When Auditing Merchandise Inventory at Year-End, the Auditor Performs a Purchase

question 56

Multiple Choice

When auditing merchandise inventory at year-end, the auditor performs a purchase cutoff test to obtain evidence that

• A)all goods purchased before year-end are received before the physical inventory count.
• B)no goods held on consignment for customers are included in the inventory balance.
• C)no goods observed during the physical count are pledged or sold.
• D)all goods owned at year-end are included in the inventory balance.

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Definitions:

Perfectly Inelastic

A situation in which the quantity demanded or supplied does not change regardless of any change in price.

Fixed Number

A specific, unchanging quantity that does not vary under different conditions or over time.

Supply Curve

A graph showing the relationship between the price of a good and the amount of it that producers are willing to supply at those prices.

Short-Run Elasticity

Refers to the responsiveness of the quantity demanded or supplied of a good or service to a price change over a short period.