Question

In: Accounting

If a short-term note payable is included in the accounts payable balance on the financial statements,...

If a short-term note payable is included in the accounts payable balance on the financial statements, there is a violation of which of the following balance-related management assertions and the corresponding auditor objectives:

A. Completeness assertion and Completeness objective.

B. Valuation and Allocation assertion and Cutoff objective.

C. Valuation and Allocation assertion and Accuracy objective.

D. Valuation and Allocation assertion and Classification objective.

Solutions

Expert Solution

Including Short term notes payable in accounts payable balance leads to under-valuation of notes payable balance and over-valuation of accounts payable balance. Thus, it is a violation of "Valuation and Allocation" assertion of financial statement. Hence, option A is incorrect.

Cut-off assertion is about that transactions and events have been recorded in the correct accounting period. Here, no such violation of accounting period is made. Hence, Option B is incorrect.

Accuracy is about : Amounts and other information w.r.t recorded transactions have been recorded appropriately, and related disclosures have been made. Here, both notes payable and accounts payable are recorded appropriately, however have been incorrectly classifed in financial statements. Hence, it is not a violation of Accuracy, but a Violation of Classification (which is about : transactions and events should be recorded in the proper accounts). Thus, Option C is also incorrect and Option D : "Valuation and Allocation assertion and Classification objective" is Correct.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

In what situation should short-term debt or notes payable be included as part of the cost...
In what situation should short-term debt or notes payable be included as part of the cost of debt when calculating the WACC?
For your company Nike: Evaluation of Financial Statements (note key word is “evaluation”) Overview Short-term liquidity...
For your company Nike: Evaluation of Financial Statements (note key word is “evaluation”) Overview Short-term liquidity Activity Ratios Financial Leverage (Debt Ratios) Profitability and Market Ratios Common-sized Income Statement Analysis Discussion of the Company’s capital structure (Can be answered in bullet points (3 minimum))
For your company Nike: Evaluation of Financial Statements (note key word is “evaluation”) Overview Short-term liquidity...
For your company Nike: Evaluation of Financial Statements (note key word is “evaluation”) Overview Short-term liquidity Activity Ratios Financial Leverage (Debt Ratios) Profitability and Market Ratios Common-sized Income Statement Analysis Discussion of the Company’s capital structure
Question 1 For many companies, current liabilities include accounts payable interest payable short-term notes payable all...
Question 1 For many companies, current liabilities include accounts payable interest payable short-term notes payable all of the above Question 2 A company issues a $15,000, 5.5% note due in 90-days. How much interest will be due at maturity? (Use a 360-day year. Round answers to two decimal places.) $825.00 $206.25 none of the above Question 4 See the previous question. On August 30, the due date of the account payable, what entry would our company make if they paid...
Cash ​$30,000 Accounts receivable 63,800 Accounts payable 52,500 ​Short-term notes payable 11,000 Inventories 66,000 Gross fixed...
Cash ​$30,000 Accounts receivable 63,800 Accounts payable 52,500 ​Short-term notes payable 11,000 Inventories 66,000 Gross fixed assets 1,061,000 Accumulated depreciation 86,000 ​Long-term debt 210,000 Common stock 480,000 Other assets 25,000 Retained earnings ​? Complete the part of the​ common-sized balance sheet below.  ​(Round to one decimal place. NOTE​: Input the Accumulated depreciation account as a negative​ value.) Common-sized Balance Sheet ASSETS Cash $ 30,000 % Accounts receivable 63,800 Inventories 66,000 Total current assets $ 159,800 % Gross fixed assets $...
The Zaarour Corporation's October 31 adjusted trial balance included many accounts, including the following. Accounts Payable...
The Zaarour Corporation's October 31 adjusted trial balance included many accounts, including the following. Accounts Payable $21,000 Accounts Receivable $27,000 Cash $23,000 Dividends $13,000 Fees Revenue $152,000 Income Taxes Expense $16,000 Income Taxes Payable $10,700 Insurance Expense $21,000 Interest Revenue $12,000 Prepaid Insurance $12,300 Retained Earnings $53,000 Supplies $16,000 Supplies Expense $15,000 Unearned Fees $12,000 Wages Expense $65,000 Wages Payable $11,000 Determine the dollar balance in the Corporation's income summary account before it was closed to retained earnings. a. $152,000...
Auditing the accounts payable balance on the balance sheet
When auditing the accounts payable balance on the balance sheet, an auditor’s procedures most likely would focus primarily on management’s assertion of Select one:a. Existenceb. Rights and obligationsc. Presentation and disclosured. Completeness.
The following items are taken from the financial statements of Sandhill Co. for 2022: Accounts payable...
The following items are taken from the financial statements of Sandhill Co. for 2022: Accounts payable $10,000 Accounts receivable 12,500 Accumulated depreciation—equipment 37,400 Advertising expense 21,300 Cash 13,800 Common stock 95,000 Depreciation expense 11,000 Dividends 14,300 Equipment 250,000 Insurance expense 3,900 Notes payable 89,500 Prepaid insurance 6,800 Rent expense 15,100 Retained earnings (beginning) 18,400 Salaries and wages expense 33,500 Salaries and wages payable 2,500 Service revenue 140,000 Supplies 4,900 Supplies expense 5,700 Can you explain ( Net Income, Retained Earnings...
The entry to record an installment payment on a long-term note payable is Mortgage Payable Cash...
The entry to record an installment payment on a long-term note payable is Mortgage Payable Cash Interest Expense Cash Mortgage Payable Interest Expense Cash Bonds Payable Cash
The following information is from Carter Corp.’s year-end financial statements.: Cash $150 Accounts Receivable $175 Short-Term...
The following information is from Carter Corp.’s year-end financial statements.: Cash $150 Accounts Receivable $175 Short-Term Investments $300 Prepaid Expenses $75 Land $1,000 Equipment $950 Accumulated Depreciation $625 Accounts Payable $275 Salaries Payable $25 Interest Payable $100 Long-Term Notes Payable $300 Long-Term Loans Payable $400 Total Revenues $2,500 a) Calculate Carter’s current ratio, quick (acid test) ratio, and days’ sales ratio for the year. (Last year Carter’s accounts receivables were $225.) b) Last year, Carter’s current ratio was 2, Carter’s...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT