANSWER THE FOLLOWING TWO QUESTIONS ON THE BOTTOM OF THE ANSWER SHEET ABC, Inc. purchased a machine for $11,000 that, in reality, would last 10 years and be sold for $1,000 at the end of its life. ABC, Inc.'s management was concerned about meeting analysts' E.P.S. forecast so they opportunistically assumed that the salvage value would be $4,000 and it would operate for 20 years. 27. Assuming that management adopted its opportunistic assumptions when computing the asset's depreciation expense, what would the financial statement implications (ie, misstated accounts) over the asset's actual life? 28. What would be the most effective way for the auditor to argue that the depreciation assumptions by the client were unrealistic during the first year in which the asset was depreciated? Match the following terms with the corresponding description by placing the letter in the blank beside appropriate term: 29. Approved Purchase Order Vendor Invoice 30. A. Contains a listing of amounts owed to vendors and service providers that are for services and goods purchased on credit B. External evidence used to verify the value and existence of balances in the A/P master file 31. Voucher Packet C. Used a sample source for testing internal controls in the acquisition and expenditure cycle 32._ Receiving Report D. Internal document used to notify the Purchasing Department that additional inventory units need to be acquired 33. Purchase Requisition E. Helps ensure that acquisitions are made for legitimate items that are consistent with the purpose of the business 34. Purchase Journal F. Assembles various documents from the acquisition cycle that are examined for accuracy before recording an asset and related accounts payable balance 35. A/P Master File G. External document that Represents amounts owed to vendors for a specific credit transaction 36. Vendor Statement H. Internal document used to record the arrival of goods at which point the client becomes owners of the goods

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