The Engineering Department at Omni Company Built a Piece of Equipment

question 12

Multiple Choice

The engineering department at Omni Company built a piece of equipment in the company's own shop for use in the company's operations. When looking at the ending balance for the fixed asset account the auditor examined all work orders, purchased materials, labor cost reports, and applied overhead that were capitalized as part of the equipment costs. Which of the following is the ASB balance assertion most closely related to the auditor's testing?

• A)Existence.
• B)Completeness.
• C)Rights and obligations.
• D)Valuation.

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Definitions:

Purchased Inventory

Inventory items that are bought from suppliers and used in the production of goods or services.

Acid-test Ratio

A liquidity metric that measures a company's ability to pay off its current liabilities without relying on the sale of inventory.

Total Prepaid Expenses

Total prepaid expenses refer to the cumulative amount of expenses paid in advance for goods or services to be received in the future, recorded as assets on the balance sheet.

Total Liabilities

The aggregate of all debts and financial obligations owed by a company to creditors at a given point in time.