Deck 12: Acquisitionpayment Process

Question 1

SCP Corporation purchased inventory on account from OBP Corporation.Which of the following occurred first?

A)The first step in OBP's sales/collection process
B)The first step in SCP's acquisition/payment process
C)A value chain analysis of the transaction
D)Management approval of the transaction

Answer 1

B

Question 2

Which of the following balance sheet items are commonly associated with the acquisition/payment process?

A)Inventory and accounts payable
B)Purchases and accounts receivable
C)Cash paid to vendors
D)Cash received from the sale of inventory

Answer 2

A

Question 3

Which of the following can serve as the basis for completing the first step in the acquisition/payment process?

A)Information technology
B)Human judgment
C)The passage of time
D)All of these

Answer 3

D

Question 4

SCP Corporation purchased inventory on account from OBP Corporation.Which of the following happens immediately after the first step in SCP's acquisition/payment process?

A)The first step in OBP's sales/collection process
B)The second step in SCP's acquisition/payment process
C)The second step in OBP's sales/collection process
D)An internal audit of the transaction by OBP

Question 5

Transactions involved in the acquisition/payment process include:

A)Debit inventory, credit cash
B)Debit inventory, credit accounts payable
C)Debit accounts payable, credit cash
D)All of these

Question 6

The acquisition/payment process:

A)Helps an organization create value for its stakeholders.
B)Can only be applied if an organization sells a product.
C)Both helps an organization create value for its stakeholders and can only be applied if an organization sells a product.
D)Neither helps an organization create value for its stakeholders nor can only be applied if an organization sells a product.

Question 7

The items and activities commonly associated with the acquisition/payment process can be seen in:

A)The income statement only.
B)The balance sheet only.
C)The statement of cash flows only.
D)All of these.

Question 8

Which of the following statements about the acquisition/payment process is least true?

A)The same document is an output of the first step and an input to the second step.
B)The document commonly used in the second step is both an output and an input.
C)The document commonly used in the second step is never used in other steps of the acquisition/payment process.
D)Many documents from the first step can be combined into a single document in the second step.

Question 9

Which of the following statements best explains the relationship between the acquisition/payment process and the sales/collection process?

A)The same transaction can be considered part of both processes.
B)All organizations that have a sales/collection process also have an inventory acquisition/payment process.
C)Both the same transaction can be considered part of both processes and all organizations that have a sales/collection process also have an inventory acquisition/payment process.
D)Neither the same transaction can be considered part of both processes nor all organizations that have a sales/collection process also have an inventory acquisition/payment process.

Question 10

The acquisition/payment process helps an organization create value for its stakeholders, which can include:

A)Vendors.
B)Stockholders.
C)Employees.
D)All of these.

Question 11

Bumble Beasley said: "The acquisition/payment process, which often deals with the asset inventory, creates the greatest value of all business processes." Which of the following terms, if eliminated from Bumble's statement, would make it stronger?

A)Asset
B)Inventory
C)Greatest
D)None of these; Bumble's statement is fine the way it is.

Question 12

The primary purpose of the acquisition/payment process is to:

A)Obtain the resources the organization needs.
B)Pay for the resources the organization needs.
C)Both obtain the resources the organization needs and pay for the resources the organization needs.
D)Neither obtain the resources the organization needs nor pay for the resources the organization needs.

Question 13

The acquisition/payment process helps an organization create value for its stakeholders.Which of the following authors developed a model that assists in understanding value creation?

A)Porter
B)Vroom
C)Pacioli
D)Gates

Question 14

Accounting information systems have five generic parts.Outputs of the acquisition/payment process can include:

A)Schedule of accounts payable.
B)Checks.
C)Both schedule of accounts payable and checks.
D)Neither schedule of accounts payable nor checks.

Question 15

As the first step in the acquisition/payment process, goods are requested based on:

A)Monitored need.
B)The amount of cash in the bank.
C)The relationship between a buyer and a seller.
D)The use of information technology.

Question 16

Which of the following balance sheet items is least likely to be associated with the acquisition/payment process?

A)Cash
B)Accounts payable
C)Raw materials
D)Treasury stock

Question 17

Which of the following statements about the acquisition/payment process is most true?

A)A single document can be either an input or an output, but never both.
B)Many documents from the first step can be combined into a single document in the second step.
C)Both a single document can be either an input or an output, but never both, and many documents from the first step can be combined into a single document in the second step are true.
D)Neither a single document can be either an input or an output, but never both, nor many documents from the first step can be combined into a single document in the second step is true.

Question 18

The fifth step in the acquisition/payment process promotes strong internal control through:

A)Bank reconciliations.
B)Separation of duties.
C)Both bank reconciliations and separation of duties.
D)Neither bank reconciliations nor separation of duties.

Question 19

The acquisition/payment process includes all of the following steps except:

A)Authorize a purchase.
B)Prepare adjusting journal entries.
C)Receive goods and services.
D)Disburse cash.

Question 20

The second step in the acquisition/payment process promotes strong internal control through:

A)Properly labeled documents.
B)Separation of duties.
C)Both properly labeled documents and separation of duties.
D)Neither properly labeled documents nor separation of duties.

Question 21

BSP Corporation purchased inventory from RSR Corporation on account, $1,000.BSP also paid $100 freight to reimburse RSR for its payment to the common carrier that transported the merchandise.The $100 freight charge is likely to be found on:

A)The bill of lading.
B)RSR Corporation's invoice.
C)Both the bill of lading and RSR Corporation's invoice.
D)Either the bill of lading or RSR Corporation's invoice, but not both.

Question 22

Which of the following documents associated with the acquisition/payment process is most likely to lead to a journal entry that debits inventory and credits accounts payable?

A)Purchase requisition, purchase order and receiving report
B)Purchase order, receiving report and invoice
C)Purchase requisition, receiving report and invoice
D)None of these

Question 23

Consider the following short case as you respond to the question: Abruzzi's Italian Kitchen is a small family restaurant with an administrative staff of four people.Giuseppi Abruzzi is the chief executive officer; his wife Maria is the chief financial officer.Their son Antonio is responsible for all transactions dealing with kitchen supplies, including the raw materials for menu items; their son Carlo is responsible for all transactions dealing with dining room supplies, such as eating utensils.The restaurant's administrative practices have developed over the ten years of its existence with minimal reliance on information technology and formal procedures and a stronger emphasis on interpersonal relationships with a few reliable vendors.Once a month, Antonio places orders for kitchen supplies with one of four vendors based on price; the supplies are usually received within ten calendar days.On receipt of the supplies, Antonio pays the vendor with a company check.Carlo follows a similar process for dining room supplies, but works with a set of three vendors, none of which sell kitchen supplies.Abruzzi's Italian Kitchen is exposed to:

A)Systems risk and human error risk.
B)Human error risk and liquidity risk.
C)Liquidity risk and systems risk.
D)Human error risk, systems risk and liquidity risk.

Question 24

As a form of internal control within the acquisition/payment process, internal auditors are most likely to:

A)Prevent or detect a problem.
B)Prevent or correct a problem.
C)Detect or correct a problem.
D)None of these; internal auditors are not a form of internal control for the acquisition/payment process.

Question 25

Accounting information systems have five generic elements.Which of the following pairs includes two examples of the same element within the context of the acquisition/payment process?

A)Purchase order and schedule of accounts payable
B)Purchase order and adequate documentation
C)Schedule of accounts payable and adequate documentation
D)All of these

Question 26

Journal entries commonly processed as part of the acquisition/payment process can include:

A)Debits to inventory.
B)Credits to accounts payable.
C)Credits to cash.
D)All of these.

Question 27

Internal controls in the acquisition/payment process should address which of the following forms of risk?

A)Liquidity risk
B)Human error risk
C)Both liquidity risk and human error risk
D)Neither liquidity risk nor human error risk

Question 28

As part of an inventory purchase, BSP Corporation paid a freight bill.The proper treatment of the freight cost in BSP's accounting information system is:

A)Capitalize to inventory.
B)Capitalize to cash.
C)Expense to inventory.
D)Expense to cash.

Question 29

BSP Corporation purchased inventory from RSR Corporation on account, $1,000.BSP also paid $100 freight to reimburse RSR for its payment to the common carrier that transported the merchandise.If RSR offered credit terms of 2/10, n/30 and BSP paid within the discount period, the total cash disbursed to RSR was:

A)$1,080.
B)$1,078.
C)$980.
D)Some other amount.

Question 30

One output of the accounting information system is the balance sheet.Transactions commonly associated with an organization's acquisition/payment process are most likely to be reflected in which sections of balance sheet?

A)Current assets and current liabilities
B)Current assets and long-term liabilities
C)Long-term assets and current liabilities
D)Long-term assets and long-term liabilities

Question 31

One output of the accounting information system is the statement of cash flows.Transactions commonly associated with an organization's acquisition/payment process are most likely to be reflected in which section of the statement of cash flows?

A)Operating
B)Investing
C)Financing
D)Non-cash investing and financing

Question 32

BSP Corporation wrote a check to RSR Corporation, one of its vendors.On the remittance advice, BSP indicated which invoices it was paying.Which of the following statements is most true?

A)BSP Corporation uses the open invoice method.
B)RSR Corporation uses the open invoice method.
C)BSP Corporation uses the balance forward method.
D)If RSR uses the open invoice method, BSP must also use the open invoice method.

Question 33

As a form of internal control, separation of duties can be applied to which steps in the acquisition/payment process?

A)Second step
B)Fourth step
C)Fifth step
D)All of these

Question 34

Which of the following serve as examples of strong separation of duties within the context of the acquisition/payment process?

A)Establishing a purchasing department
B)Requiring all purchases over $500 to be approved by a manager
C)Both establishing a purchasing department and requiring all purchases over $500 to be approved by a manager
D)Neither establishing a purchasing department nor requiring all purchases over $500 to be approved by a manager

Question 35

Which of the following can serve as both an input to and an output of the acquisition/payment process?

A)Check
B)Purchase order
C)Both check and purchase order
D)Neither check nor purchase order

Question 36

The journal entry to record the purchase of inventory on account is:

A)Debit inventory, credit accounts payable.
B)Debit accounts payable, credit inventory.
C)Debit inventory, credit cash.
D)Debit accounts payable, credit cash.

Question 37

Consider the following short case as you respond to the question: Abruzzi's Italian Kitchen is a small family restaurant with an administrative staff of four people.Giuseppi Abruzzi is the chief executive officer; his wife Maria is the chief financial officer.Their son Antonio is responsible for all transactions dealing with kitchen supplies, including the raw materials for menu items; their son Carlo is responsible for all transactions dealing with dining room supplies, such as eating utensils.The restaurant's administrative practices have developed over the ten years of its existence with minimal reliance on information technology and formal procedures and a stronger emphasis on interpersonal relationships with a few reliable vendors.Once a month, Antonio places orders for kitchen supplies with one of four vendors based on price; the supplies are usually received within ten calendar days.On receipt of the supplies, Antonio pays the vendor with a company check.Carlo follows a similar process for dining room supplies, but works with a set of three vendors, none of which sell kitchen supplies.Which of the following statements about internal control at Abruzzi's Italian Kitchen is most true?

A)It has adequate separation of duties because Giuseppi is CEO and Maria is CFO.
B)It has adequate separation of duties because Antonio orders kitchen supplies and Carlo orders dining room supplies.
C)It does not need to separate duties because it is a family-owned business.
D)None of these statements is true.

Question 38

Accounting information systems have five generic elements.Which of the following pairs includes examples of two different elements within the context of the acquisition/payment process?

A)Purchase requisition and schedule of accounts payable
B)Journal entry that debits inventory and credits cash
C)Separation of duties and a blind copy of the receiving report
D)All of these

Question 39

Internal controls associated with the acquisition/payment process include:

A)Separation of duties.
B)Adequate documentation.
C)Both separation of duties and adequate documentation.
D)Neither separation of duties nor adequate documentation.

Question 40

Which of the following items associated with the acquisition/payment process is likely to expose an organization to one or more forms of operational risk?

A)Purchase order prepared by hand
B)Schedule of accounts payable prepared with Excel
C)Both purchase order prepared by hand and schedule of accounts payable prepared with Excel
D)Neither purchase order prepared by hand nor schedule of accounts payable prepared with Excel

Question 41

Consider the flowcharting symbols shown below and the flowchart depicted above as you answer the question? The symbol labeled "approve purchase order" would be appropriately replaced in the flowchart with which of the following:

A)Symbol A
B)Symbol B
C)Symbol C
D)Symbol D

Question 42

Consider the following case as you respond to the questions: HSO Corp.designs, manufactures and sells golf carts, scooters and similar vehicles.When a prospective client contacts one of their seven corporate offices, the office manager fills out an "intake questionnaire" to determine if HSO can meet the prospective client's needs.The office manager assembles a team of employees with expertise in design, production, marketing and accounting; the team reviews the intake questionnaire and determines if HSO can take on the order.If so, the office manager prepares a three-page written proposal for the prospective client; the proposal explains the responsibilities of both HSO and the client, along with a timeline and a budget.The proposal is forwarded to the prospective client electronically, and the client has ten calendar days to accept it.If HSO cannot take on the order, the prospective client receives an automatically generated form letter; if the prospective client does not accept the proposal within ten calendar days, they receive a different form letter.The new client remits half of the fee at the time the proposal is accepted, and HSO prepares weekly progress reports as the project moves forward.The reports are filed in HSO's database; a hard copy is sent to the client.On a monthly basis, HSO's office manager prepares a comprehensive status report for all current engagements.One week before each project is concluded, HSO bills the client for half of the remaining amount due; after the client has paid all outstanding invoices, HSO completes the work and bills the client for all remaining amounts.HSO delivers the finished product; the client must pay the full amount due within 30 days of the final invoice date.If the client pays within 15 days, HSO gives a 3% discount off the amount due.On April 1 of the current year, EPL Corporation accepted a three-page written proposal from HSO to design and build 10 customized golf carts for EPL's internal use.The total price for the order was $3400.A REA model of EPL's process will include which of the following in the center column: (i) choose a supplier, (ii) purchase equipment, (iii) pay invoice?

A)I and II only
B)II and III only
C)I and III only
D)I, II and III

Question 43

Consider the following case as you respond to the questions: HSO Corp.designs, manufactures and sells golf carts, scooters and similar vehicles.When a prospective client contacts one of their seven corporate offices, the office manager fills out an "intake questionnaire" to determine if HSO can meet the prospective client's needs.The office manager assembles a team of employees with expertise in design, production, marketing and accounting; the team reviews the intake questionnaire and determines if HSO can take on the order.If so, the office manager prepares a three-page written proposal for the prospective client; the proposal explains the responsibilities of both HSO and the client, along with a timeline and a budget.The proposal is forwarded to the prospective client electronically, and the client has ten calendar days to accept it.If HSO cannot take on the order, the prospective client receives an automatically generated form letter; if the prospective client does not accept the proposal within ten calendar days, they receive a different form letter.The new client remits half of the fee at the time the proposal is accepted, and HSO prepares weekly progress reports as the project moves forward.The reports are filed in HSO's database; a hard copy is sent to the client.On a monthly basis, HSO's office manager prepares a comprehensive status report for all current engagements.One week before each project is concluded, HSO bills the client for half of the remaining amount due; after the client has paid all outstanding invoices, HSO completes the work and bills the client for all remaining amounts.HSO delivers the finished product; the client must pay the full amount due within 30 days of the final invoice date.If the client pays within 15 days, HSO gives a 3% discount off the amount due.On April 1 of the current year, EPL Corporation accepted a three-page written proposal from HSO to design and build 10 customized golf carts for EPL's internal use.The total price for the order was $3400.How will EPL account for the design cost in its accounting information system?

A)It will be expensed in the period incurred.
B)It will be expensed when cash is paid.
C)It will be capitalized to inventory.
D)It will be capitalized to some other asset.

Question 44

Consider the following short case as you respond to the question: Abruzzi's Italian Kitchen is a small family restaurant with an administrative staff of four people.Giuseppi Abruzzi is the chief executive officer; his wife Maria is the chief financial officer.Their son Antonio is responsible for all transactions dealing with kitchen supplies, including the raw materials for menu items; their son Carlo is responsible for all transactions dealing with dining room supplies, such as eating utensils.The restaurant's administrative practices have developed over the ten years of its existence with minimal reliance on information technology and formal procedures and a stronger emphasis on interpersonal relationships with a few reliable vendors.Once a month, Antonio places orders for kitchen supplies with one of four vendors based on price; the supplies are usually received within ten calendar days.On receipt of the supplies, Antonio pays the vendor with a company check.Carlo follows a similar process for dining room supplies, but works with a set of three vendors, none of which sell kitchen supplies.Internal control would be strengthened at Abruzzi's Italian Kitchen if:

A)The company broadened its pool of vendors for kitchen and dining room supplies.
B)Maria took over the responsibility of paying vendors.
C)Both the company broadened its pool of vendors for kitchen and dining room supplies and Maria took over the responsibility of paying vendors.
D)Neither the company broadened its pool of vendors for kitchen and dining room supplies nor Maria took over the responsibility of paying vendors.

Question 45

Consider the following systems flowchart as you respond to the question: Which of the following statements is most true?

A)The company has adequate separation of duties.
B)The company uses all documents commonly associated with the process depicted.
C)Both the company has adequate separation of duties and the company uses all documents commonly associated with the process depicted are true.
D)Neither the company has adequate separation of duties nor the company uses all documents commonly associated with the process depicted is true.

Question 46

Consider the following systems flowchart as you respond to the question: The flowchart comes closest to representing:

A)Porter's value chain.
B)The acquisition/payment process.
C)Both porter's value chain and the acquisition/payment process.
D)Neither porter's value chain nor the acquisition/payment process.

Question 47

Consider the following case as you respond to the questions: HSO Corp.designs, manufactures and sells golf carts, scooters and similar vehicles.When a prospective client contacts one of their seven corporate offices, the office manager fills out an "intake questionnaire" to determine if HSO can meet the prospective client's needs.The office manager assembles a team of employees with expertise in design, production, marketing and accounting; the team reviews the intake questionnaire and determines if HSO can take on the order.If so, the office manager prepares a three-page written proposal for the prospective client; the proposal explains the responsibilities of both HSO and the client, along with a timeline and a budget.The proposal is forwarded to the prospective client electronically, and the client has ten calendar days to accept it.If HSO cannot take on the order, the prospective client receives an automatically generated form letter; if the prospective client does not accept the proposal within ten calendar days, they receive a different form letter.The new client remits half of the fee at the time the proposal is accepted, and HSO prepares weekly progress reports as the project moves forward.The reports are filed in HSO's database; a hard copy is sent to the client.On a monthly basis, HSO's office manager prepares a comprehensive status report for all current engagements.One week before each project is concluded, HSO bills the client for half of the remaining amount due; after the client has paid all outstanding invoices, HSO completes the work and bills the client for all remaining amounts.HSO delivers the finished product; the client must pay the full amount due within 30 days of the final invoice date.If the client pays within 15 days, HSO gives a 3% discount off the amount due.On April 1 of the current year, EPL Corporation accepted a three-page written proposal from HSO to design and build 10 customized golf carts for EPL's internal use.The total price for the order was $3400.Which of the following occurred first?

A)The first step in HSO's sales/collection process
B)The first step in EPL's acquisition/payment process
C)EPL's cash payment to HSO
D)HSO's receipt of cash from EPL

Question 48

Consider the flowcharting symbols shown below and the flowchart depicted above as you answer the question: Symbol D could be appropriately included in which column(s) of the flowchart?

A)General manager only
B)Inventory manager only
C)Both general manager only and inventory manager only
D)Neither general manager only nor inventory manager only

Question 49

Consider the following short case as you respond to the question: Abruzzi's Italian Kitchen is a small family restaurant with an administrative staff of four people.Giuseppi Abruzzi is the chief executive officer; his wife Maria is the chief financial officer.Their son Antonio is responsible for all transactions dealing with kitchen supplies, including the raw materials for menu items; their son Carlo is responsible for all transactions dealing with dining room supplies, such as eating utensils.The restaurant's administrative practices have developed over the ten years of its existence with minimal reliance on information technology and formal procedures and a stronger emphasis on interpersonal relationships with a few reliable vendors.Once a month, Antonio places orders for kitchen supplies with one of four vendors based on price; the supplies are usually received within ten calendar days.On receipt of the supplies, Antonio pays the vendor with a company check.Carlo follows a similar process for dining room supplies, but works with a set of three vendors, none of which sell kitchen supplies.Internal control would be strengthened at Abruzzi's Italian Kitchen if:

A)Kitchen supplies were ordered more than once a month.
B)Non-family members were hired in key positions.
C)Both kitchen supplies were ordered more than once a month and non-family members were hired in key positions.
D)Neither kitchen supplies were ordered more than once a month nor non-family members were hired in key positions.

Question 50

Consider the following systems flowchart as you respond to the question: Which of the following statements about documents in the flowchart is most true?

A)"Purchase order" and "approved purchase order" should not be shown separately since they refer to the same document.
B)The flowchart should include at least two more document symbols.
C)Both "Purchase order" and "approved purchase order" should not be shown separately since they refer to the same document and the flowchart should include at least two more document symbols are true.
D)Neither "Purchase order" and "approved purchase order" should not be shown separately since they refer to the same document nor the flowchart should include at least two more document symbols is true.

Question 51

Consider the following case as you respond to the questions: HSO Corp.designs, manufactures and sells golf carts, scooters and similar vehicles.When a prospective client contacts one of their seven corporate offices, the office manager fills out an "intake questionnaire" to determine if HSO can meet the prospective client's needs.The office manager assembles a team of employees with expertise in design, production, marketing and accounting; the team reviews the intake questionnaire and determines if HSO can take on the order.If so, the office manager prepares a three-page written proposal for the prospective client; the proposal explains the responsibilities of both HSO and the client, along with a timeline and a budget.The proposal is forwarded to the prospective client electronically, and the client has ten calendar days to accept it.If HSO cannot take on the order, the prospective client receives an automatically generated form letter; if the prospective client does not accept the proposal within ten calendar days, they receive a different form letter.The new client remits half of the fee at the time the proposal is accepted, and HSO prepares weekly progress reports as the project moves forward.The reports are filed in HSO's database; a hard copy is sent to the client.On a monthly basis, HSO's office manager prepares a comprehensive status report for all current engagements.One week before each project is concluded, HSO bills the client for half of the remaining amount due; after the client has paid all outstanding invoices, HSO completes the work and bills the client for all remaining amounts.HSO delivers the finished product; the client must pay the full amount due within 30 days of the final invoice date.If the client pays within 15 days, HSO gives a 3% discount off the amount due.On April 1 of the current year, EPL Corporation accepted a three-page written proposal from HSO to design and build 10 customized golf carts for EPL's internal use.The total price for the order was $3400.Considering the accounts involved in the transaction from EPL's perspective, which of the following correctly pairs an account on the balance sheet with the appropriate section of the balance sheet?

A)inventory, current assets
B)equipment, plant assets
C)Both inventory, current assets and equipment, plant assets
D)Neither inventory, current assets nor equipment, plant assets

Question 52

Consider the following case as you respond to the questions: HSO Corp.designs, manufactures and sells golf carts, scooters and similar vehicles.When a prospective client contacts one of their seven corporate offices, the office manager fills out an "intake questionnaire" to determine if HSO can meet the prospective client's needs.The office manager assembles a team of employees with expertise in design, production, marketing and accounting; the team reviews the intake questionnaire and determines if HSO can take on the order.If so, the office manager prepares a three-page written proposal for the prospective client; the proposal explains the responsibilities of both HSO and the client, along with a timeline and a budget.The proposal is forwarded to the prospective client electronically, and the client has ten calendar days to accept it.If HSO cannot take on the order, the prospective client receives an automatically generated form letter; if the prospective client does not accept the proposal within ten calendar days, they receive a different form letter.The new client remits half of the fee at the time the proposal is accepted, and HSO prepares weekly progress reports as the project moves forward.The reports are filed in HSO's database; a hard copy is sent to the client.On a monthly basis, HSO's office manager prepares a comprehensive status report for all current engagements.One week before each project is concluded, HSO bills the client for half of the remaining amount due; after the client has paid all outstanding invoices, HSO completes the work and bills the client for all remaining amounts.HSO delivers the finished product; the client must pay the full amount due within 30 days of the final invoice date.If the client pays within 15 days, HSO gives a 3% discount off the amount due.On April 1 of the current year, EPL Corporation accepted a three-page written proposal from HSO to design and build 10 customized golf carts for EPL's internal use.The total price for the order was $3400.In a systems flowchart of EPL's process, ___ is likely to be outside the system boundary.

A)HSO Corporation
B)HSO's office manager
C)EPL's purchasing department
D)EPL's accounting department

Question 53

Consider the following case as you respond to the questions: HSO Corp.designs, manufactures and sells golf carts, scooters and similar vehicles.When a prospective client contacts one of their seven corporate offices, the office manager fills out an "intake questionnaire" to determine if HSO can meet the prospective client's needs.The office manager assembles a team of employees with expertise in design, production, marketing and accounting; the team reviews the intake questionnaire and determines if HSO can take on the order.If so, the office manager prepares a three-page written proposal for the prospective client; the proposal explains the responsibilities of both HSO and the client, along with a timeline and a budget.The proposal is forwarded to the prospective client electronically, and the client has ten calendar days to accept it.If HSO cannot take on the order, the prospective client receives an automatically generated form letter; if the prospective client does not accept the proposal within ten calendar days, they receive a different form letter.The new client remits half of the fee at the time the proposal is accepted, and HSO prepares weekly progress reports as the project moves forward.The reports are filed in HSO's database; a hard copy is sent to the client.On a monthly basis, HSO's office manager prepares a comprehensive status report for all current engagements.One week before each project is concluded, HSO bills the client for half of the remaining amount due; after the client has paid all outstanding invoices, HSO completes the work and bills the client for all remaining amounts.HSO delivers the finished product; the client must pay the full amount due within 30 days of the final invoice date.If the client pays within 15 days, HSO gives a 3% discount off the amount due.On April 1 of the current year, EPL Corporation accepted a three-page written proposal from HSO to design and build 10 customized golf carts for EPL's internal use.The total price for the order was $3400.If EPL pays the final invoice within 15 days, the check will be for:

A)$1700.00
B)$850.00
C)$824.50
D)some other amount

Question 54

Consider the following case as you respond to the questions: HSO Corp.designs, manufactures and sells golf carts, scooters and similar vehicles.When a prospective client contacts one of their seven corporate offices, the office manager fills out an "intake questionnaire" to determine if HSO can meet the prospective client's needs.The office manager assembles a team of employees with expertise in design, production, marketing and accounting; the team reviews the intake questionnaire and determines if HSO can take on the order.If so, the office manager prepares a three-page written proposal for the prospective client; the proposal explains the responsibilities of both HSO and the client, along with a timeline and a budget.The proposal is forwarded to the prospective client electronically, and the client has ten calendar days to accept it.If HSO cannot take on the order, the prospective client receives an automatically generated form letter; if the prospective client does not accept the proposal within ten calendar days, they receive a different form letter.The new client remits half of the fee at the time the proposal is accepted, and HSO prepares weekly progress reports as the project moves forward.The reports are filed in HSO's database; a hard copy is sent to the client.On a monthly basis, HSO's office manager prepares a comprehensive status report for all current engagements.One week before each project is concluded, HSO bills the client for half of the remaining amount due; after the client has paid all outstanding invoices, HSO completes the work and bills the client for all remaining amounts.HSO delivers the finished product; the client must pay the full amount due within 30 days of the final invoice date.If the client pays within 15 days, HSO gives a 3% discount off the amount due.On April 1 of the current year, EPL Corporation accepted a three-page written proposal from HSO to design and build 10 customized golf carts for EPL's internal use.The total price for the order was $3400.For the transaction described, EPL's relational database will include a(n) ___ table with ___ as its primary key.

A)inventory; purchase order number
B)equipment; purchase order number
C)equipment; item identification number
D)inventory; item identification number

Question 55

Consider the following case as you respond to the questions: HSO Corp.designs, manufactures and sells golf carts, scooters and similar vehicles.When a prospective client contacts one of their seven corporate offices, the office manager fills out an "intake questionnaire" to determine if HSO can meet the prospective client's needs.The office manager assembles a team of employees with expertise in design, production, marketing and accounting; the team reviews the intake questionnaire and determines if HSO can take on the order.If so, the office manager prepares a three-page written proposal for the prospective client; the proposal explains the responsibilities of both HSO and the client, along with a timeline and a budget.The proposal is forwarded to the prospective client electronically, and the client has ten calendar days to accept it.If HSO cannot take on the order, the prospective client receives an automatically generated form letter; if the prospective client does not accept the proposal within ten calendar days, they receive a different form letter.The new client remits half of the fee at the time the proposal is accepted, and HSO prepares weekly progress reports as the project moves forward.The reports are filed in HSO's database; a hard copy is sent to the client.On a monthly basis, HSO's office manager prepares a comprehensive status report for all current engagements.One week before each project is concluded, HSO bills the client for half of the remaining amount due; after the client has paid all outstanding invoices, HSO completes the work and bills the client for all remaining amounts.HSO delivers the finished product; the client must pay the full amount due within 30 days of the final invoice date.If the client pays within 15 days, HSO gives a 3% discount off the amount due.On April 1 of the current year, EPL Corporation accepted a three-page written proposal from HSO to design and build 10 customized golf carts for EPL's internal use.The total price for the order was $3400.Which of the following would be considered a derivable amount?

A)The total cost for HSO to manufacture the golf carts
B)The balance in EPL's equipment account
C)The balance in EPL's cash account
D)All of these

Question 56

Consider the following case as you respond to the questions: HSO Corp.designs, manufactures and sells golf carts, scooters and similar vehicles.When a prospective client contacts one of their seven corporate offices, the office manager fills out an "intake questionnaire" to determine if HSO can meet the prospective client's needs.The office manager assembles a team of employees with expertise in design, production, marketing and accounting; the team reviews the intake questionnaire and determines if HSO can take on the order.If so, the office manager prepares a three-page written proposal for the prospective client; the proposal explains the responsibilities of both HSO and the client, along with a timeline and a budget.The proposal is forwarded to the prospective client electronically, and the client has ten calendar days to accept it.If HSO cannot take on the order, the prospective client receives an automatically generated form letter; if the prospective client does not accept the proposal within ten calendar days, they receive a different form letter.The new client remits half of the fee at the time the proposal is accepted, and HSO prepares weekly progress reports as the project moves forward.The reports are filed in HSO's database; a hard copy is sent to the client.On a monthly basis, HSO's office manager prepares a comprehensive status report for all current engagements.One week before each project is concluded, HSO bills the client for half of the remaining amount due; after the client has paid all outstanding invoices, HSO completes the work and bills the client for all remaining amounts.HSO delivers the finished product; the client must pay the full amount due within 30 days of the final invoice date.If the client pays within 15 days, HSO gives a 3% discount off the amount due.On April 1 of the current year, EPL Corporation accepted a three-page written proposal from HSO to design and build 10 customized golf carts for EPL's internal use.The total price for the order was $3400.A REA model of EPL's process will include which of the following in the first column: (i) cash, (ii) equipment, (iii) inventory?

A)I and II only
B)II and III only
C)I and III only
D)I, II and III

Question 57

Consider the following systems flowchart as you respond to the question: Based on the flowchart, which of the following statements is most true?

A)The company does not use any form of information technology in the process depicted.
B)At least three tasks are completed manually.
C)Both the company does not use any form of information technology in the process depicted and at least three tasks are completed manually are true.
D)Neither the company does not use any form of information technology in the process depicted nor at least three tasks are completed manually is true.

Question 58

Consider the following case as you respond to the questions: HSO Corp.designs, manufactures and sells golf carts, scooters and similar vehicles.When a prospective client contacts one of their seven corporate offices, the office manager fills out an "intake questionnaire" to determine if HSO can meet the prospective client's needs.The office manager assembles a team of employees with expertise in design, production, marketing and accounting; the team reviews the intake questionnaire and determines if HSO can take on the order.If so, the office manager prepares a three-page written proposal for the prospective client; the proposal explains the responsibilities of both HSO and the client, along with a timeline and a budget.The proposal is forwarded to the prospective client electronically, and the client has ten calendar days to accept it.If HSO cannot take on the order, the prospective client receives an automatically generated form letter; if the prospective client does not accept the proposal within ten calendar days, they receive a different form letter.The new client remits half of the fee at the time the proposal is accepted, and HSO prepares weekly progress reports as the project moves forward.The reports are filed in HSO's database; a hard copy is sent to the client.On a monthly basis, HSO's office manager prepares a comprehensive status report for all current engagements.One week before each project is concluded, HSO bills the client for half of the remaining amount due; after the client has paid all outstanding invoices, HSO completes the work and bills the client for all remaining amounts.HSO delivers the finished product; the client must pay the full amount due within 30 days of the final invoice date.If the client pays within 15 days, HSO gives a 3% discount off the amount due.On April 1 of the current year, EPL Corporation accepted a three-page written proposal from HSO to design and build 10 customized golf carts for EPL's internal use.The total price for the order was $3400.If EPL pays the final invoice 20 days after it is received, the total dollar amount debited to inventory for the golf carts will be:

A)less than $3400.
B)exactly $3400.
C)more than $3400.
D)the amount cannot be determined from the information given.

Question 59

Consider the following systems flowchart as you respond to the question: In the flowchart, the vendor:

A)Is outside the system boundary and therefore should be omitted.
B)Should be omitted because it has too few symbols in its column.
C)Is exposed to credit risk.
D)Should not ship goods before generating an invoice.

Question 60

Consider the following systems flowchart as you respond to the question: Assuming the actual process works exactly as depicted in the flowchart, ___ is in a position to steal from the company.

A)The inventory manager only
B)The accounting manager only
C)Either the inventory manager or the accounting manager
D)Neither the inventory manager nor the accounting manager

Question 61

OTA Corporation completed the following events as part of its acquisition/payment process.Record each one in general journal format; if an event does not require a journal entry, write "not applicable."
a.Received request to order 300 units of inventory with an expected cost of $1,400.
b.Purchased inventory on account, $1,500.Terms: 2/10, n/30.
c.Paid freight bill on inbound inventory, $300.
d.Received previously ordered inventory.
e.Returned previously purchased merchandise to supplier, $200.
f.Paid vendor total amount owed on the 15^th day after purchase.

Question 62

Accounting information systems have five generic elements.Identify and describe two examples of each element in the acquisition/payment process of PTW Corporation based on the following narrative:
PTW Corporation sells computer peripherals and related devices, such as printers, ink, flash drives and cables.PTW has a staff of three purchasing agents, each of whom is in charge of a specific set of inventory items.Each purchasing agent uses his/her discretion in making decisions about when to order inventory, how much inventory to order and which vendor to purchase from.When ordered inventory arrives at PTW, one of two receiving clerks matches the items, quantities and vendors against a copy of the purchase order, then either stocks the merchandise on the shelves or puts it in the storeroom.PTW's accountant receives a copy of the invoice from the vendor, as well as an e-mail from one of the receiving clerks indicating that merchandise has been received.The e-mail also includes the relevant purchase order number.The accountant files the invoice by date in a filing cabinet; once a week, the accountant removes invoices from the filing cabinet and pays them by check.To cut down on clutter in the office, the accountant shreds the vendor invoice after the check has been paid by the bank.The accountant also completes a bank reconciliation within two weeks of receiving the bank statement in the mail.

Question 63

Create all necessary database specifications (table names and field names) for PTW Corporation's acquisition/payment process based on the following narrative.Indicate primary keys by underlining and foreign keys with brackets.PTW Corporation sells computer peripherals and related devices, such as printers, ink, flash drives and cables.PTW has a staff of three purchasing agents, each of whom is in charge of a specific set of inventory items.Each purchasing agent uses his/her discretion in making decisions about when to order inventory, how much inventory to order and which vendor to purchase from.When ordered inventory arrives at PTW, one of two receiving clerks matches the items, quantities and vendors against a copy of the purchase order, then either stocks the merchandise on the shelves or puts it in the storeroom.PTW's accountant receives a copy of the invoice from the vendor, as well as an e-mail from one of the receiving clerks indicating that merchandise has been received.The e-mail also includes the relevant purchase order number.The accountant files the invoice by date in a filing cabinet; once a week, the accountant removes invoices from the filing cabinet and pays them by check.To cut down on clutter in the office, the accountant shreds the vendor invoice after the check has been paid by the bank.The accountant also completes a bank reconciliation within two weeks of receiving the bank statement in the mail.

Question 64

Homemade Crafts Company (HCC) sells collectible items such as dolls, jewelry, drink coasters and table linens.The company, which has five full-time employees, obtains its merchandise from independent contractors throughout the United States; they then mark up the products and sell them at craft stores and other outlets.Two of the five employees interact with the independent contractors, arranging inventory purchases based on demand for HCC's products and their own personal preferences.Those same employees use their personal vehicles to transport the inventory from HCC's main office to the retail locations where they will be sold.A third employee serves as the company's receptionist, while the fourth manages all aspects of the accounting information system.The company president is the fifth employee, and is in charge of administrative affairs such as hiring, performance evaluation and publicity.HCC purchases its entire inventory on account from the independent contractors, some of whom offer cash discount terms for early payment.The company accountant records purchases in Quickbooks using invoices submitted by the two employees in charge of purchasing.Quickbooks is set up to remind the accountant to pay invoices three days before their due date.At that time, the accountant prepares a check and uses a rubber stamp of the president's signature to sign the check before mailing it to the appropriate vendor.The receptionist, who also deposits cash receipts in the bank, reconciles the bank statement once a month.Identify three risk exposures for HCC's acquisition/payment process.For each risk exposure, indicate how it would be classified in Brown's risk taxonomy.Also suggest, for each risk exposure, two internal controls.Do not use the same internal control more than once.

Question 65

Several symbols that might be used in a systems flowchart of the acquisition/payment process are listed below.

Question 66

Several journal entries common to the acquisition/payment process are listed below.For each, explain what transaction the entry is recording.

Question 67

Consider the flowchart below (Figure TB13-4).Recommend improvements to the acquisition/payment process depicted.

Question 68

Using the format illustrated in the text, create a risk/control matrix for PTW Corporation's acquisition/payment process.The matrix should have three entries.PTW Corporation sells computer peripherals and related devices, such as printers, ink, flash drives and cables.PTW has a staff of three purchasing agents, each of whom is in charge of a specific set of inventory items.Each purchasing agent uses his/her discretion in making decisions about when to order inventory, how much inventory to order and which vendor to purchase from.When ordered inventory arrives at PTW, one of two receiving clerks matches the items, quantities and vendors against a copy of the purchase order, then either stocks the merchandise on the shelves or puts it in the storeroom.PTW's accountant receives a copy of the invoice from the vendor, as well as an e-mail from one of the receiving clerks indicating that merchandise has been received.The e-mail also includes the relevant purchase order number.The accountant files the invoice by date in a filing cabinet; once a week, the accountant removes invoices from the filing cabinet and pays them by check.To cut down on clutter in the office, the accountant shreds the vendor invoice after the check has been paid by the bank.The accountant also completes a bank reconciliation within two weeks of receiving the bank statement in the mail.

Question 69

Analyze the following narrative.Identify five risk exposures PTW faces in its acquisition/payment process; for each exposure, recommend two internal controls.PTW Corporation sells computer peripherals and related devices, such as printers, ink, flash drives and cables.PTW has a staff of three purchasing agents, each of whom is in charge of a specific set of inventory items.Each purchasing agent uses his/her discretion in making decisions about when to order inventory, how much inventory to order and which vendor to purchase from.When ordered inventory arrives at PTW, one of two receiving clerks matches the items, quantities and vendors against a copy of the purchase order, then either stocks the merchandise on the shelves or puts it in the storeroom.PTW's accountant receives a copy of the invoice from the vendor, as well as an e-mail from one of the receiving clerks indicating that merchandise has been received.The e-mail also includes the relevant purchase order number.The accountant files the invoice by date in a filing cabinet; once a week, the accountant removes invoices from the filing cabinet and pays them by check.To cut down on clutter in the office, the accountant shreds the vendor invoice after the check has been paid by the bank.The accountant also completes a bank reconciliation within two weeks of receiving the bank statement in the mail.

Question 70

Prepare a Level Zero data flow diagram of the acquisition/payment process described below.PTW Corporation sells computer peripherals and related devices, such as printers, ink, flash drives and cables.PTW has a staff of three purchasing agents, each of whom is in charge of a specific set of inventory items.Each purchasing agent uses his/her discretion in making decisions about when to order inventory, how much inventory to order and which vendor to purchase from.When ordered inventory arrives at PTW, one of two receiving clerks matches the items, quantities and vendors against a copy of the purchase order, then either stocks the merchandise on the shelves or puts it in the storeroom.PTW's accountant receives a copy of the invoice from the vendor, as well as an e-mail from one of the receiving clerks indicating that merchandise has been received.The e-mail also includes the relevant purchase order number.The accountant files the invoice by date in a filing cabinet; once a week, the accountant removes invoices from the filing cabinet and pays them by check.To cut down on clutter in the office, the accountant shreds the vendor invoice after the check has been paid by the bank.The accountant also completes a bank reconciliation within two weeks of receiving the bank statement in the mail.

Question 71

OTA Corporation completed the following events as part of its acquisition/payment process.For each event, indicate the document(s) OTA would use.(Some events may require more than one document; other transactions may require no documents.)
a.Received request to order 300 units of inventory with an expected cost of $1,400.
b.Purchased inventory on account, $1,500.Terms: 2/10, n/30.
c.Paid freight bill on inbound inventory, $300.
d.Received previously ordered inventory.
e.Returned previously purchased merchandise to supplier, $200.
f.Paid vendor total amount owed on the 15^th day after purchase.

Question 72

List, in order, the steps in the acquisition/payment process discussed in the text.

Question 73

Accounting information systems have five generic elements.Which one applies to each item listed below within the context of the acquisition/payment process?
a.Adequate documentation of the process
b.Check, from the viewpoint of the buyer
c.Inventory status report
d.Purchase order, from the viewpoint of the purchasing department
e.Purchase requisition, from the viewpoint of the purchasing department
f.Purchases/inventory junction file
g.Recording journal entries to purchase inventory
h.Separation of duties
i.Steps in the acquisition/payment process
j.Vendor master file

Question 74

In your own words, explain the role and purpose of the acquisition/payment process.Do not list the steps in the process as part of your response.