2019 AICPA released Q's; Materiality question

The 125k materiality threshold doesn't really matter here, since all the answers below 125k, what matters is the related party transactions the enitity must disclose them even if they are trivial, coz these are like off balance sheet transactions, or sales to subsidiaries (double counts).

( we found a DOG in a remote area) is a nice mnemonic from far:
1 D : debt of others guaranteed
2 O : obligations with banks l/cs
3 G: guarantees to repurchase assets or recevivables
These must be disclosed even if they are remote not just probable or reasonably possible..
On the other hand the rest of the options is really self correcting (the entity will get caught eventually) assuming of course post b/s inquires and subsequent year audit..

When A) the suppliers would demand payment and they would pay so it would appear on the CF statement even without a payable.

C) well its an expense so the bottom line would still be the same, although if by miscellaneous they meant non operating the operating income would be overstated but the net is the same.

D) the allowance (although will understate current net income) eventually would overstate the next period income coz the 40k would be received, and no effect on accounts receivable.
And next year with overstated allowance they would not be able to record more so little to no bad debt exp. Would be recorded.

They simply shifted the income to next year ( assuming they wrote off the a/r then recovered them) happens all the time (coz they already achieved the target so all bonuses are earned;)
Better have the 40k as a head start next year.

Had any one of these 3 above 125k an except for opinion must be rendered, if the management won't correct it of course