Equipment Acquisitions That Are Misclassified as Maintenance Expenses Most Likely

question 64

Multiple Choice

Equipment acquisitions that are misclassified as maintenance expenses most likely would be detected by a control activity that provides for:

• A)segregation of duties of employees in the accounts payable department.
• B)independent verification of invoices for disbursements recorded as equipment acquisitions.
• C)investigation of variances within a formal budgeting system.
• D)authorization by the board of directors of significant equipment acquisitions.

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Definitions:

Economic Profit

The difference between a firm's total revenue and its total costs, including both explicit and implicit costs, reflecting the real profitability of the business.

Loss

The result of a company or individual spending more money than they receive.

Equilibrium

An equilibrium in the market where demand equals supply, causing price stability.

Kinked-demand Model

A model used to explain price stability in oligopolistic markets, suggesting that firms may not change their pricing in response to small changes in costs or demand due to a perceived kink in the demand curve.