Correct Answer: A

Explanation: The quick ratio includes the current assets that can be "quickly" converted to cash such as cash, marketable securities and receivables. Therefore, fluctuating market prices for short-term investments (marketable securities) may adversely affect the ratio.

Correct Answer: B

Explanation: Assertions about completeness deal with whether all accounts and transactions that should be presented in the financial statements are so included. If an auditor test counts selected items while observing a client's physical inventory and then traces those counts to the client's inventory listing, the auditor is obtaining evidence that all inventory items that should be included in the listing, which becomes the basis for the financial statement amounts, are so included.

The assertions presented in the incorrect answer choices are not tested by this procedure. If an inventory item is test counted and on the listing, the client may not have the rights to that item. In order to test existence, the auditor would compare the listing to the actual items on hand instead of comparing the test counts to the listing. Valuation of inventory includes tests of lower of cost and market, not just quantities obtained during test counts.

Today’s question: REG

Gero Corp. had operating income of $160,000, after deducting $10,000 for contributions to State University, but not including dividends of $2,000 received from nonaffiliated taxable domestic corporations. In computing the maximum allowable deduction for contributions, Gero should apply the percentage limitation to a base amount of _________

A)   $172,000

B)   $174,000

C)   $170,000

D)   $162,000