The Auditor Can Best Verify a Client's Bond Sinking Fund

question 37

Multiple Choice

The auditor can best verify a client's bond sinking fund transactions and year-end balance by:

• A)Confirmation with individual holders of retired bonds.
• B)Confirmation with the bond trustee.
• C)Recomputation of interest expense,interest payable,and amortization of bond discount or premium.
• D)Examination and count of the bonds retired during the year.

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Definitions:

Lessor's Balance Sheet

A financial statement detailing the assets, liabilities, and equity of a lessor under lease transactions.

Current Asset

An asset that is expected to be converted into cash, sold, or consumed within one year or within the business's normal operating cycle.

Interest Income

The earnings received from investing in interest-bearing financial instruments, like bonds, loans, or savings accounts.

Sales-Type Lease

A lease arrangement that allows a lessor to sell an asset and earn interest income over the lease term, often used in financing agreements for expensive equipment.