Tennessee Company Violated Company Policy by Erroneously Capitalizing the Cost

question 22

Multiple Choice

Tennessee Company violated company policy by erroneously capitalizing the cost of painting its warehouse. The CPA examining Tennessee's financial statements would most likely learn of this error by:

• A)discussing Tennessee's capitalization policies with its controller.
• B)reviewing the titles and descriptions for all construction work orders issued during the year.
• C)observing during the physical inventory observation that the warehouse has been painted.
• D)examining in detail a sample of construction work orders.

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Definitions:

Year-End Assets

The total value of all assets held by an individual or entity at the conclusion of a financial year.

Liabilities

Financial obligations or debts owed by a business or individual.

Equity Mutual Funds

Investment funds that pool money from various investors to purchase a diversified portfolio of stocks.

Fixed-Income Securities

Investments that provide regular income payments, such as bonds or treasury bills, with predetermined interest rates.