Budd, the Purchasing Agent for Lake Hardware Wholesalers, Has a Relative

question 25

Multiple Choice

Budd, the purchasing agent for Lake Hardware Wholesalers, has a relative who owns a retail hardware store. Budd arranged for hardware to be delivered by manufacturers to the retail store on a C.O.D. basis, thereby enabling his relative to buy at Lake's wholesale prices. Budd was probably able to accomplish this because of Lake's poor internal control over:

• A)purchase requisitions.
• B)cash receipts.
• C)perpetual inventory records.
• D)purchase orders.

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Definitions:

Reversing Entries

Journal entries made at the beginning of an accounting period to reverse or cancel out adjusting entries made at the end of the previous period.

Premium on Bonds Payable

Premium on Bonds Payable refers to the amount by which the bond's selling price exceeds its face value or par value.

Interest Expense

The cost incurred by an entity for borrowed funds over a period, represented as an expense on the income statement.

Bonds Before Maturity

The buying or selling of bonds in the financial markets before they have reached their specified maturity date.