Study the following material and independent transactions below: Transaction 1 Dr Accumulated depreciation $ 100,000 Dr Accounts receivable (a related company) $ 4,900,000 Cr Buildings $ 2,600,000 Cr Gain on disposal of buildings $ 2,400,000 Transaction 2 Dr Sales returns $ 2,000,000 Dr Inventory $ 1,000,000 Cr Accounts receivable $ 2,000,000 Cr Cost of sales $ 1,000,000 Required: For each of the transactions above: Describe the transaction represented by the double entry; Describe two (2) audit assertions contained in the transaction that would be of interest to the auditor; and Describe two (2) substantive audit procedures the auditor will need to perform in order to verify these assertions.
Study the following material and independent transactions below: Transaction 1 Dr Accumulated depreciation $ 100,000 Dr Accounts receivable (a related company) $ 4,900,000 Cr Buildings $ 2,600,000 Cr Gain on disposal of buildings $ 2,400,000 Transaction 2 Dr Sales returns $ 2,000,000 Dr Inventory $ 1,000,000 Cr Accounts receivable $ 2,000,000 Cr Cost of sales $ 1,000,000 Required: For each of the transactions above: Describe the transaction represented by the double entry; Describe two (2) audit assertions contained in the transaction that would be of interest to the auditor; and Describe two (2) substantive audit procedures the auditor will need to perform in order to verify these assertions.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Study the following material and independent transactions below:
|
Transaction 1 Dr |
$ 100,000 |
|
|
Dr |
$ 4,900,000 |
|
|
Cr Buildings |
|
$ 2,600,000 |
|
Cr Gain on disposal of buildings |
|
$ 2,400,000 |
|
Transaction 2 |
|
|
|
Dr Sales returns |
$ 2,000,000 |
|
|
Dr Inventory |
$ 1,000,000 |
|
|
Cr Accounts receivable |
|
$ 2,000,000 |
|
Cr Cost of sales |
|
$ 1,000,000 |
Required:
For each of the transactions above:
- Describe the transaction represented by the double entry;
- Describe two (2) audit assertions contained in the transaction that would be of interest to the auditor; and
- Describe two (2) substantive
audit procedures the auditor will need to perform in order to verify these assertions.
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