AUD Study Group Q4 2014 - Page 47

Viewing 15 replies - 691 through 705 (of 1,961 total)
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  • #622541
    Tarheelgirl
    Member

    Heath Co.'s current ratio is 4:1. Which of the following transactions would normally increase its current ratio?

    A. Purchasing inventory on account

    B. Selling inventory on account

    C. Collecting an account receivable

    D. Purchasing machinery for cash

    FAR - 46, 79 (7/8/14)
    AUD - 56, 59, 2/23/15 3rd times a charm!
    BEC - 69, 74 Really??
    REG - April, I hope. Fingers crossed!

    #622542
    Future Ninja
    Participant

    B?

    AUD - 79 (expired) retaking July 28,2016
    FAR - 76 expiring July 31, 2016
    BEC - 85
    REG - 74,74,74,74,59,70,

    #622543
    Future Ninja
    Participant

    debit Accounts Receivable

    credit Sales

    AUD - 79 (expired) retaking July 28,2016
    FAR - 76 expiring July 31, 2016
    BEC - 85
    REG - 74,74,74,74,59,70,

    #622544
    Future Ninja
    Participant

    @tarheelgirl – is it B?

    AUD - 79 (expired) retaking July 28,2016
    FAR - 76 expiring July 31, 2016
    BEC - 85
    REG - 74,74,74,74,59,70,

    #622545
    Tarheelgirl
    Member

    B. The current ratio is computed by dividing current assets (CA) by current liabilities (CL). Thus, a current ratio of 4:1 means Heath has four times more current assets than current liabilities.

    Both inventory and accounts receivable are current assets which appear in the numerator when computing the current ratio. However, since inventory is sold on account at a price greater than its cost, current assets will increase by the sales price amount and decrease by the cost of inventory sold. Thus, selling inventory on account will increase the current ratio.

    Purchasing inventory on account increases current assets and current liabilities by the same amount. However, the absolute change is not all you need to consider. Because the current ratio is 4:1, the proportionate effect of an increase in CL will be greater than the effect of an equal increase in CA. Thus, the current ratio will decrease.

    FAR - 46, 79 (7/8/14)
    AUD - 56, 59, 2/23/15 3rd times a charm!
    BEC - 69, 74 Really??
    REG - April, I hope. Fingers crossed!

    #622546
    kappa1032
    Participant

    Great question!

    FAR - 81
    REG - 74, 87
    AUD - 88
    BEC - 88

    Finally.

    “The only guarantee for failure is to stop trying”
    ― John C. Maxwell

    #622547
    Anonymous
    Inactive

    Can someone confirm this?

    When the prior year is audited by another auditor and comparative FS are reported, you could only express an opinion on the current year. But if management was not present for the prior year and comparative FS are reported, a management representation letter is still needed for BOTH years?

    #622548
    Anonymous
    Inactive

    So only two more days left to prepare.. just started public today to boot.. gonna be a rough two days…

    Good Luck to those testing in the next few days 🙂

    #622549
    Anonymous
    Inactive

    An auditor concludes that there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time. If the entity’s disclosures concerning this matter are adequate and no other issues prevail, the audit report may include a

    Disclaimer of Opinion Qualified Opinion

    A. No No

    B. Yes No

    C. Yes Yes

    D. No Yes

    #622550
    Anonymous
    Inactive

    I would think A but believe this is a trick question so D?

    1. Which of the following statements with respect to an auditor’s report expressing an opinion on a specific item in a financial statement is correct?

    A. Materiality must be related to the specified item rather than to the financial statements taken as a whole.

    B. Such a report can only be expressed if the auditor is also engaged to audit the entire set of financial statements.

    C. The attention devoted to the specified item is usually less than it would be if the financial statements taken as a whole were being audited.

    D. The auditor who has issued an adverse opinion on the financial statements taken as a whole can never express an opinion on a specified item in these financial statements.

    #622551
    Anonymous
    Inactive

    2. Skates, an independent auditor, was engaged to perform an examination of the financial statements of Apex Incorporated 1 month after its fiscal year had ended. Although the inventory count was not observed by Skates, and accounts receivable were not confirmed by direct communication with creditors, Skates was able to gain satisfaction by applying alternative auditing procedures. Skates’ auditor’s report will probably contain

    A. An “except for” qualification.

    B. An unmodified opinion and a basis for modification paragraph.

    C. Either a qualified opinion or a disclaimer of opinion.

    D. A standard unmodified opinion.

    #622552
    mariam almas
    Participant

    Is it B for the first Q ??

    AUD: 81 (Done)
    REG: Currently studying
    FAR: TBD
    BEC: TBD

    NH

    #622553
    mariam almas
    Participant

    A for the second ?

    AUD: 81 (Done)
    REG: Currently studying
    FAR: TBD
    BEC: TBD

    NH

    #622554
    mariam almas
    Participant

    D for the third ??

    goooooood morning guys 3 days left (awwwch my stomach)

    AUD: 81 (Done)
    REG: Currently studying
    FAR: TBD
    BEC: TBD

    NH

    #622555
    Anonymous
    Inactive

    @CPAHOPEFULL11 Same answer with mariam.

    1. A I'm choosing A or B but I think B is for Report on Summary of FS

    2. D

    I'll check back later if there are more answers to my question. I will post the correct answer in a few.

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