Because the Failure to Record Disposals of Property, Plant, and Equipment

question 95

Multiple Choice

Because the failure to record disposals of property, plant, and equipment can significantly affect the financial statements, the search for unrecorded disposals is essential.Which of the following is not a procedure used to verify disposals?

• A)Make inquiries of management and production personnel about the possibility of the disposal of assets.
• B)Review whether newly acquired assets replace existing assets.
• C)Test the valuation of fixed assets recorded in prior periods.
• D)Review plant modifications and changes in product line, taxes, or insurance coverage.

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Definitions:

Liquidated Damages

A predetermined amount of money that must be paid as damages for failure to perform under a contract, the amount of which is stipulated within the contract itself.

Breach of Contract

The violation of a contractual obligation by one party that results in harm or loss to the other party.

Breach of Contract

A legal term referring to the violation of a binding agreement between two or more parties.

Contractual Duties

Obligations that parties must follow as outlined in a contract, enforceable by law.