ACCOUNTING
Comprehensive Problem 1 Kelly Consulting
Comprehensive Problem 1 Kelly Pitney
VERSIONS:
Accounting, 23rd Edition SOLUTION
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2010
Accounting, 24th Edition SOLUTION
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2012
For ACT101 and ACT300 SOLUTION
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2008
Friday, July 1, 2011
Thursday, June 30, 2011
The primary objective of auditing is to add credibility to the financial statements prepared by management
ACCOUNTING
AUDITING - True or False / Multiple Choice / Matching Type
1. The primary objective of auditing is to add credibility to the financial statements prepared by management. True or False
2. Auditing is not possible in the absence of verifiable data. True or False
3. Compliance with “Statements on Auditing Standards” is mandatory for all auditors. True or False
4. The training called for by the first general standard comes solely from practical experience. True or False
5. The second general standard likens the auditor’s role in an audit to the role of an attorney in a legal case. True or False
6. The susceptibility of an assertion to a material misstatement, assuming that there are no controls, is: (Multiple Choice)
7. The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated is: (Multiple Choice)
8. The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity’s internal controls is: (Multiple Choice)
9. The least costly form of testing is usually: (Multiple Choice)
10. In practice, the use of analytical procedures has proven to be: (Multiple Choice)
11. Assume the preliminary audit strategy was based on a planned assessed level of control risk at a low level. Based on the final assessed level of control risk, the auditor would need to move substantive tests from interim to year-end and increase the extent of tests of details in order to accommodate a lower acceptable level of detection risk if: (Multiple Choice)
12. Tests of details of transactions generally use evidence from: (Multiple Choice)
13. The auditor would prepare a bank reconciliation using the bank statement obtained from the client and verify major reconciling items and mathematical accuracy when detection risk is: (Multiple Choice)
REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provided.
A. Existence or occurrence
B. Completeness
C. Valuation or allocation
D. Rights and obligations
E. Presentation and disclosure
14. Examine consignment agreements.
15. Examine check register for the month following year end for disbursements relating to the audit period.
16. Select high dollar items from the perpetual inventory records for inspection/counting during the physical inventory.
17. Select vendor accounts with high activity during the year, and low balance at year-end for confirmation.
18. Examine vehicle registration forms to determine the registered owner.
19. Measuring the amount of monetary errors in transactions and balances is a primary purpose of substantive tests. True or False
20. The extent of substantive tests, in practice means the length of time during which substantive tests are to be performed. True or False
Click here for the SOLUTION
AUDITING - True or False / Multiple Choice / Matching Type
1. The primary objective of auditing is to add credibility to the financial statements prepared by management. True or False
2. Auditing is not possible in the absence of verifiable data. True or False
3. Compliance with “Statements on Auditing Standards” is mandatory for all auditors. True or False
4. The training called for by the first general standard comes solely from practical experience. True or False
5. The second general standard likens the auditor’s role in an audit to the role of an attorney in a legal case. True or False
6. The susceptibility of an assertion to a material misstatement, assuming that there are no controls, is: (Multiple Choice)
7. The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated is: (Multiple Choice)
8. The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity’s internal controls is: (Multiple Choice)
9. The least costly form of testing is usually: (Multiple Choice)
10. In practice, the use of analytical procedures has proven to be: (Multiple Choice)
11. Assume the preliminary audit strategy was based on a planned assessed level of control risk at a low level. Based on the final assessed level of control risk, the auditor would need to move substantive tests from interim to year-end and increase the extent of tests of details in order to accommodate a lower acceptable level of detection risk if: (Multiple Choice)
12. Tests of details of transactions generally use evidence from: (Multiple Choice)
13. The auditor would prepare a bank reconciliation using the bank statement obtained from the client and verify major reconciling items and mathematical accuracy when detection risk is: (Multiple Choice)
REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provided.
A. Existence or occurrence
B. Completeness
C. Valuation or allocation
D. Rights and obligations
E. Presentation and disclosure
14. Examine consignment agreements.
15. Examine check register for the month following year end for disbursements relating to the audit period.
16. Select high dollar items from the perpetual inventory records for inspection/counting during the physical inventory.
17. Select vendor accounts with high activity during the year, and low balance at year-end for confirmation.
18. Examine vehicle registration forms to determine the registered owner.
19. Measuring the amount of monetary errors in transactions and balances is a primary purpose of substantive tests. True or False
20. The extent of substantive tests, in practice means the length of time during which substantive tests are to be performed. True or False
Click here for the SOLUTION
Monday, June 27, 2011
Selected balances from a company's financial statements are shown below. Calculate the following ratios for 2012
ACCOUNTING
Selected balances from a company's financial statements are shown below. Calculate the following ratios for 2012:
(a) accounts receivable turnover
(b) inventory turnover
(c) days' sales uncollected
(d) days' sales in inventory
(e) profit margin.
(f) return on total assets.
December 31 December 31
For the 2012 2011 Year 2012
Accounts receivable……………………. $ 27,000 $ 24,000
Merchandise inventory………………. 25,000 20,000
Total assets…………………………………. 296,000 244,000
Accounts payable………………………… 26,000 32,000
Salaries payable…………………………… 3,000 4,400
Sales (all on credit)………………………. $312,000
Cost of goods sold……………………….. 165,600
Salaries expenses………………………… 48,000
Other expenses…………………………… 75,000
Net income………………………………….. 24,000
Click here for the SOLUTION
Selected balances from a company's financial statements are shown below. Calculate the following ratios for 2012:
(a) accounts receivable turnover
(b) inventory turnover
(c) days' sales uncollected
(d) days' sales in inventory
(e) profit margin.
(f) return on total assets.
December 31 December 31
For the 2012 2011 Year 2012
Accounts receivable……………………. $ 27,000 $ 24,000
Merchandise inventory………………. 25,000 20,000
Total assets…………………………………. 296,000 244,000
Accounts payable………………………… 26,000 32,000
Salaries payable…………………………… 3,000 4,400
Sales (all on credit)………………………. $312,000
Cost of goods sold……………………….. 165,600
Salaries expenses………………………… 48,000
Other expenses…………………………… 75,000
Net income………………………………….. 24,000
Click here for the SOLUTION
Sunday, June 12, 2011
Sepracor, Inc., a U.S. drug company, reported the following information
ACCOUNTING
International Reporting Case
Sepracor, Inc., a U.S. drug company, reported the following information. The company prepares its financial statements in accordance with U.S. GAAP.
2007 (,000)
Current Liabilities $ 554,114
Convertible Subordinated Debt 648,020
Total Liabilities 1,228,313
Stockholders’ Equity 176,413
Net Income 58,333
Analysts attempting to compare Sepracor to international drug companies may face a challenge due to differences in accounting for convertible debt under iGAAP. Under IAS 32, Financial Instruments, convertible bonds, at issuance, must be classified separately into their debt and equity components based on estimated fair value.
INSTRUCTIONS:
(a) Compute the following rations for Sepracor, Inc. (assume that year-end balances approximate annual averages.)
(1) Return on assets.
(2) Return on stockholders equity
(3) Debt to asset ratio
(b) Briefly discuss the operating performance and financial position of Sepracor. Industry averages for these ratios in 2007were: ROA 3.5%; return on equity 16%; and debt to assets 75%. Based on this analysis would you make an investment in the company's 5% convertible bonds? Explain.
(c) Assume you want to compare Sepracor to an international company, like Bayer (which prepares its financial statements in accordance with iGAAP). Assuming that the fair value of the equity components of Sepracor's convertible bonds is $150,000, how would you adjust the analysis above to make valid comparisons between Sepracor and Bayer
Click here for the SOLUTION
International Reporting Case
Sepracor, Inc., a U.S. drug company, reported the following information. The company prepares its financial statements in accordance with U.S. GAAP.
2007 (,000)
Current Liabilities $ 554,114
Convertible Subordinated Debt 648,020
Total Liabilities 1,228,313
Stockholders’ Equity 176,413
Net Income 58,333
Analysts attempting to compare Sepracor to international drug companies may face a challenge due to differences in accounting for convertible debt under iGAAP. Under IAS 32, Financial Instruments, convertible bonds, at issuance, must be classified separately into their debt and equity components based on estimated fair value.
INSTRUCTIONS:
(a) Compute the following rations for Sepracor, Inc. (assume that year-end balances approximate annual averages.)
(1) Return on assets.
(2) Return on stockholders equity
(3) Debt to asset ratio
(b) Briefly discuss the operating performance and financial position of Sepracor. Industry averages for these ratios in 2007were: ROA 3.5%; return on equity 16%; and debt to assets 75%. Based on this analysis would you make an investment in the company's 5% convertible bonds? Explain.
(c) Assume you want to compare Sepracor to an international company, like Bayer (which prepares its financial statements in accordance with iGAAP). Assuming that the fair value of the equity components of Sepracor's convertible bonds is $150,000, how would you adjust the analysis above to make valid comparisons between Sepracor and Bayer
Click here for the SOLUTION
Monday, May 16, 2011
Comprehensive Problem 1 The Accounting Cycle
Monday, August 9, 2010
BYP 14-7 BYP14-7 BYP 14-7 BYP14-7 Tappit Corp. is a medium-sized wholesaler of automotive parts
ACC 280 / XACC 280
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 / XACC 280 Solution
Help in ACC 280
Help in XACC 280
Ethics Case
BYP 14-7 Tappit Corp. is a medium-sized wholesaler of automotive parts. It has 10 stockholders who have been paid a total of $1 million in cash dividends for 8 consecutive years. The board’s policy requires that, for this dividend to be declared, net cash provided by operating activities as reported in Tappit’s current year’s statement of cash flows must exceed $1 million. President and CEO Willie Morton’s job is secure so long as he produces annual operating cash flows to support the usual dividend. At the end of the current year, controller Robert Jennings presents president Willie Morton with some disappointing news: The net cash provided by operating activities is calculated by the indirect method to be only $970,000. The president says to Robert, “We must get that amount above $1 million. Isn’t there some way to increase operating cash flow by another $30,000?” Robert answers, “These figures were prepared by my assistant. I’ll go back to my office and see what I can do.” The president replies, “I know you won’t let me down, Robert.”
Upon close scrutiny of the statement of cash flows, Robert concludes that he can get the operating cash flows above $1 million by reclassifying a $60,000, 2-year note payable listed in the financing activities section as “Proceeds from bank loan—$60,000.” He will report the note instead as “Increase in payables—$60,000” and treat it as an adjustment of net income in the operating activities section. He returns to the president, saying, “You can tell the board to declare their usual dividend. Our net cash flow provided by operating activities is $1,030,000.”
“Good man, Robert! I knew I could count on you,” exults the president.
Instructions
(a) Who are the stakeholders in this situation?
(b) Was there anything unethical about the president’s actions? Was there anything unethical about the controller’s actions?
(c) Are the board members or anyone else likely to discover the misclassification?
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 / XACC 280 Solution
Help in ACC 280
Help in XACC 280
Ethics Case
BYP 14-7 Tappit Corp. is a medium-sized wholesaler of automotive parts. It has 10 stockholders who have been paid a total of $1 million in cash dividends for 8 consecutive years. The board’s policy requires that, for this dividend to be declared, net cash provided by operating activities as reported in Tappit’s current year’s statement of cash flows must exceed $1 million. President and CEO Willie Morton’s job is secure so long as he produces annual operating cash flows to support the usual dividend. At the end of the current year, controller Robert Jennings presents president Willie Morton with some disappointing news: The net cash provided by operating activities is calculated by the indirect method to be only $970,000. The president says to Robert, “We must get that amount above $1 million. Isn’t there some way to increase operating cash flow by another $30,000?” Robert answers, “These figures were prepared by my assistant. I’ll go back to my office and see what I can do.” The president replies, “I know you won’t let me down, Robert.”
Upon close scrutiny of the statement of cash flows, Robert concludes that he can get the operating cash flows above $1 million by reclassifying a $60,000, 2-year note payable listed in the financing activities section as “Proceeds from bank loan—$60,000.” He will report the note instead as “Increase in payables—$60,000” and treat it as an adjustment of net income in the operating activities section. He returns to the president, saying, “You can tell the board to declare their usual dividend. Our net cash flow provided by operating activities is $1,030,000.”
“Good man, Robert! I knew I could count on you,” exults the president.
Instructions
(a) Who are the stakeholders in this situation?
(b) Was there anything unethical about the president’s actions? Was there anything unethical about the controller’s actions?
(c) Are the board members or anyone else likely to discover the misclassification?
Click here for the SOLUTION
BYP1-7 BYP 1-7 BYP1-7 BYP 1-7 Wayne Terrago Wayne Terrago, controller for Robbin Industries, was reviewing production cost reports for the year
ACC 280 / XACC 280
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 / XACC 280 Solution
Help in ACC 280
Help in XACC 280
Ethics Case
BYP 1-7 Wayne Terrago, controller for Robbin Industries, was reviewing production cost reports for the year. One amount in these reports continued to bother him-advertising. During the year, the company had instituted an expensive advertising campaign to sell some of its slower-moving products. It was still too early to tell whether the advertising campaign was successful. There had been much internal debate as how to report advertising cost. The vice president of finance argued that advertising costs should be reported as a cost of production, just like direct materials and direct labor. He therefore recommended that this cost be identified as manufacturing overhead and reported as part of inventory costs until sold. Others disagreed. Terrago believed that this cost should be reported as an expense of the current period, based on the conservatism principle. Others argued that it should be reported as Prepaid Advertising and reported as a current asset.
The president finally had to decide the issue. He argued that these costs should be reported as inventory. His arguments were practical ones. He noted that the company was experiencing financial difficulty and expensing this amount in the current period might jeopardize a planned bond offering. Also, by reporting the advertising costs as inventory rather than as prepaid advertising, less attention would be directed to it by the financial community.
Instructions
(a) Who are the stakeholders in this situation?
(b) What are the ethical issues involved in this situation?
(c) What would you do if you were Wayne Terrago?
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 / XACC 280 Solution
Help in ACC 280
Help in XACC 280
Ethics Case
BYP 1-7 Wayne Terrago, controller for Robbin Industries, was reviewing production cost reports for the year. One amount in these reports continued to bother him-advertising. During the year, the company had instituted an expensive advertising campaign to sell some of its slower-moving products. It was still too early to tell whether the advertising campaign was successful. There had been much internal debate as how to report advertising cost. The vice president of finance argued that advertising costs should be reported as a cost of production, just like direct materials and direct labor. He therefore recommended that this cost be identified as manufacturing overhead and reported as part of inventory costs until sold. Others disagreed. Terrago believed that this cost should be reported as an expense of the current period, based on the conservatism principle. Others argued that it should be reported as Prepaid Advertising and reported as a current asset.
The president finally had to decide the issue. He argued that these costs should be reported as inventory. His arguments were practical ones. He noted that the company was experiencing financial difficulty and expensing this amount in the current period might jeopardize a planned bond offering. Also, by reporting the advertising costs as inventory rather than as prepaid advertising, less attention would be directed to it by the financial community.
Instructions
(a) Who are the stakeholders in this situation?
(b) What are the ethical issues involved in this situation?
(c) What would you do if you were Wayne Terrago?
Click here for the SOLUTION
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