Heavy Manufacturing Company is in the business of making steel plates,forming heavy metal slabs,and drilling and scoring metals.The company recently upgraded many of its forming machines.Fortunately,it was able to sell its old equipment at a reasonable price.The effect was that sales for the quarter are substantially improved over the same period in the prior year.The general transaction-related audit objective affected by this activity is
A)timing.
B)accuracy.
C)occurrence.
D)classification.

Question

Quizplus · Accepted Answer

The correct answer is classification because the sale of old equipment and the improvement in sales from the core business activities (making steel plates, forming heavy metal slabs, and drilling and scoring metals) should be classified differently in the financial statements. The sale of old equipment is a one-time transaction that does not relate to the core operational revenue, thus affecting the classification objective to ensure transactions are recorded in the proper accounts.

Heavy Manufacturing Company Is in the Business of Making Steel