Correct Answer: B

Explanation: Since Fox changed the terms of the offer, the letter was a counteroffer and not a valid acceptance. The remaining answer choices are incorrect because no contract was formed and Fox doesn't have to sign and return an offer to accept.

Today's question: AUD

King, CPA, was engaged to audit the financial statements of Newton Company after its fiscal year had ended. King neither observed the inventory count nor confirmed the receivables by direct communication with debtors, but was satisfied concerning both after applying alternative procedures. King's auditor's report most likely contained a(an):

A) Qualified opinion

B) Disclaimer of opinion

C) Unqualified opinion

D) Unqualified opinion with an explanatory paragraph

Correct Answer: C

Explanation: Observation of the inventory count and confirmation of receivables is normally performed during an audit. However, if circumstances do not permit these procedures to be performed, the auditor may apply alternative audit procedures that may include observation of an inventory count at a later date and the verification of receivable balances by auditing subsequent cash receipts. If the auditor is able to employ alternative procedures he considers appropriate in the circumstances, no modification or qualification of the audit report is necessary.

Today's question: BEC

If a firm's credit terms require payment with 45 days but allow a discount of 2 percent if paid within 15 days (using a 360-day year), the approximate cost/benefit of the trade credit terms is what?

A) 2 percent.

B) 16 percent.

C) 48 percent.

D) 24 percent.

Correct Answer: D

Explanation: If the credit terms are 2/15 net 45, then a company not taking the 2% discount would have an extra 30 days (45 - 15) to use the money. Thirty days divided into a 360 day year equals twelve 30 day periods in a year. Therefore, if it costs 2% to hold the money an additional 30 days, and there are twelve 30 day periods in a year, then the approximate cost/benefit of the trade credit terms is 24% (2% x 12).