Ch.10 Savage Purchasing And Payments Process Exam Questions - Digital Test Bank | Accounting Info Systems 1e by Arline A. Savage. DOCX document preview.
Accounting Information Systems, 1e (Savage)
Chapter 10 Purchasing and Payments Process
1) Some business activities in the purchasing and payments processes result in the exchange of economic resources and recording of accounting transactions. Other activities in the processes do not result in an accounting transaction. Choose from the list below the activity that does NOT result in an accounting transaction.
A) Selecting vendors
B) Returning goods or negotiating allowances
C) Paying for purchases
D) Receiving raw materials
Diff: 1
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Introduction
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Reporting
2) Some business activities in the purchasing and payments processes result in the exchange of economic resources and recording of accounting transactions. Other activities in the processes do not result in an accounting transaction. Choose from the list below the activity that does NOT result in an accounting transaction.
A) Returning goods or negotiating allowances
B) Negotiating contracts and payment terms
C) Paying for purchases
D) Receiving raw materials
Diff: 1
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Introduction
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Reporting
3) Some business activities in the purchasing and payments processes result in the exchange of economic resources and recording of accounting transactions. Other activities in the processes do not result in an accounting transaction. Choose from the list below the activity that does NOT result in an accounting transaction.
A) Returning goods or negotiating allowances
B) Paying for purchases
C) Ordering raw materials
D) Receiving raw materials
Diff: 1
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Introduction
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Reporting
4) In which financial statement is a line item for inventory found?
A) Balance sheet
B) Income statement
C) Cash flow statement
D) Statement of shareholder equity
Diff: 1
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Reporting
5) Inventory is a balance sheet line item that includes all items used in the creation of products. Which of the following is classified as an item that is used in the creation of a product?
A) Raw materials
B) Work in progress
C) Finished goods
D) Cash
Diff: 1
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Reporting
6) Inventory is a balance sheet line item that includes all items used in the creation of products. Which of the following is classified as products in the process of being manufactured?
A) Raw materials
B) Work in progress
C) Finished goods
D) Cash
Diff: 1
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Reporting
7) Inventory is a balance sheet line item that includes all items used in the creation of products. Which of the following is classified as products ready to ship to customers?
A) Raw materials
B) Work in progress
C) Finished goods
D) Cash
Diff: 1
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Reporting
8) Review the diagram below:
What business activity does A represent?
A) Inventory Control
B) Purchasing
C) Receiving
D) Accounts Payable
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
9) Review the diagram below:
What business activity does B represent?
A) Inventory Control
B) Purchasing
C) Receiving
D) Accounts Payable
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
10) Review the diagram below:
What business activity does C represent?
A) Inventory Control
B) Purchasing
C) Receiving
D) Accounts Payable
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
11) Review the diagram below:
What business activity does D represent?
A) Inventory Control
B) Purchasing
C) Receiving
D) Accounts Payable
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
12) Review the diagram below:
What business activity does E represent?
A) Inventory Control
B) Purchasing
C) Receiving
D) Accounts Payable
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
13) Review the diagram below:
Which deliverable is A?
A) Purchase Requisition
B) Purchase Order
C) Receiving Report
D) Check or electronic transfer
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
14) Review the diagram below:
Which deliverable is B?
A) Purchase Requisition
B) Purchase Order
C) Receiving Report
D) Check or electronic transfer
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
15) Review the diagram below:
Which deliverable is C?
A) Purchase Requisition
B) Purchase Order
C) Receiving Report
D) Check or electronic transfer
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
16) Review the diagram below:
Which deliverable is D?
A) Purchase Requisition
B) Purchase Order
C) Receiving Report
D) Check or electronic transfer
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
17) There are four departments in a company that are directly involved in the purchasing processes. Which department manages inventory and is responsible for ensuring that there is an optimal amount of inventory on hand, issuing requisitions when additional inventory is required?
A) Inventory Control
B) Purchasing
C) Receiving
D) Accounts Payable
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
18) There are four departments in a company that are directly involved in the purchasing processes. Which department receives the purchase requisitions and transforms them into purchase orders?
A) Inventory Control
B) Purchasing
C) Receiving
D) Accounts Payable
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
19) There are four departments in a company that are directly involved in the purchasing processes. Which department receives the orders along with a supplier-generated packing slip, checks the condition of the shipment and counts the quantities?
A) Inventory Control
B) Purchasing
C) Receiving
D) Accounts Payable
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
20) There are four departments in a company that are directly involved in the purchasing processes. Which department receives the vendor invoices?
A) Inventory Control
B) Purchasing
C) Receiving
D) Accounts Payable
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
21) Choose from the list below the best definition of Inventory management.
A) Inventory management is the process that coordinates the communication of inventory availability and needs across the purchasing, conversion and sales processes.
B) Inventory management oversees the lifecycle of a product from procuring raw materials through customer sales.
C) Inventory management receives the orders along with a supplier-generated packing slip, which shows quantities and descriptions.
D) Inventory management are products in the process of being manufactured.
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Management
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
22) Choose from the list below the best definition of Supply chain management.
A) Supply chain management is the process that coordinates the communication of inventory availability and needs across the purchasing, conversion and sales processes.
B) Supply chain management oversees the life cycle of a product from procuring raw materials through customer sales.
C) Supply chain management receives the orders along with a supplier-generated packing slip, which shows quantities and descriptions.
D) Supply chain management are products in the process of being manufactured.
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Supply Chain Management
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
23) Numerous departments are involved in the purchases and payments processes. Choose from the list below one of the departments that is involved in the purchases and payments processes.
A) Purchasing
B) Sales
C) Operations
D) Marketing
Diff: 1
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Purchasing Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
24) Numerous departments are involved in the purchases and payments processes. Choose from the list below one of the departments that is involved in the purchases and payments processes.
A) Sales
B) Receiving
C) Operations
D) Marketing
Diff: 1
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Purchasing Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
25) Numerous departments are involved in the purchases and payments processes. Choose from the list below one of the departments that is involved in the purchases and payments processes.
A) Sales
B) Operations
C) Warehouse
D) Marketing
Diff: 1
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Purchasing Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
26) Numerous departments are involved in the purchases and payments processes. Choose from the list below one of the departments that is involved in the purchases and payments processes.
A) Sales
B) Operations
C) Marketing
D) Accounts Payable
Diff: 1
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Purchasing Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
27) Choose from the list below the best control activity to prevent receiving products from unapproved vendors.
A) Regularly review approved vendors and their performance. Update the database to remove inactive vendors and those who do not meet performance standards.
B) All purchases routed through the purchasing department
C) Segregation of duties
D) Implement training for employees who communicate with vendors for purchasing.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
28) Choose from the list below the best control activity to prevent purchases from unapproved vendors which are conflicts of interest or unauthorized related-party transactions that may result in regulatory or reputational damage.
A) Regularly review approved vendors and their performance. Update the database to remove inactive vendors and those who do not meet performance standards.
B) All purchases routed through the purchasing department
C) Segregation of duties
D) Implement training for employees who communicate with vendors for purchasing.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
29) Choose from the list below the best control activity to prevent unauthorized changes to the vendor table that may result in fraudulent purchases or loss of financial assets.
A) Regularly review approved vendors and their performance. Update the database to remove inactive vendors and those who do not meet performance standards.
B) All purchases routed through the purchasing department
C) Segregation of duties
D) Implement training for employees who communicate with vendors for purchasing.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
30) Choose from the list below the best control activity to prevent entering oral or written contracts prior to the completion of the vendor onboarding process that may result in a financial obligation to unapproved vendors.
A) Regularly review approved vendors and their performance. Update the database to remove inactive vendors and those who do not meet performance standards.
B) All purchases routed through the purchasing department
C) Segregation of duties
D) Implement training for employees who communicate with vendors for purchasing.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
31) Choose from the list below the best control activity to prevent unauthorized purchase requisitions that may result in unauthorized or fraudulent purchases.
A) An authorized person from the department making the request must approve the requisition.
B) Separate the duties of ordering goods from receiving, payment, and accounting responsibilities.
C) Match purchase requisitions with purchase orders and generate an exception report investigation.
D) Each blanket purchase order must specify monetary limits and have a specified duration.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
32) Choose from the list below the best control activity to prevent unauthorized purchase orders submitted to an unauthorized vendor that may result in unauthorized or fraudulent purchases.
A) An authorized person from the department making the request must approve the requisition.
B) Separate the duties of ordering goods from receiving, payment, and accounting responsibilities.
C) Match purchase requisitions with purchase orders and generate an exception report investigation.
D) Each blanket purchase order must specify monetary limits and have a specified duration.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
33) Choose from the list below the best control activity to prevent purchase requisitions split into more than one purchase order to circumvent authorized limits that may result in unauthorized or fraudulent purchases.
A) An authorized person from the department making the request must approve the requisition.
B) Separate the duties of ordering goods from receiving, payment, and accounting responsibilities.
C) Match purchase requisitions with purchase orders and generate an exception report investigation.
D) Each blanket purchase order must specify monetary limits and have a specified duration.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
34) Choose from the list below the best control activity to prevent blanket purchase orders that may result in excessive purchases.
A) An authorized person from the department making the request must approve the requisition.
B) Separate the duties of ordering goods from receiving, payment, and accounting responsibilities.
C) Match purchase requisitions with purchase orders and generate an exception report investigation.
D) Each blanket purchase order must specify monetary limits and have a specified duration.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
35) Choose from the list below the best control activity to prevent accepting goods that were not ordered.
A) Three-way matching of purchase order, receiving report, and vendor invoice prior to payment
B) Implement an e-procurement system that matches the scheduled delivery window period with the delivery date.
C) Match goods received data to data on purchase orders.
D) Restrict physical access to the receiving department.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
36) Choose from the list below the best control activity to prevent goods accepted earlier or later than the scheduled delivery date that may result in excessive or obsolete inventory.
A) Three-way matching of purchase order, receiving report, and vendor invoice prior to payment
B) Implement an e-procurement system that matches the scheduled delivery window period with the delivery date.
C) Match goods received data to data on purchase orders.
D) Restrict physical access to the receiving department.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
37) Choose from the list below the best control activity to prevent goods that are received but not recorded.
A) Three-way matching of purchase order, receiving report, and vendor invoice prior to payment
B) Implement an e-procurement system that matches the scheduled delivery window period with the delivery date.
C) Match goods received data to data on purchase order.
D) Restrict physical access to the receiving department.
Diff: 2
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
38) Numerous departments are involved in the fixed assets purchases and payments processes. Choose from the list below one of the departments that is involved in the fixed assets purchases and payments processes.
A) Purchasing
B) Sales
C) Operations
D) Marketing
Diff: 1
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Fixed Asset Acquisitions Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
39) Numerous departments are involved in the fixed assets purchases and payments processes. Choose from the list below one of the departments that is involved in the fixed assets purchases and payments processes.
A) Sales
B) Receiving
C) Operations
D) Marketing
Diff: 1
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Fixed Asset Acquisitions Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
40) Numerous departments are involved in the fixed assets purchases and payments processes. Choose from the list below one of the departments that is involved in the fixed assets purchases and payments processes.
A) Sales
B) Operations
C) Accounts Payable
D) Marketing
Diff: 1
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Fixed Asset Acquisitions Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
41) Numerous departments are involved in the fixed assets purchases and payments processes. Choose from the list below one of the departments that is involved in the fixed assets purchases and payments processes.
A) Sales
B) Operations
C) Marketing
D) Fixed Asset Accounting
Diff: 1
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Fixed Asset Acquisitions Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
42) The textbook discussed four of the stages of the Fixed Asset acquisitions process. Which stage corresponds to the following description?
"The department that uses a particular fixed asset generally initiates the purchasing process with a purchase requisition."
A) Stage 1: Asset Procurement
B) Stage 2: Receiving and Tagging
C) Stage 3: Recording Assets
D) Stage 4: Asset Reconciliation
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Fixed Asset Acquisitions Process
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
43) The textbook discussed four of the stages of the Fixed Asset acquisitions process. Which stage corresponds to the following description?
"Routine purchases of fixed assets follow a common pattern; the fixed asset is inspected, the receiving report is prepared, the fixed asset is delivered to the requesting department for installation and/or use, fixed assets are tagged for future identification purposes."
A) Stage 1: Asset Procurement
B) Stage 2: Receiving and Tagging
C) Stage 3: Recording Assets
D) Stage 4: Asset Reconciliation
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Fixed Asset Acquisitions Process
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
44) The textbook discussed four of the stages of the Fixed Asset acquisitions process. Which stage corresponds to the following description?
"The accounting for a fixed asset occurs when the asset is recorded."
A) Stage 1: Asset Procurement
B) Stage 2: Receiving and Tagging
C) Stage 3: Recording Assets
D) Stage 4: Asset Reconciliation
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Fixed Asset Acquisitions Process
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
45) The textbook discussed four of the stages of the Fixed Asset acquisitions process. Which stage corresponds to the following description?
"In addition to the purchasing and payment journal entries, the fixed asset accountant ensures the fixed asset subsidiary ledger is updated."
A) Stage 1: Asset Procurement
B) Stage 2: Receiving and Tagging
C) Stage 3: Recording Assets
D) Stage 4: Asset Reconciliation
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Fixed Asset Acquisitions Process
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
46) Choose the best definition from the list below of bid rigging.
A) Vendors collude with one another and reach advance agreement as to the winning bidder for a particular contract. The winning bidder agrees to compensate the other vendors in some manner.
B) An external document used to request a supplier to sell and deliver the products in the quantities and for the prices specified
C) A supplier generated document, which shows quantities and descriptions of items delivered to the receiving department at the specified warehouse location
D) A document that shows the descriptions and quantities of goods received from vendors
Diff: 1
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Internal Control over Fixed Asset Acquisitions
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
47) Bid rigging and kickbacks create unfair and uncompetitive bidding processes which may result in financial losses due to paying higher prices in the absence of competition. Choose the best control activity to address this risk.
A) Tagging all fixed assets
B) Expand the list of bidders to make it more difficult for bidders to collude.
C) Regular management review of fixed asset accounting transactions and trends in fixed asset ratios
D) Periodically checking fixed assets against the fixed asset records
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Internal Control over Fixed Asset Acquisitions
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
48) Bid rigging and kickbacks create unfair and uncompetitive bidding processes which may result in financial losses due to paying higher prices in the absence of competition. Choose the best control activity to address this risk.
A) Tagging all fixed assets
B) Regular management review of fixed asset accounting transactions and trends in fixed asset ratios
C) Require bidders to sign and submit non-collusion affidavits stating the bidder has not colluded with employees or other bidders.
D) Periodically checking fixed assets against the fixed asset records
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Internal Control over Fixed Asset Acquisitions
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
49) Bid rigging and kickbacks create unfair and uncompetitive bidding processes which may result in financial losses due to paying higher prices in the absence of competition. Choose the best control activity to address this risk.
A) Tagging all fixed assets
B) Monthly fixed asset reconciliation and independent review of the subsidiary ledger with the general ledger
C) Periodically checking fixed assets against the fixed asset records
D) Have a code of conduct that employees must agree to and sign, as well as training for employees that includes firing and legal actions for engaging in fraud.
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Internal Control over Fixed Asset Acquisitions
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
50) Capitalizing items that are not fixed assets may result in inflated net income and assets, financial statement misstatements, fines and penalties, or reputational damage. Choose the best control activity to address this risk.
A) Tagging all fixed assets
B) Expand the list of bidders to make it more difficult for bidders to collude.
C) Require bidders to sign and submit non-collusion affidavits stating the bidder has not colluded with employees or other bidders.
D) Have a code of conduct that employees must agree to and sign, as well as training for employees that includes firing and legal actions for engaging in fraud.
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Internal Control over Fixed Asset Acquisitions
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
51) Capitalizing items that are not fixed assets may result in inflated net income and assets, financial statement misstatements, fines and penalties, or reputational damage. Choose the best control activity to address this risk.
A) Expand the list of bidders to make it more difficult for bidders to collude.
B) Ensure regular management review of fixed asset accounting transactions and trends in fixed asset ratios.
C) Require bidders to sign and submit non-collusion affidavits stating the bidder has not colluded with employees or other bidders.
D) Have a code of conduct that employees must agree to and sign, as well as training for employees that includes firing and legal actions for engaging in fraud.
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Internal Control over Fixed Asset Acquisitions
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
52) Capitalizing items that are not fixed assets may result in inflated net income and assets, financial statement misstatements, fines and penalties, or reputational damage. Choose the best control activity to address this risk.
A) Expand the list of bidders to make it more difficult for bidders to collude.
B) Require bidders to sign and submit non-collusion affidavits stating the bidder has not colluded with employees or other bidders.
C) Periodically checking physical fixed assets against the fixed asset records
D) Have a code of conduct that employees must agree to and sign, as well as training for employees that includes firing and legal actions for engaging in fraud.
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Internal Control over Fixed Asset Acquisitions
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
53) Capitalizing items that are not fixed assets may result in inflated net income and assets, financial statement misstatements, fines and penalties, or reputational damage. Choose the best control activity to address this risk.
A) Expand the list of bidders to make it more difficult for bidders to collude.
B) Require bidders to sign and submit non-collusion affidavits stating the bidder has not colluded with employees or other bidders.
C) Have a code of conduct that employees must agree to and sign, as well as training for employees that includes firing and legal actions for engaging in fraud.
D) Monthly fixed asset reconciliation and independent review of the subsidiary ledger with the general ledger
Diff: 2
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Internal Control over Fixed Asset Acquisitions
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
54) The 3-way match takes documents from 3 departments and matches them before paying a vendor invoice. Choose from the list below one of the departments a document should be received from by accounts payable to perform the match.
A) Purchasing
B) Sales
C) Operations
D) Marketing
Diff: 1
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Credit Payments Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
55) The 3-way match takes documents from 3 departments and matches them before paying a vendor invoice. Choose from the list below one of the departments a document should be received from by accounts payable to perform the match.
A) Sales
B) Receiving
C) Operations
D) Marketing
Diff: 1
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Credit Payments Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
56) The traditional three-way match matches the purchase order, receiving report and what other document?
A) Vendor invoice
B) Sales order
C) Vendor table
D) Packing slip
Diff: 1
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Credit Payments Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
57) The traditional three-way match matches the purchase order, vendor invoice and what other document?
A) Sales order
B) Receiving report
C) Vendor table
D) Packing slip
Diff: 1
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Credit Payments Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
58) The traditional three-way match matches the receiving report, vendor invoice and what other document?
A) Sales order
B) Vendor table
C) Purchase order
D) Packing slip
Diff: 1
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Credit Payments Process
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
59) Unrecorded payments may result in duplicate payments to vendors or misstatement of financial statements by overstating cash and accounts payable. Choose the best control activity to address this risk.
A) Report missing numbers in a sequence of prenumbered checks or ETFs for investigation and resolution.
B) Comparison of vendor ID in cash payments journal with vendor ID on supporting documentation and payments voucher
C) A three-way match against the purchase order, receiving report, and vendor's invoice
D) Take advantage of all supplier discounts if favorable to the company.
Diff: 2
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Internal Control over Payments to Vendors
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
60) Unrecorded payments may result in duplicate payments to vendors or misstatement of financial statements by overstating cash and accounts payable. Choose the best control activity to address this risk.
A) Comparison of vendor ID in cash payments journal with vendor ID on supporting documentation and payments voucher
B) Comparison of the total of the authorized vouchers submitted for payment to the total in the cash disbursements journal for a specific period
C) A three-way match against the purchase order, receiving report, and vendor's invoice
D) Take advantage of all supplier discounts if favorable to the company.
Diff: 2
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Internal Control over Payments to Vendors
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
61) Payments recorded in the wrong vendor account may result in duplicate payments to vendors. Choose the best control activity to address this risk.
A) Comparison of the total of the authorized vouchers submitted for payment to the total in the cash disbursements journal for a specific period
B) A three-way match against the purchase order, receiving report, and vendor's invoice
C) Comparison of vendor ID in cash payments journal with vendor ID on supporting documentation and payments voucher
D) Take advantage of all supplier discounts if favorable to the company.
Diff: 2
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Internal Control over Payments to Vendors
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
62) Payments recorded in the wrong vendor account may result in duplicate payments to vendors. Choose the best control activity to address this risk.
A) Comparison of the total of the authorized vouchers submitted for payment to the total in the cash disbursements journal for a specific period
B) A three-way match against the purchase order, receiving report, and vendor's invoice
C) Comparison of vendor ID in cash payments journal with vendor ID on supporting documentation and payments voucher
D) Take advantage of all supplier discounts if favorable to the company.
Diff: 2
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Internal Control over Payments to Vendors
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
63) Payments recorded in the wrong vendor account may result in duplicate payments to vendors. Choose the best control activity to address this risk.
A) Comparison of the total of the authorized vouchers submitted for payment to the total in the cash disbursements journal for a specific period
B) A three-way match against the purchase order, receiving report, and vendor's invoice
C) Take advantage of all supplier discounts if favorable to the company.
D) Reconciliation of vendor statements with the accounts payable subsidiary ledger
Diff: 2
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Internal Control over Payments to Vendors
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
64) Payments made to unauthorized or nonexistent purchases may result in fraudulent misappropriation of cash. Choose the best control activity to address this risk.
A) Apply a three-way match against the purchase order, receiving report, and vendor's invoice.
B) Comparison of the total of the authorized vouchers submitted for payment to the total in the cash disbursements journal for a specific period
C) Take advantage of all supplier discounts if favorable to the company.
D) Reconciliation of vendor statements with accounts payable subsidiary ledger
Diff: 2
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Internal Control over Payments to Vendors
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
65) Payments made to unauthorized or nonexistent purchases may result in fraudulent misappropriation of cash. Choose the best control activity to address this risk.
A) Comparison of the total of the authorized vouchers submitted for payment to the total in the cash disbursements journal for a specific period
B) Comparison of payment information with purchase order and receiving report information
C) Take advantage of all supplier discounts if favorable to the company.
D) Reconciliation of vendor statements with accounts payable subsidiary ledger
Diff: 2
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Internal Control over Payments to Vendors
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
66) Invoices paid twice may result in overpayments to vendors. Choose the best control activity to address this risk.
A) Comparison of the total of the authorized vouchers submitted for payment to the total in the cash disbursements journal for a specific period
B) Comparison of payment information with purchase order and receiving report information
C) Vendor invoice, payment voucher and supporting documentation must be tagged or cancelled to prevent reuse.
D) Take advantage of all supplier discounts if favorable to the company.
Diff: 2
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Internal Control over Payments to Vendors
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
67) The use of cash not being optimized may result in loss of assets and poor cash management. Choose the best control activity to address this risk.
A) Comparison of the total of the authorized vouchers submitted for payment to the total in the cash disbursements journal for a specific period
B) Comparison of payment information with purchase order and receiving report information
C) Vendor invoice, payment voucher and supporting documentation must be tagged or cancelled to prevent reuse.
D) Take advantage of all supplier discounts if favorable to the company.
Diff: 2
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Internal Control over Payments to Vendors
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
68) There are five modules in the ERP system cloud map that support the specific purchasing and payment business processes. Choose one of the modules from the list below.
A) Inventory
B) Bill of Material
C) Time and Attendance
D) Payroll
Diff: 1
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Database Design
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
69) There are five modules in the ERP system cloud map that support the specific purchasing and payment business processes. Choose one of the modules from the list below.
A) Bill of Material
B) Shipping/Receiving
C) Time and Attendance
D) Payroll
Diff: 1
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Database Design
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
70) There are five modules in the ERP system cloud map that support the specific purchasing and payment business processes. Choose one of the modules from the list below.
A) Bill of Material
B) Time and Attendance
C) Fixed Assets
D) Payroll
Diff: 1
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Database Design
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
71) There are five modules in the ERP system cloud map that support the specific purchasing and payment business processes. Choose one of the modules from the list below.
A) Bill of Material
B) Time and Attendance
C) Payroll
D) Accounts Payable
Diff: 1
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Database Design
AACSB: Analytic
Bloom's: Knowledge
AICPA: AC: Systems and Process Management
72) The data collected during the purchasing of raw materials can be converted into several purchasing reports. Below is a list of some of those reports. Which report is summarized to show what products have been received within a period of time?
A) Product received — by time
B) Purchase requisitions filled and open
C) Purchase orders filled and open
D) Purchase orders aging
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
73) The data collected during the purchasing of raw materials can be converted into several purchasing reports. Below is a list of some of those reports. Which report lists the total number of purchase requisitions that have been purchased or remain outstanding within a period of time?
A) Product received — by time
B) Purchase requisitions filled and open
C) Purchase orders filled and open
D) Purchase orders aging
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
74) The data collected during the purchasing of raw materials can be converted into several purchasing reports. Below is a list of some of those reports. Which report lists the total number of purchase orders that have been completed by suppliers and vendors or remain outstanding within a period of time?
A) Product received — by time
B) Purchase requisitions filled and open
C) Purchase orders filled and open
D) Purchase orders aging
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
75) The data collected during the purchasing of raw materials can be converted into several purchasing reports. Below is a list of some of those reports. Which report lists days purchase orders have been outstanding classified in buckets?
A) Product received — by time
B) Purchase requisitions filled and open
C) Purchase orders filled and open
D) Purchase orders aging
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
76) The data collected during the purchasing of raw materials can be converted into several purchasing reports. Below is a list of some of those reports. Which report lists the items on backorder from suppliers and vendors?
A) Backorder report
B) Purchase requisitions filled and open
C) Purchase orders filled and open
D) Purchase orders aging
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
77) The data collected during the purchasing of raw materials can be converted into several purchasing reports. Below is a list of some of those reports. Which report is a master list of all approved vendors from the vendor master table?
A) Product received — by time
B) Main vendor table
C) Purchase orders filled and open
D) Purchase orders aging
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
78) The raw material purchasing reports can provide management with insight into how to improve processes. Additional raw materials purchasing analytics can be used for decision making and dashboards. Which raw material purchasing analytic describes how long it took to receive an order, quantity of goods received, and condition of goods received?
A) Vendor performance
B) Receiving reconciliation
C) Vendor prices
D) Vendor frequency
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
79) The raw material purchasing reports can provide management with insight into how to improve processes. Additional raw materials purchasing analytics can be used for decision making and dashboards. Which raw material purchasing analytic compares the goods received to the approved purchase order?
A) Vendor performance
B) Receiving reconciliation
C) Vendor prices
D) Vendor frequency
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
80) The raw material purchasing reports can provide management with insight into how to improve processes. Additional raw materials purchasing analytics can be used for decision making and dashboards. Which raw material purchasing analytic analyzes vendor price increases greater than a threshold amount over a period of time?
A) Vendor performance
B) Receiving reconciliation
C) Vendor prices
D) Vendor frequency
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
81) The raw material purchasing reports can provide management with insight into how to improve processes. Additional raw materials purchasing analytics can be used for decision making and dashboards. Which raw material purchasing analytic analyzes the frequency of purchasing at a single vendor increasing greater than a threshold over time?
A) Vendor performance
B) Receiving reconciliation
C) Vendor prices
D) Vendor frequency
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
82) The raw material purchasing reports can provide management with insight into how to improve processes. Additional raw materials purchasing analytics can be used for decision making and dashboards. Which raw material purchasing analytic analyzes vendors with the same telephone number, address, or email?
A) Duplicate vendor data
B) Receiving reconciliation
C) Vendor prices
D) Vendor frequency
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
83) The raw material purchasing reports can provide management with insight into how to improve processes. Additional raw materials purchasing analytics can be used for decision making and dashboards. Which raw material purchasing analytic compares vendor telephone numbers, addresses, emails, and bank accounts to the employee master table?
A) Vendor performance
B) Vendor-employee comparison
C) Vendor prices
D) Vendor frequency
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
84) The raw material purchasing reports can provide management with insight into how to improve processes. Additional raw materials purchasing analytics can be used for decision making and dashboards. Which raw material purchasing analytic analyzes discount terms given, discounts taken, and discounts forfeited?
A) Vendor performance
B) Receiving reconciliation
C) Discounts
D) Vendor frequency
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
85) The raw material purchasing reports can provide management with insight into how to improve processes. Additional raw materials purchasing analytics can be used for decision making and dashboards. Which raw material purchasing analytic calculates purchasing ratios, such as accounts payable turnover days, purchasing to sales, and purchases growth to sales growth?
A) Vendor performance
B) Receiving reconciliation
C) Vendor prices
D) Financial ratios
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
86) The data collected during the accounts payable process can be converted into several accounts payable reports. Below is a list of some of those reports. Which accounting journal report captures all payments recorded?
A) Cash disbursements journal
B) Purchases by vendor
C) Accounts payable
D) Vendor aging report
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
87) The data collected during the accounts payable process can be converted into several accounts payable reports. Below is a list of some of those reports. Which report summarizes purchases by vendor over a specific period of time to look for unusual activity?
A) Cash disbursements journal
B) Purchases by vendor
C) Accounts payable
D) Vendor aging report
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
88) The data collected during the accounts payable process can be converted into several accounts payable reports. Below is a list of some of those reports. Which report lists outstanding accounts payable balances, which can be summarized by vendor?
A) Cash disbursements journal
B) Purchases by vendor
C) Accounts payable
D) Vendor aging report
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
89) The data collected during the accounts payable process can be converted into several accounts payable reports. Below is a list of some of those reports. Which report summarizes outstanding accounts payable by vendor and separates them into buckets based on the number of days outstanding?
A) Cash disbursements journal
B) Purchases by vendor
C) Accounts payable
D) Vendor aging report
Diff: 2
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Reporting and Insights
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
90) There are five business activities involved in the purchasing process.
i. Pay for the inventory received
ii. Order the inventory
iii. Determine inventory to order
iv. Receive the inventory
v. Request availability and prices
Put these activities in the correct order.
Diff: 2
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Application
AICPA: AC: Systems and Process Management
91) Raw materials are purchased from a seller, called a supplier or vendor. While the terms "supplier" and "vendor" may sound interchangeable, there's a subtle difference between them. Briefly describe the differences between suppliers and vendors.
• Vendors supply in both B2C and B2B sales relationships
• A supplier only enters B2B relationships
Diff: 3
Learning Objective: 10.1 Describe the relationship between the inventory purchasing and payments processes, inventory management, and supply chain management.
Section Reference: Inventory Purchasing and Payments Processes
AACSB: Analytic
Bloom's: Synthesis
AICPA: AC: Systems and Process Management
92) RAM Manufacturing LLC is a rapidly growing manufacturer of parts for the automotive industry. RAM Manufacturing maintains a lot of inventory and uses NetSuite as their ERP system. RAM Manufacturing uses an approved vendor table. Senior management of RAM Manufacturing wants to ensure that only approved vendors are used. Discuss some of the general control activities RAM Manufacturing may want to implement for the approved vendor table.
• Use automated supplier portals to validate vendors and obtain required documentation before approving and adding them to the vendor table.
• Use documented and authorized policies and procedures, with established criteria and screening mechanisms to evaluate vendors.
Diff: 3
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Synthesis
AICPA: AC: Systems and Process Management
93) RAM Manufacturing LLC is a rapidly growing manufacturer of parts for the automotive industry. RAM Manufacturing maintains a lot of inventory and uses NetSuite as their ERP system. Senior management of RAM Manufacturing wants to ensure that appropriate controls are used in the purchasing department. Discuss some of the general control activities RAM Manufacturing may want to implement for purchase orders.
• Implement an e-procurement system, which can integrate with their ERP system, for automation of the purchasing process.
• Implement a paperless evaluated receipt settlement (ERS) system between suppliers and the company.
• Prenumber and account for purchase requisitions and purchase orders.
Diff: 3
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Synthesis
AICPA: AC: Systems and Process Management
94) RAM Manufacturing LLC is a rapidly growing manufacturer of parts for the automotive industry. RAM Manufacturing maintains a lot of inventory and uses NetSuite as their ERP system. Senior management of RAM Manufacturing wants to ensure that appropriate controls are used in the receiving department. Discuss some of the general control activities RAM Manufacturing may want to implement for receiving.
• Maintain segregation of duties.
• Physically segregate receiving employees from warehouse storage areas, production, and shipping.
• Ensure that each physical facility should have its own receiving location.
• Restrict physical access to the receiving department.
• Install cameras in the receiving areas.
• Control access to the receiving system.
• Implement an e-procurement system.
• Ensure that all receiving exceptions are returned to the supplier or else investigated and resolved in a timely manner, with an audit trail of evidence documenting the physical movement of goods.
• Ensure that policies and procedures and training for employees in receiving are clearly documented and authorized.
• Implement an ongoing performance monitoring program of suppliers using receiving department reports.
Diff: 3
Learning Objective: 10.2 Summarize the purchasing process for inventory and other goods or services.
Section Reference: Internal Control over Purchasing
AACSB: Analytic
Bloom's: Synthesis
AICPA: AC: Systems and Process Management
95) RAM Manufacturing LLC is a rapidly growing manufacturer of parts for the automotive industry. RAM Manufacturing maintains a lot of inventory and uses NetSuite as their ERP system. RAM Manufacturing recently purchased a new warehouse building for $350,000, paid $3,000 in legal fees, $10,000 in agent commissions and $150,000 to remodel the warehouse. The land on which the warehouse sits cost $170,000. RAM Manufacturing took out a mortgage for $500,000 and paid the remainder in cash. Record the journal entry.
Land 170,000
Building 513,000
Mortgage Loan 500,000
Cash 183,000
Diff: 3
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Fixed Asset Acquisitions Process
AACSB: Analytic
Bloom's: Synthesis
AICPA: AC: Reporting
96) RAM Manufacturing LLC is a rapidly growing manufacturer of parts for the automotive industry. RAM Manufacturing maintains a lot of inventory and uses NetSuite as their ERP system. RAM Manufacturing recently purchased a new laser marking machine for $27,500 and a used industrial strength lathe for $25,300. $1,950 worth of cleaning and maintenance was required to get the lathe ready for use. RAM Manufacturing took out an equipment loan for $40,000 and paid the remainder in cash. Record the journal entry.
Equipment 54,750
Equipment Loan 40,000
Cash 14,750
Diff: 3
Learning Objective: 10.3 Explain the fixed asset acquisitions process.
Section Reference: Fixed Asset Acquisitions Process
AACSB: Analytic
Bloom's: Synthesis
AICPA: AC: Reporting
97) RAM Manufacturing LLC is a rapidly growing manufacturer of parts for the automotive industry. RAM Manufacturing is considering purchasing and implementing an ERP system but has not yet chosen a vendor. Maeve, an accounts payable clerk, manually recorded a payment in the wrong vendor account and this eventually resulted in duplicate payments to the vendor.
What control activity could be implemented to prevent this risk in the future?
Diff: 3
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Credit Payments Process
AACSB: Analytic
Bloom's: Synthesis
AICPA: AC: Systems and Process Management
98) RAM Manufacturing LLC is a small but rapidly growing manufacturer of parts for the automotive industry. RAM Manufacturing is considering purchasing and implementing an ERP system but has not yet chosen a vendor. Maeve, an accounts payable clerk, processes accounts payable twice per month and regularly fails to take advantage of offered vendor payment discounts.
What control activity could be implemented to prevent this risk in the future?
Diff: 3
Learning Objective: 10.4 Evaluate the credit payments process.
Section Reference: Credit Payments Process
AACSB: Analytic
Bloom's: Synthesis
AICPA: AC: Systems and Process Management
99) RAM Manufacturing LLC is a rapidly growing manufacturer of parts for the automotive industry. Maeve, an accounts payable analyst, is performing a three-way match before issuing payments to the vendors. RAM Manufacturing recently went live with NetSuite as their ERP system. However, they have not yet started using the receiving system and use Microsoft Excel to track receipts. Therefore, Maeve must match the combined purchase order and invoice with a separate spreadsheet that has the receiving report data.
Purchase and invoice data:
Receiving report spreadsheet:
Do all the invoices pass the three-way match? If not, explain why.
Diff: 3
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Database Design
AACSB: Analytic
Bloom's: Synthesis
AICPA: AC: Systems and Process Management
100) RAM Manufacturing LLC is a rapidly growing manufacturer of parts for the automotive industry. Maeve, an accounts payable analyst, is performing a three-way match before issuing payments to the vendors. RAM Manufacturing recently went live with NetSuite as their ERP system. However, they have not yet started using the receiving system and use Microsoft Excel to track receipts. Therefore, Maeve must match the combined purchase order and invoice with a separate spreadsheet that has the receiving report data.
Purchase and invoice data:
Receiving report spreadsheet:
Do all the invoices pass the three-way match? If not, explain why.
Diff: 3
Learning Objective: 10.5 Use the key data in the underlying database for reporting and insights.
Section Reference: Database Design
AACSB: Analytic
Bloom's: Synthesis
AICPA: AC: Systems and Process Management
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