Question

The purchase of fixed assets is likely to require different authorization processes than the purchase of inventory. Which of the following is not likely to be a part of the authorization of fixed assets?

a) specific authorization
b) inclusion in the capital budget
c) an investment analysis or feasibility analysis of the purchase
d) approval of the depreciation schedule

Answer 1

The authorization process for purchasing fixed assets includes specific authorization, inclusion in the capital budget, and an investment or feasibility analysis. Approval of the depreciation schedule is not part of the initial authorization process but comes later during financial accounting. Therefore correct option is D

Step-by-step explanation:

The purchase of fixed assets often involves a number of authorization processes to ensure the acquisition is necessary and beneficial for the company. When authorizing the purchase of fixed assets, the following are typically included in the process:

• Specific authorization from management or the board of directors to ensure that the purchase aligns with company policy and strategy.
• Inclusion in the capital budget, which provides a plan for the long-term investments of the company and indicates that funds have been allocated for the purchase.
• An investment analysis or feasibility analysis to evaluate the potential return on investment and to ensure that the asset will add value to the company.

However, the approval of the depreciation schedule is not typically part of the initial authorization process. Instead, it comes later when accounting for the fixed asset in financial records and determining its impact on financial statements over time.