Allowance for Doubtful Accounts on the balance sheet
A. increases the net realizable value of accounts receivable
B. is offset against total current assets
C. is a contra-account to accounts receivable
D. appears under the heading "Other Assets"
Ans: C. is a contra-account to accounts receivable
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At the beginning of 2011, Gannon Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note as a $1,000 trade note receivable on its 2011 year-end statement of financial position and $1,000 as sales revenue for 2011. What effect did this accounting for the note have on Gannon's net earnings for 2011, 2012, 2013, and its retained earnings at the end of 2013, respectively?
a. Overstate, overstate, understate, zero b. Overstate, understate, understate, understate c. Overstate, overstate, overstate, overstate d. None of these
When initially planning a risk-based audit, which of the following steps is MOST critical?
A. Evaluating the organization's entire environment as a whole B. Establishing an audit methodology based on accepted frameworks, such as COBIT or COSO C. Documenting procedures to ensure that the auditor achieves the planned audit objectives D. The identification of the areas of high risk for controls failure