1. Would it be considered unusal to find debits to fixedassets coming from a jou

Question

1. Would it be considered unusal to find debits to fixedassets coming from a journal entry source rather than a purchasejournal? Explain. 2. Would it be normal to find entried to accumulatedepreciation and depreciation expense to come from a journal entrysource rather than another source? 3. Assume you were auditing FedEx and in your sample of debitsto fixed assets, you find an entry for $500,000 with the followingnotation: "Capitalization of line capacity per CFO, amounts wereoriginally incorrected recorded as an expense." Explain what you would do to complete the audit of this item.What evidence would you need to see to either corroborate orquestion the entry? 1. Would it be considered unusal to find debits to fixedassets coming from a journal entry source rather than a purchasejournal? Explain. 2. Would it be normal to find entried to accumulatedepreciation and depreciation expense to come from a journal entrysource rather than another source? 3. Assume you were auditing FedEx and in your sample of debitsto fixed assets, you find an entry for $500,000 with the followingnotation: "Capitalization of line capacity per CFO, amounts wereoriginally incorrected recorded as an expense." Explain what you would do to complete the audit of this item.What evidence would you need to see to either corroborate orquestion the entry?

Explanation / Answer

1. Would it be considered unusal to find debits tofixed assets coming from a journal entry source rather than apurchase journal? Explain. No it wouldn't be unusual to find debits to fixed assetscoming from a journal entry rather than a purchase journal.Purchase journal is generally made for Raw materials purchased incase of manufacturing company Or for merchandised inventory forresale in case of trading concern. If debits is made through purchase journal then cost of goodswould be increased and it would be difficult to physically verifythe period-end inventory for raw materials or for merchandisedinventory. Consequently a tru and fair view of the financialaffairs of the company wouldn't reflect in financial statementsviz. Income Statement and Balance Sheet. 3. Assume you were auditing FedEx and in your sampleof debits to fixed assets, you find an entry for $500,000 with thefollowing notation: "Capitalization of line capacity per CFO,amounts were originally incorrected recorded as anexpense." Explain what you would do to complete the audit ofthis item. What evidence would you need to see to eithercorroborate or question the entry? I would like to see the following documents:
1)Purchase order issued to supplier and its authorization bythe appropriate authority 2)delivery note from the supplier 3)goods received note prepared by the Fedex logisticdepartment 4) Supplier's Invoice for the line capacity in tune withpurchase order issued 5) the payment voucher 6) the previous voucher showing debit to expense account

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