Multiple choice Questions:
1) One of the six steps involved in performing analytical procedures includes the following:
A) Analyze data and identify significant differences.
B) Understand the relationship between materiality and audit evidence.
C) Understand the role of analytical procedures in planning and performing the audit.
D) Perform the calculations using industry data.
2) Elvis Company purchases inventory for $70,000 on March 19, 2008, and sells it to Graceland Corporation for $95,000 on May 14, 2008. Graceland still holds the inventory on December 31, 2008, and determines that its market value (replacement cost) is $82,000 at that time. Graceland writes the inventory down from $95,000 to its lower market value of $82,000 at the end of the year. Elvis owns 75% of Graceland. Based on this information, what amount of inventory should be eliminated in the consolidation workpaper for 2008?
A) $12,000
B) $14,000
C) $13,000
D) $15,000
3) Which one of the following analytical procedures may indicate possible inventory obsolescence problems when ratios are large?
A) Inventory growth to cost of sales growth
B) Finished goods produced to raw material used
C) Finished goods produced to direct labor
D) Inventory turnover
4) Joshua owns 100% of Steeler Corporation's stock. Joshua's basis in the stock is $8,000. Steeler Corporation has E&P of $40,000. If Steeler Corporation redeems 60% of Joshua's stock for $50,000, Joshua must report dividend income of
A) $8,000.00
B) $0.00
C) $50,000.00
D) $40,000.00
5)
An effective accounting system should identify and record only the valid transaction of the entity that occurred in the current period, which relates to the
A) rights and obligations assertion
B) valuation or allocation assertion
C) presentation and disclosure assertion
D) existence or occurrence assertion