Question 1

BSP Corporation purchased inventory from RSR Corporation on account, $1,000.BSP also paid $100 freight to reimburse RSR for its payment to the common carrier that transported the merchandise.The $100 freight charge is likely to be found on:
A)The bill of lading.
B)RSR Corporation's invoice.
C)Both the bill of lading and RSR Corporation's invoice.
D)Either the bill of lading or RSR Corporation's invoice, but not both.

Accepted Answer

The $100 freight charge is likely to be found on both the bill of lading (as it pertains to the transportation of the merchandise) and RSR Corporation's invoice (as they charged BSP for the reimbursement).

Question 2

Which of the following documents associated with the acquisition/payment process is most likely to lead to a journal entry that debits inventory and credits accounts payable?
A)Purchase requisition, purchase order and receiving report
B)Purchase order, receiving report and invoice
C)Purchase requisition, receiving report and invoice
D)None of these

Accepted Answer

The purchase order initiates the purchase, the receiving report confirms that the goods have been received and inventory can be recorded, and the invoice validates the amount owed and serves as the basis for the accounts payable entry. Therefore, a journal entry debiting inventory and crediting accounts payable will typically result from the receipt of the invoice.

Question 3

Consider the following short case as you respond to the question: Abruzzi's Italian Kitchen is a small family restaurant with an administrative staff of four people.Giuseppi Abruzzi is the chief executive officer; his wife Maria is the chief financial officer.Their son Antonio is responsible for all transactions dealing with kitchen supplies, including the raw materials for menu items; their son Carlo is responsible for all transactions dealing with dining room supplies, such as eating utensils.The restaurant's administrative practices have developed over the ten years of its existence with minimal reliance on information technology and formal procedures and a stronger emphasis on interpersonal relationships with a few reliable vendors.Once a month, Antonio places orders for kitchen supplies with one of four vendors based on price; the supplies are usually received within ten calendar days.On receipt of the supplies, Antonio pays the vendor with a company check.Carlo follows a similar process for dining room supplies, but works with a set of three vendors, none of which sell kitchen supplies.Abruzzi's Italian Kitchen is exposed to:
A)Systems risk and human error risk.
B)Human error risk and liquidity risk.
C)Liquidity risk and systems risk.
D)Human error risk, systems risk and liquidity risk.

Accepted Answer

The answer of Consider the following short case as you...

Question 4

As a form of internal control within the acquisition/payment process, internal auditors are most likely to:
A)Prevent or detect a problem.
B)Prevent or correct a problem.
C)Detect or correct a problem.
D)None of these; internal auditors are not a form of internal control for the acquisition/payment process.

Accepted Answer

Internal auditors are responsible for providing independent assurance that an organization's internal controls are operating effectively. They can help to prevent or detect problems in the acquisition/payment process by reviewing the process and identifying any weaknesses.

Question 5

Accounting information systems have five generic elements.Which of the following pairs includes two examples of the same element within the context of the acquisition/payment process?
A)Purchase order and schedule of accounts payable
B)Purchase order and adequate documentation
C)Schedule of accounts payable and adequate documentation
D)All of these

Accepted Answer

Purchase order and schedule of accounts payable are both examples of documents and records, which are one of the five generic elements of accounting information systems.

Question 6

Journal entries commonly processed as part of the acquisition/payment process can include:
A)Debits to inventory.
B)Credits to accounts payable.
C)Credits to cash.
D)All of these.

Accepted Answer

In the acquisition/payment process, there are several journal entries that need to be processed including debits to inventory for goods received, credits to accounts payable for the amount owed to vendors, and credits to cash for payments made to vendors. Therefore, all of these choices are correct.

Question 7

Internal controls in the acquisition/payment process should address which of the following forms of risk?
A)Liquidity risk
B)Human error risk
C)Both liquidity risk and human error risk
D)Neither liquidity risk nor human error risk

Accepted Answer

Internal controls in the acquisition/payment process should address both liquidity risk and human error risk. Liquidity risk refers to the risk of not being able to meet financial obligations in a timely manner, while human error risk refers to the potential for mistakes or oversights in the processing of payments or acquisition of goods and services. Effective internal controls can help to mitigate these risks and ensure the accuracy and completeness of transactions.

Question 8

As part of an inventory purchase, BSP Corporation paid a freight bill.The proper treatment of the freight cost in BSP's accounting information system is:
A)Capitalize to inventory.
B)Capitalize to cash.
C)Expense to inventory.
D)Expense to cash.

Accepted Answer

Freight associated with the purchase of inventory should be capitalized as part of the inventory cost.

Question 9

BSP Corporation purchased inventory from RSR Corporation on account, $1,000.BSP also paid $100 freight to reimburse RSR for its payment to the common carrier that transported the merchandise.If RSR offered credit terms of 2/10, n/30 and BSP paid within the discount period, the total cash disbursed to RSR was:
A)$1,080.
B)$1,078.
C)$980.
D)Some other amount.

Accepted Answer

The answer of BSP Corporation purchased inventory from RSR Corporation...

Question 10

One output of the accounting information system is the balance sheet.Transactions commonly associated with an organization's acquisition/payment process are most likely to be reflected in which sections of balance sheet?
A)Current assets and current liabilities
B)Current assets and long-term liabilities
C)Long-term assets and current liabilities
D)Long-term assets and long-term liabilities

Accepted Answer

Transactions associated with an organization's acquisition/payment process are typically reflected in the current assets and current liabilities sections of the balance sheet. Current assets would include items such as cash, accounts receivable, and inventory which are used in the day-to-day operations of the business. Current liabilities would include items such as accounts payable, short-term loans, and accrued expenses that are due within the next twelve months.

Question 11

One output of the accounting information system is the statement of cash flows.Transactions commonly associated with an organization's acquisition/payment process are most likely to be reflected in which section of the statement of cash flows?
A)Operating
B)Investing
C)Financing
D)Non-cash investing and financing

Accepted Answer

The acquisition/payment process typically involves transactions related to the day-to-day operations of a business, such as purchasing inventory or paying for services, which are reflected in the operating section of the statement of cash flows.

Question 12

BSP Corporation wrote a check to RSR Corporation, one of its vendors.On the remittance advice, BSP indicated which invoices it was paying.Which of the following statements is most true?
A)BSP Corporation uses the open invoice method.
B)RSR Corporation uses the open invoice method.
C)BSP Corporation uses the balance forward method.
D)If RSR uses the open invoice method, BSP must also use the open invoice method.

Accepted Answer

The answer of BSP Corporation wrote a check to RSR...

Question 13

As a form of internal control, separation of duties can be applied to which steps in the acquisition/payment process?
A)Second step
B)Fourth step
C)Fifth step
D)All of these

Accepted Answer

Separation of duties should be applied to all steps in the acquisition/payment process to ensure that no single person has control over multiple steps, which helps prevent fraud and errors.

Question 14

Which of the following serve as examples of strong separation of duties within the context of the acquisition/payment process?
A)Establishing a purchasing department
B)Requiring all purchases over $500 to be approved by a manager
C)Both establishing a purchasing department and requiring all purchases over $500 to be approved by a manager
D)Neither establishing a purchasing department nor requiring all purchases over $500 to be approved by a manager

Accepted Answer

Establishing a purchasing department creates a clear separation of duties between those who are responsible for making purchases and those who are responsible for paying for them. Requiring all purchases over a certain amount to be approved by a manager adds an additional layer of oversight and control over the purchasing process, thus further strengthening the separation of duties. Together, these measures help ensure that no single individual has complete control over the acquisition and payment process, reducing the risk of fraud or errors.

Question 15

Which of the following can serve as both an input to and an output of the acquisition/payment process?
A)Check
B)Purchase order
C)Both check and purchase order
D)Neither check nor purchase order

Accepted Answer

The answer of Which of the following can serve as...

Question 16

The journal entry to record the purchase of inventory on account is:
A)Debit inventory, credit accounts payable.
B)Debit accounts payable, credit inventory.
C)Debit inventory, credit cash.
D)Debit accounts payable, credit cash.

Accepted Answer

The purchase of inventory is a liability that needs to be recorded. When the inventory is bought on account, it means the payment is due later, so account payable account needs to be credited. Inventory is a current asset, so it needs to be debited. Therefore, the journal entry to record the purchase of inventory on account is: Debit inventory, credit accounts payable.

Question 17

Consider the following short case as you respond to the question: Abruzzi's Italian Kitchen is a small family restaurant with an administrative staff of four people.Giuseppi Abruzzi is the chief executive officer; his wife Maria is the chief financial officer.Their son Antonio is responsible for all transactions dealing with kitchen supplies, including the raw materials for menu items; their son Carlo is responsible for all transactions dealing with dining room supplies, such as eating utensils.The restaurant's administrative practices have developed over the ten years of its existence with minimal reliance on information technology and formal procedures and a stronger emphasis on interpersonal relationships with a few reliable vendors.Once a month, Antonio places orders for kitchen supplies with one of four vendors based on price; the supplies are usually received within ten calendar days.On receipt of the supplies, Antonio pays the vendor with a company check.Carlo follows a similar process for dining room supplies, but works with a set of three vendors, none of which sell kitchen supplies.Which of the following statements about internal control at Abruzzi's Italian Kitchen is most true?
A)It has adequate separation of duties because Giuseppi is CEO and Maria is CFO.
B)It has adequate separation of duties because Antonio orders kitchen supplies and Carlo orders dining room supplies.
C)It does not need to separate duties because it is a family-owned business.
D)None of these statements is true.

Accepted Answer

The statements provided do not accurately describe an adequate separation of duties in terms of internal control principles. Adequate separation of duties involves dividing responsibilities among different individuals to reduce the risk of error or fraud. In this case, while different family members have distinct roles, the processes described do not ensure that duties such as ordering, receiving, and payment are adequately separated to prevent potential conflicts of interest or fraud.

Question 18

Accounting information systems have five generic elements.Which of the following pairs includes examples of two different elements within the context of the acquisition/payment process?
A)Purchase requisition and schedule of accounts payable
B)Journal entry that debits inventory and credits cash
C)Separation of duties and a blind copy of the receiving report
D)All of these

Accepted Answer

The five generic elements of accounting information systems are: 
1) Input
2) Processing
3) Output
4) Storage
5) Feedback

Within the context of the acquisition/payment process, examples of the different elements are: 
- Input: Purchase requisition
- Processing: Schedule of accounts payable (this involves organizing and summarizing data)
- Output: Journal entry that debits inventory and credits cash
- Storage: Blind copy of the receiving report
- Feedback: Separation of duties (this provides feedback to ensure that no one person has control of the process)

Therefore, choice A (purchase requisition and schedule of accounts payable) includes examples of two different elements within the context of the acquisition/payment process.

Question 19

Internal controls associated with the acquisition/payment process include:
A)Separation of duties.
B)Adequate documentation.
C)Both separation of duties and adequate documentation.
D)Neither separation of duties nor adequate documentation.

Accepted Answer

Both separation of duties and adequate documentation are important internal controls associated with the acquisition/payment process. Separation of duties ensures that no single individual has control over the entire process and helps prevent fraud or errors. Adequate documentation ensures that all transactions are properly recorded and can be easily traced, reducing the risk of errors and fraud. Both of these controls work together to create a strong system of internal control.

Question 20

Which of the following items associated with the acquisition/payment process is likely to expose an organization to one or more forms of operational risk?
A)Purchase order prepared by hand
B)Schedule of accounts payable prepared with Excel
C)Both purchase order prepared by hand and schedule of accounts payable prepared with Excel
D)Neither purchase order prepared by hand nor schedule of accounts payable prepared with Excel

Accepted Answer

Both options A and B can expose an organization to operational risk. A purchase order prepared by hand can contain errors or be lost, while a schedule of accounts payable prepared with Excel can contain formula errors or be subject to manipulation if access controls are not in place. Choosing option C covers both possibilities. Option D is incorrect as it implies that neither option presents a risk, which is not accurate.

Quiz 12: Acquisitionpayment Process

BSP Corporation purchased inventory from RSR Corporation on account, $1,000.BSP also paid $100 freight to reimburse RSR for its payment to the common carrier that transported the merchandise.The $100 freight charge is likely to be found on:

Which of the following documents associated with the acquisition/payment process is most likely to lead to a journal entry that debits inventory and credits accounts payable?

As a form of internal control within the acquisition/payment process, internal auditors are most likely to:

Accounting information systems have five generic elements.Which of the following pairs includes two examples of the same element within the context of the acquisition/payment process?

Journal entries commonly processed as part of the acquisition/payment process can include:

Internal controls in the acquisition/payment process should address which of the following forms of risk?

As part of an inventory purchase, BSP Corporation paid a freight bill.The proper treatment of the freight cost in BSP's accounting information system is:

One output of the accounting information system is the balance sheet.Transactions commonly associated with an organization's acquisition/payment process are most likely to be reflected in which sections of balance sheet?

One output of the accounting information system is the statement of cash flows.Transactions commonly associated with an organization's acquisition/payment process are most likely to be reflected in which section of the statement of cash flows?

BSP Corporation wrote a check to RSR Corporation, one of its vendors.On the remittance advice, BSP indicated which invoices it was paying.Which of the following statements is most true?

As a form of internal control, separation of duties can be applied to which steps in the acquisition/payment process?

Which of the following serve as examples of strong separation of duties within the context of the acquisition/payment process?

Which of the following can serve as both an input to and an output of the acquisition/payment process?

The journal entry to record the purchase of inventory on account is:

Accounting information systems have five generic elements.Which of the following pairs includes examples of two different elements within the context of the acquisition/payment process?

Internal controls associated with the acquisition/payment process include:

Which of the following items associated with the acquisition/payment process is likely to expose an organization to one or more forms of operational risk?