Fall Success: Accounting Assignment Help for Student

Published: 11 months ago

Fall Success: Accounting Assignment Help for Student

22. 2.1 Why do we need to group data in the form of a frequency table? Explain briefly. 2.2 How are the.

2.1 Why do we need to group data in the form of a frequency table? Explain briefly. 2.2 How are the relative frequencies and percentages of categories obtained from the frequencies of categories? Illustrate with the help of an example. 2.3 The following data give the results of a sample survey. The letters A, B, and C represent the three categories. AB B A C B C C C A CB C A C C B C C A AB C C B C B A C A a. Prepare a frequency distribution table. b. Calculate the relative frequencies and percentages for all categories. c. What percentage of the elements in this sample belong to category B? d. What percentage of the elements in this sample belong to category A or C? e. Draw a bar graph for the frequency distribution

23. Ex 12-17 Present value of amounts due Tommy John is going to receive $1,000,000 in three years....

Ex 12-17  Present value of amounts due

Tommy John is going to receive $1,000,000 in three years. The current market rate of interest is 10%.

a.     Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually.

b.     Why is the present value less than the $1,000,000 to be received in the future?

24. Vermont Clock Works manufactures fine, handcrafted clocks. The firm uses a job-order costing sys-...

Vermont Clock Works manufactures fine, handcrafted clocks. The firm uses a job-order costing sys- tem, and manufacturing overhead is applied on the basis of direct-labor hours. Estimated manufacturing overhead for the year is $260,000. The firm employs 10 master clockmakers, who constitute the direct- labor force. Each of these employees is expected to work 2,000 hours during the year, which represents each employee’s practical capacity. The following events occurred during October.

a.      The firm purchased 2,900 board feet of mahogany veneer at $12 per board foot.

b.      Twenty brass counterweights were requisitioned for production. Each weight cost $27.

c.       Five gallons of glue were requisitioned for production. The glue cost $25 per gallon. Glue is treated as an indirect material.

d.      Depreciation on the clockworks building for October was $7,000.

e.       A $300 utility bill was paid in cash.

f.      Time cards showed the following usage of labor:

Job number G60: 12 grandfather’s clocks, 950 hours of direct labor Job number C81: 15 cuckoo clocks, 500 hours of direct labor

The master clockmakers (direct-labor personnel) earn $22 per hour.

g.      The October property tax bill for $890 was received but not yet paid in cash.

h.      The firm employs laborers who perform various tasks such as material handling and shop cleanup. Their wages for October amounted to $3,100.

i.       Job number G60, which was started in July, was finished in October. The total cost of the job was

$15,100.

j.      Nine of the grandfather’s clocks from job number G60 were sold in October for $1,600 each.

Required:

1.      Calculate the firm’s predetermined overhead rate for the year.

2.      Prepare journal entries to record the events described above.

25. Exercise 2-36 Cost of Goods Sold Allyson Ashley makes jet skis. During the year, Allyson...

Exercise 2-36  Cost of Goods Sold

Allyson Ashley makes jet skis. During the year, Allyson manufactured 94,000 jet skis. Finished goods inventory had the following units:

January 1                       6,800

December 31                 7,200

Required:

1.       How many jet skis did Allyson sell during the year?

2.       If each jet ski had a product cost of $2,200, what was the cost of goods sold last year?

26. The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at...

The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit Consider each case separately: 1a. What is the current annual operating income? b. What is the present breakeven point in revenues? Compute the new operating income for each of the following changes: 2. A $0.04 per unit increase in variable costs 3. A 10% increase in fixed costs and a 10% increase in units sold 4. A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable cost per unit, and a 40% increase in units sold Compute the new breakeven point in units for each of the following changes: 5. A 10% increase in fixed costs 6. A 10% increase in selling price and a $20,000 increase in fixed costs

27. 1. Based on concepts discussed in this chapter, describe the factors that have contributed to 3M s..

1. Based on concepts discussed in this chapter, describe the factors that have contributed to 3M s new product success. 2. Is 3M s product development process customer centered? Why or why not? 3. Considering the product life cycle, what challenges does 3Mface in managing its product portfolio? 4. Are there limits to how big 3M s product portfolio can grow? Explain. 5. Is it possible for 3M to maintain steady growth and profitability and raise that growth to much higher levels?

28. Suppose that the two bones found belonging to the male in questions 13b and 13c were his ulna, which

Suppose that the two bones found belonging to the male in questions 13b and 13c were his ulna, which is 21 cm long, as well as his humerus, which is 30 cm. Calculate his height using both the ulna and the humerus bone measurements. Show your work.

29. TAX FORM/RETURN PREPARATION PROBLEMS Melodic Musical Sales, Inc. is located at 5500 Fourth Avenue...

TAX FORM/RETURN PREPARATION PROBLEMS Melodic Musical Sales, Inc. is located at 5500 Fourth Avenue, City, ST 98765. The cor- poration uses the calendar year and accrual basis for both book and tax purposes. It is en- gaged in the sale of musical instruments with an employer identification number (EIN) of XX-2019017. The company incorporated on December 31, 2013, and began business on January 2, 2014. Table C:3-3 contains balance sheet information at January 1, 2017, and December 31, 2017. Table C:3-4 presents an unaudited GAAP income statement for 2017. These schedules are presented on a book basis. Other information follows the tables. Estimated Tax Payments (Form 2220): The corporation deposited estimated tax payments as follows: April 15, 2017 June 15, 2017 September 15, 2017 December 15, 2017 Total $100,000 200,000 235,000 235.000 $770,000 Taxable income in 2016 was $1.4 million, and the 2016 tax was S476,000. The corpora- tion earned its 2017 taxable income evenly throughout the year. Therefore, it does not use the annualization or seasonal methods.

30. Seth Feye established Reliance Financial Services on July 1, 2014. Reliance Financial Services...

Seth Feye established Reliance Financial Services on July 1, 2016. Reliance Financial Services offers financial planning advice to its clients. The effect of each transaction and the balances after each transaction for July follow:

31. (Objectives 9-6, 9-7, 9-8) Whitehead, CPA, is planning the audit of a newly obtained client,...

(Objectives 9-6, 9-7, 9-8) Whitehead, CPA, is planning the audit of a newly obtained client, Henderson Energy Corporation, for the year ended December 31, 2011. Henderson Energy is regulated by the state utility commission and because it is a publicly traded company the audited financial statements must be filed with the Securities and Exchange Commission (SEC). Henderson Energy is considerably more profitable than many of its competitors, largely due to its extensive investment in information technologies used in its energy distribution and other key business processes. Recent growth into rural markets, however, has placed some strain on 2011 operations. Additionally, Henderson Energy expanded its investments into speculative markets and is also making greater use of derivative and hedging transactions to mitigate some of its investment risks. Because of the complexities of the underlying accounting associated with these activities, Henderson Energy added several highly experienced accountants within its financial reporting team. Internal audit, which has direct reporting responsibility to the audit committee, is also actively involved in reviewing key accounting assumptions and estimates on a quarterly basis. Whitehead’s discussions with the predecessor auditor revealed that the client has experienced some difficulty in correctly tracking existing property, plant, and equipment items. This largely involves equipment located at its multiple energy production facilities. During the recent year, Henderson acquired a regional electric company, which expanded the number of energy production facilities. Whitehead plans to staff the audit engagement with several members of the firm who have experience in auditing energy and public companies. The extent of partner review of key accounts will be extensive.

Required

Based on the above information, identify factors that affect the risk of material mis - statement in the December 31, 2011 financial statements of Henderson Energy. Indicate whether the factor increases or decreases the risk of material misstatement. Also, identify which audit risk model component is affected by the factor. Use the format below:

(Objective 9-6)

AUDIT RISK MODEL COMPONENTS

Each of the four risks in the audit risk model is sufficiently important to merit detailed discussion. This section briefly discusses all four to provide an overview of the risks. Acceptable audit risk and inherent risk are discussed in greater detail later in this chapter. Control risk is examined in Chapter 10. Planned detection risk is the risk that audit evidence for a segment will fail to detect misstatements exceeding tolerable misstatement. There are two key points to know about planned detection risk. Planned detection risk is dependent on the other three factors in the model. It will change only if the auditor changes one of the other risk model factors. Planned detection risk determines the amount of substantive evidence that the auditor plans to accumulate, inversely with the size of planned detection risk. If planned detection risk is reduced, the auditor needs to accumulate more evidence to achieve the reduced planned risk. For example, in Table 9-2, planned detection risk (D) is low for inventory and warehousing, which causes planned evidence to be high. The opposite is true for payroll and personnel. In the preceding numerical example, the planned detection risk (PDR) of .05 means the auditor plans to accumulate evidence until the risk of misstatements exceeding tolerable misstatement is reduced to 5 percent. If control risk (CR) were .50 instead of 1.0, planned detection risk (PDR) would be .10, and planned evidence could therefore be reduced. Inherent risk measures the auditor’s assessment of the likelihood that there are material misstatements due to error or fraud in a segment before considering the effectiveness of internal control. If the auditor concludes that a high likelihood of misstatement exists, the auditor will conclude that inherent risk is high. Internal con trols are ignored in setting inherent risk because they are considered separately in the audit risk model as control risk. In Table 9-2, inherent risk (A) was assessed high for acquisi tions and payments and inventory and warehousing and lower for payroll and personnel and capital acquisition and repayment. Such assessments are typically based on discus sions with management, knowledge of the company, and results in audits of previous years. Inherent risk is inversely related to planned detection risk and directly related to evidence. Inherent risk for inventory and warehousing in Table 9-2 is high, which results in a lower planned detection risk and more planned evidence than if inherent risk were lower. We’ll examine this in greater detail later in the chapter. In addition to increasing audit evidence for a higher inherent risk in a given audit area, auditors commonly assign more experienced staff to that area and review the completed audit tests more thoroughly. For example, if inherent risk for inventory obsolescence is extremely high, it makes sense for the CPA firm to assign an experienced staff person to perform more extensive tests for inventory obsolescence and to more carefully review the audit results. Control risk measures the auditor’s assessment of whether misstatements exceeding a tolerable amount in a segment will be prevented or detected on a timely basis by the client’s internal controls. Assume that the auditor concludes that internal controls are completely ineffective to prevent or detect misstatements. That is the likely conclusion for inventory and warehousing (B) in Table 9-2 (p. 260). The auditor will therefore assign a high, perhaps 100 percent, risk factor to control risk. The more effective the internal controls, the lower the risk factor that can be assigned to control risk. The audit risk model shows the close relationship between inherent and control risks. For example, an inherent risk of 40 percent and a control risk of 60 percent affect planned detection risk and planned evidence the same as an inherent risk of 60 percent and a control risk of 40 percent. In both cases, multiplying IR by CR results in a de - nominator in the audit risk model of 24 percent. The combination of inherent risk and control risk is referred to in auditing standards as the risk of material misstatement. The auditor may make a combined assessment of the risk of material misstatement or the auditor can separately assess inherent risk and control risk. (Remember, inherent risk is the expectation of misstatements before considering the effect of internal control.) As with inherent risk, the relationship between control risk and planned detection risk is inverse, whereas the relationship between control risk and substantive evidence is direct. If the auditor concludes that internal controls are effective, planned detection risk can be increased and evidence therefore decreased. The auditor can increase planned detection risk when controls are effective because effective internal controls reduce the likelihood of misstatements in the financial statements. Before auditors can set control risk less than 100 percent, they must obtain an understanding of internal control, evaluate how well it should function based on the understanding, and test the internal controls for effectiveness. Obtaining an under - standing of internal control is required for all audits. The latter two are assessment of control risk steps that are required only when the auditor assesses control risk below maximum. Auditors of larger public companies choose to rely extensively on controls because they must test the effectiveness of internal control over financial reporting to satisfy Sarbanes–Oxley Act requirements. Auditors of other companies and other types of entities are also likely to rely on controls that are effective, especially when day-to-day trans action processing involves highly automated procedures. When controls are likely to be ineffective and inherent risk is high, the use of the audit risk model causes the auditor to decrease planned detection risk and thereby increase planned evidence. We devote the entire next chapter to understanding internal control, assessing control risk, and evaluating their impact on evidence requirements. Acceptable audit risk is a measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued. When auditors decide on a lower acceptable audit risk, they want to be more certain that the financial statements are not materially mis - stated. Zero risk is certainty, and a 100 percent risk is complete uncertainty. Complete assurance (zero risk) of the accuracy of the financial statements is not economically practical. Moreover, as we discussed in Chapter 6, the auditor cannot guarantee the complete absence of material misstatements. Often, auditors refer to the term audit assurance (also called overall assurance or level of assurance) instead of acceptable audit risk. Audit assurance or any of the equiva - lent terms is the complement of acceptable audit risk, that is, one minus acceptable audit risk. In other words, acceptable audit risk of 2 percent is the same as audit assurance of 98 percent. The concept of acceptable audit risk can be more easily understood by thinking in terms of a large number of audits, say, 10,000. What portion of these audits can include material misstatements without having an adverse effect on society? Certainly, the portion is below 10 percent. It is probably much closer to 1 percent or less. If an auditor believes that the appropriate percentage is 1 percent, then acceptable audit risk should be set at 1 percent, or perhaps lower, based on the specific circumstances. When employing the audit risk model, there is a direct relationship between acceptable audit risk and planned detection risk, and an inverse relationship between acceptable audit risk and planned evidence. If the auditor decides to reduce acceptable audit risk, planned detection risk is thereby reduced, and planned evidence must be increased. For a client with lower acceptable audit risk, auditors also often assign more experienced staff or review the audit files more extensively. There are important distinctions in how the auditor assesses the four risk factors in the audit risk model. For acceptable audit risk, the auditor decides the risk the CPA firm is willing to take that the financial statements are misstated after the audit is completed, based on certain client related factors. An example of a client where the auditor will accept very little risk (low acceptable audit risk) is for an initial public offering. We will discuss factors affecting acceptable audit risk shortly. Inherent risk and control risk are based on auditors’ expectations or predictions of client conditions. An example of a high inherent risk is inventory that has not been sold for two years. An example of a low control risk is adequate separation of duties between asset custody and accounting. The auditor cannot change these client conditions, but can only make a likelihood assessment. Inherent risk factors are discussed later in the chapter and control risk is covered in Chapter 10. Detection risk is dependent completely on the other three risks. It can be determined only after the auditor assesses the other three risks.