Fall Semester Research Paper

Fall Semester Research Paper
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Fall Semester Research Paper

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27. Question 1 Selected accounts from the chart of accounts of Mercer Company are shown below 401 Sal...
Question 1 Selected accounts from the chart of accounts of Mercer Company are shown below 401 Sales Revenue 101 Cash 112 Accounts Receivable 412 Sales Returns and Allowances 414 Sales Discounts 120 Inventory 126 Supplies 505 Cost of Goods Sold 726 Salaries and Wages Expense 157 Equipment 201 Accounts Payable The cost of all merchandise sold was 60% of the sales price. During January, Mercer completed the following transactions. Jan. 3 Purchased merchandise on account from Gallagher Co. $10,400 4 Purchased supplies for cash $70 4 Sold merchandise on account to Wheeler $5,790, invoice no. 371, terms 1/10, n/30 5 Returned $300 worth of damaged goods purchased on account from Gallagher Co. on January 3 6 Made cash sales for the week totaling $3,170. 8 Purchased merchandise on account from Phegley Co. $6,000. 9 Sold merchandise on account to Linton Corp. $6,500, invoice no. 372, terms 1/10, n/30. 11 Purchased merchandise on account from Cora Co. $3,620. 13 Paid in full Gallagher Co. on account less a 2% discount. 13 Made cash sales for the week totaling $6,970. 15 Received payment from Linton Corp. for invoice no. 372. 15 Paid semi-monthly salaries of $14,200 to employees 17 Received payment from Wheeler for invoice no. 371 17 Sold merchandise on account to Delaney Co. $1,160, invoice no. 373, terms 1/10, n/30 19 Purchased equipment on account from Dozier Corp. $5,260 20 Cash sales for the week totaled $3,890. 20 Paid in full Phegley Co. on account less a 2% discount. 23 Purchased merchandise on account from Gallagher Co. $7,910 24 Purchased merchandise on account from Atchison Corp. $5,030 27 Made cash sales for the week totaling $4,430. 30 Received payment from Delaney Co. for invoice no. 373. 31 Paid semi-monthly salaries of $13,640 to employees. 31 Sold merchandise on account to Wheeler $9,260, invoice no. 374, terms 1/10, n/30. Mercer Company uses the following journals. 1. Sales journal. 2. Single-column purchases journal 3. Cash receipts journal. 4. Cash payments journal. 5. General journal.
28. 1. Which of the following procedures would an auditor most likely rely on to verify management’s...
1. Which of the following procedures would an auditor most likely rely on to verify management’s assertion of completeness?
a. Reviewing standard bank confirmations for indications of cash manipulations.
b. Comparing a sample of shipping documents to related sales invoices.
c. Observing the entity’s distribution of payroll checks.
d. Confirming a sample of recorded receivables by direct communication with the debtors.
2. In testing the existence assertion for an asset, an auditor ordinarily works from the
a. Financial statements to the potentially unrecorded items.
b. Potentially unrecorded items to the financial statements.
c. Accounting records to the supporting documents.
d. Supporting documents to the accounting records.
3. Which of the following statements concerning audit evidence is correct?
a. To be appropriate, audit evidence should be either persuasive or relevant but need not be both.
b. The measure of the reliability of audit evidence lies in the auditor’s judgment.
c. The difficulty and expense of obtaining audit evidence concerning an account balance are a valid basis for omitting the test.
d. An entity’s general ledger may be sufficient audit evidence to support the financial statements.
4. Which of the following procedures would provide the most reliable audit evidence?
a. Inquiries of the entity’s internal accounting staff.
b. Inspection of prenumbered entity purchase orders filed in the vouchers payable department.
c. Observation of procedures performed by the entity’s personnel on the entity’s trial balance.
d. Inspection of bank statements obtained directly from the entity’s financial institution.
5. Which of the following types of audit evidence is the least reliable?
a. Prenumbered purchase order forms prepared by the entity.
b. Bank statements obtained from the entity.
c. Test counts of inventory performed by the auditor.
d. Correspondence from the entity’s attorney about litigation.
6. Audit evidence can come in different forms with different degrees of reliability. Which of the following is the most persuasive type of evidence?
a. Bank statements obtained from the entity.
b. Computations made by the auditor.
c. Prenumbered entity sales invoices.
d. Vendors’ invoices included in the entity’s files.
7. An auditor would be least likely to use confirmations in connection with the examination of
a. Inventory held in a third- party warehouse.
b. Refundable income taxes.
c. Long- term debt.
d. Stockholders’ equity.
8. The assurance bucket is filled with all of the following types of evidence except
a. Test of controls.
b. The audit report.
c. Substantive analytical procedures.
d. Tests of details.
9. The primary objective of final analytical procedures is to
a. Obtain evidence from details tested to corroborate particular assertions.
b. Identify areas that represent specific risks relevant to the audit.
c. Assist the auditor in assessing the validity of the conclusions reached.
d. Satisfy doubts when questions arise about an entity’s ability to continue in existence.
10. The substantive analytical procedure known as trend analysis is best described by
a. The comparison, across time or to a benchmark, of relationships between financial statement accounts or between an account and nonfinancial data.
b. Development of a model to form an expectation using financial data, non-financial data, or both to test account balances or changes in account balances between accounting periods.
c. The examination of changes in an account over time.
d. The comparison of common- size financial statements over time.
11. The current file of the auditor’s working papers should generally include
a. A flowchart of the accounting system.
b. Organization charts.
c. A copy of the financial statements.
d. Copies of bond and note indentures.
12. The permanent file section of the working papers that is kept for each audit client most likely contains
a. Review notes pertaining to questions and comments regarding the audit work performed.
b. A schedule of time spent on the engagement by each individual auditor.
c. Correspondence with the entity’s legal counsel concerning pending litigation.
d. Narrative descriptions of the entity’s accounting system and control procedures.
13. An audit document that reflects the major components of an amount reported in the financial statements is referred to as a (n)
a. Lead schedule
b. Supporting schedule.
c. Audit control account.
d. Working trial balance.
29. Which one of the following is not an objective of a system of internal controls? a Safeguard com...
Which one of the following is not an objective of a system of internal controls? a Safeguard company assets. b Enhance the accuracy and reliability of accounting records c. Fairness of the financial statements d Reduce the risks of errors. All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act except a independent outside auditors must attest to the level of internal control b. companies must develop sound internal controls over financial reporting c. companies must continually assess the functionality of internal controls d independent outside auditors must eliminate redundant internal controls Internal controls are concerned with a only manual systems of accounting b the extent of government regulations c. safeguarding assets d. preparing income tax returns Internal controls are not designed to safeguard assets from a natural disasters b. employee theft c. robbery d unauthorized use.
30. Michael Mirer worked for Dawson Company for six months this year and earned $11,200. The other...
Michael Mirer worked for Dawson Company for six months this year and earned $11,200. The other six months, he earned $6,900 working for McBride company (a separate company). The amount of FUTA taxes to be paid on Mirer’s wages by the two companies is:
31. Anderson International Limited is evaluating a project in Erewhon. The project will create the...
Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows:
Year Cash Flow
0 –$ 1,330,000
1 505,000
2 570,000
3 465,000
4 420,000
All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are “blocked” and must be reinvested with the government for one year. The reinvestment rate for these funds is 5 percent.
If Anderson uses a required return of 15 percent on this project, what are the NPV and IRR of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places.
32. Travel Warehouse distributes suitcases to retail stores and extends credit terms of n/30 to all of..
Travel Warehouse distributes suitcases to retail stores and extends credit terms of n/30 to all of its customers. Travel Warehouse uses a perpetual inventory system and at the end of June its inventory consisted of 25 suitcases purchased at $30 each. During the month of July, the following merchandising transactions occurred: July 1 Purchased 50 suitcases on account for $30 each from Trunk Manufacturers, terms n/30, FOB destination. 2 The correct company paid $125 freight on the July 1 purchase. 4 Received $150 credit for five suitcases returned to Trunk Manufacturers because they were damaged. 10 Sold 45 suitcases on account to Satchel World for $55 each. 12 Issued a $275 credit for five suitcases returned by Satchel World because they were the wrong colour. The suitcases were returned to inventory. 15 Purchased 60 additional suitcases from Trunk Manufacturers for $27.50 each, terms n/30, FOB shipping point. 18 Paid $150 freight to AA Trucking Company for merchandise purchased from Trunk Manufacturers. 21 Sold 54 suitcases on account to Fly-By-Night for $55 each. 23 Gave Fly-By-Night a $110 credit for two returned suitcases. Th e suitcases had been damaged and were sent to the recyclers. 30 Paid Trunk Manufacturers for the July 1 purchase. 31 Received balance owing from Satchel World. Instructions (a) Record the transactions for the month of July for Travel Warehouse. (b) Create a T account for Merchandise Inventory. Post the opening balance and
33. Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $24,...
Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $24,000 and credit terms of 3/10, n/60. The merchandise had cost Mesa $16,000. Santa Fe paid within the discount period. Assume that both buyer and seller use a perpetual inventory system. 1. Prepare entries that the buyer should record for (a) the purchase and (b) the cash payment. 2. Prepare entries that the seller should record for (a) the sale and (b) the cash collection. 3. Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 8% and paid it back on the last day of the credit period. Compute how much the buyer saved by following this strategy. (Assume a 365-day year and round dollar amounts to the nearest cent, including computation of interest per day.)
34. Pope’s Garage had the following accounts and amounts in its financial statements on December 31...
Pope’s Garage had the following accounts and amounts in its financial statements on December 31, 2016. Assume that all balance sheet items reflect account balances at December 31, 2016, and that all income statement items reflect activities that occurred during the year then ended.
33,000 Accounts receivable Depreciation expense 11,700 24,500 Land 88,000 Cost of goods sold Retained earnings 56,600 11,300 Cash 68,500 Equipment 5,500 Supplies Accounts payable 22,500 20,200 Service revenue 2,200 Interest expense 8,000 Common Stock 17.016 Income tax expense 44,000 Accumulated depreciation 40,000 Long-term debt 13,400 Supplies expense 28,300 Merchandise inventory 166,000 Sales revenue requ a. Calculate the total current assets at December 31, 2016. Total current assets es and Stoc c. Calculate the earnings from operations (operating income) for the year ended December 31, 2016. Operating income d. Calculate the net income (or loss) for the year ended December 31, 2016. f If $17,500 of dividends had been declared and paid during the year, what was the January 1, 2016. balance of retained earnings? tained earnings
35. For each of the items below, identify which fund would
For each of the items below, identify which fund would be used to account for the item and provide a justification for your answer.
a. A city government issued general obligation bonds to finance the construction of a new jail.
b. A state government collected a tax of $1.00 per pack of cigarettes which is (by law) required to be used to fund health and fitness programs in public schools.
c. A county government expended $1 million to expand the water treatment plant.
d. A donor provided investments totaling $4 million to create an endowment, the earnings of which will be used to provide scholarships.
e. A donor provided $50,000 to be used to purchase newspaper and magazine subscriptions for the public library. There is no requirement that the original principal may not be spent.
f. A city government sold surplus street maintenance trucks for $10,000.
36. The cost of an asset is $1,200,000, and its residual value is $100,000. Estimated useful life of ...
The cost of an asset is $1,200,000, and its residual value is $100,000. Estimated useful life of the asset is five years. Calculate depreciation for the second year using the double-declining-balance method of depreciation. (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)
$440,000
$288,000
$240,000
$220,000
37. Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product
Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers:
38. DESCRIBE SOME EHTICAL DILEMMAS SALES PROFESSIONALS MAY ENCOUNTER. HOW CAN SALES COMPENSATION...
DESCRIBE SOME EHTICAL DILEMMAS SALES PROFESSIONALS MAY ENCOUNTER. HOW CAN SALES COMPENSATION PROGRAMS BE MODIED TO MINIMIZE ETHICAL DILEMMAS?
39. Explain where each of the following items would appear on
Explain where each of the following items would appear on
(1) A multiple step income statement, and on
(2) A single-step income statement:
(a) Gain on sale of equipment,
(b) Interest expense,
(c) Casualty loss from vandalism, and
(d) Cost of goods sold.
40. Indicate whether each of the following is identified with (1) an asset, (2) a liability, or (3)...
EX 1-8 Asset, liability, owner’s equity items
Indicate whether each of the following is identified with (1) an asset, (2) a liability, or (3) owner’s equity:
a. cash
b. wages expense
c. accounts payable
d. fees earned
e. supplies
f. land
41. On August 1, 2013, Limbaugh Communications issued $30 million of 10% nonconvertible bonds at 104. Th
On August 1, 2013, Limbaugh Communications issued $30 million of 10% nonconvertible bonds at 104. The bonds are due on July 31, 2033. Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $60, one share of Limbaugh CommunicationsAc€?c no par common stock. Interstate Containers purchased 20% of the bond issue. On August 1, 2013, the market value of the common stock was $58 per share and the market value of each warrant was $8.
In February 2024, when LimbaughAc€?cs common stock had a market price of $72 per share and the unamortized discount balance was $1 million, Interstate Containers exercised the warrants it held.

Required:
1. Prepare the journal entries on August 1, 2013, to record (a) the issuance of the bonds by Limbaugh and (b) the investment by Interstate. (If no journal entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in millions and round to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)

42. Plant-wide, department, and ABC indirect cost rates. Roadster Company (RC) designs and produces...
Plant-wide, department, and ABC indirect cost rates. Roadster Company (RC) designs and produces automotive parts. In 2017, actual variable manufacturing overhead is $280,000. RC’s simple costing system allocates variable manufacturing overhead to its three customers based on machine-hours and prices its contracts based on full costs. One of its customers has regularly complained of being charged noncompetitive prices, so RC’s controller Matthew Draper realizes that it is time to examine the consumption of overhead resources more closely. He knows that there are three main departments that consume overhead resources: design, production, and engineering. Interviews with the department personnel and examination of time records yield the following detailed information:

1. Compute the manufacturing overhead allocated to each customer in 2017 using the simple costing system that uses machine-hours as the allocation base.
2. Compute the manufacturing overhead allocated to each customer in 2017 using department-based manufacturing overhead rates.
3. Comment on your answers in requirements 1 and 2. Which customer do you think was complaining about being overcharged in the simple system? If the new department-based rates are used to price contracts, which customer(s) will be unhappy? How would you respond to these concerns?
4. How else might RC use the information available from its department-by-department analysis of manufacturing overhead costs?
5. RC’s managers are wondering if they should further refine the department-by-department costing system into an ABC system by identifying different activities within each department. Under what conditions would it not be worthwhile to further refine the department costing system into an ABC system?