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Subject Topic: QUESTION OF THE DAY - MCQ’S ALL SECTIONS (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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AndrewCPA
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Posted: 29 Sep 2010 at 11:25 | IP Logged  

Correct! Nice to see you on this forum as well, Herbert.

Correct Answer: B

Explanation: 
Working capital is equal to current assets - current liabilities. The refinancing of $50,000 of short term debt with long term debt decreases current liabilities and increases long term debt. The decrease in short term debt decreases current liabilities causing working capital to go up. The prepayment of $50,000 of next year's rent increases and decreases current assets, thus causing no change in working capital. The acquisition of land through the issuance of common stock has no effect on current assets or current liabilities, therefore no change in working capital. The purchase of temporary investments for cash increases and decreases current assets, thereby not changing working capital.



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AndrewCPA
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Posted: 29 Sep 2010 at 18:35 | IP Logged  

Today's question: AUD

A limitation on the scope of an auditor's examination sufficient to preclude an unqualified opinion will usually result when management:

A)   Presents financial statements that are prepared in accordance with the cash receipts and disbursements basis of accounting.

B)   States that the financial statements are not intended to be presented in conformity with generally accepted accounting principles.

C)   Does not make the minutes of the Board of Directors' meetings available to the auditor.

D)  Asks the auditor to report on the balance sheet and not on the other basic financial statements.



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pres2112
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Posted: 29 Sep 2010 at 21:03 | IP Logged  

C
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AndrewCPA
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Posted: 30 Sep 2010 at 11:15 | IP Logged  

Correct Answer: C

Explanation: 
The auditor will typically want the client to make all minutes of meetings of stockholders, directors and committees of directors available. If management does not make these minutes available to the auditor, this would be considered a scope restriction which could result in the auditor qualifying his opinion or disclaiming an opinion.

The remaining answer choices are incorrect for the following reasons:

• It refers to financial statements prepared in conformity with a basis of accounting other than GAAP. The auditor can express an unqualified opinion on whether these financial statements are presented fairly in conformity with the cash basis. The auditor's report on these cash-basis financial statements would include a statement that they were prepared using a basis of accounting other than GAAP and would refer the reader to a note in the financial statements where management states that the financial statements are not intended to be presented in accordance with GAAP.
• It involves a situation which has limited reporting objectives; the auditor can issue an unqualified opinion on one basic financial statement and not on the others.


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AndrewCPA
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Posted: 30 Sep 2010 at 18:30 | IP Logged  

Today’s question: REG

Under the Sales Article of the UCC, which of the following statements is correct regarding the warranty of merchantability arising when there has been a sale of goods by a merchant seller?

A)   The warranty must be in writing.

B)   The warranty arises when the buyer relies on the seller's skill in selecting the goods purchased.

C)   The warranty cannot be disclaimed.

D)   The warranty arises as a matter of law when the seller ordinarily sells the goods purchased.



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