Cheaney Corporation owns a number of cruise ships and a chain of hotels. The hotels, which have not been profitable, were discontinued on September 1, 2008. The 2008 operating results for the company were as follows.
Operating revenues $12,850,000
Operating expenses 8,700,000
Operating income $ 4,150,000
Analysis discloses that these data include the operating results of the hotel chain, which were: operating revenues $2,000,000 and operating expenses $2,400,000.The hotels were sold at a gain of $200,000 before taxes. This gain is not included in the operating results. During the year, Cheaney suffered an extraordinary loss of $800,000 before taxes, which is not included in the operating results. In 2008, the company had other revenues and gains of $100,000, which are not included in the operating results. The corporation is in the 30% income tax bracket.
Instructions:
Complete the condensed income statement.
Click here for the solution: Cheaney Corporation owns a number of cruise ships and a chain of hotels
Showing posts with label chain. Show all posts
Showing posts with label chain. Show all posts
Thursday, January 14, 2016
Friday, October 9, 2015
American Movieplex, a large movie theater chain, leases most of its theater facilities
Ethics Case 15-4 Leasehold improvements
American Movieplex, a large movie theater chain, leases most of its theater facilities. In conjunction with recent operating leases, the company spent $28 million for seats and carpeting. The question being discussed over breakfast on Wednesday morning was the length of the depreciation period for these leasehold improvements. The company controller, Sarah Keene, was surprised by the suggestion of Larry Person, her new assistant.
Keene: Why 25 years? We've never depreciated leasehold improvements for such a long period.
Person: I noticed that in my review of back records. But during our expansion to the Midwest, we don't need expenses to be any higher than necessary.
Keene: But isn't that a pretty rosy estimate of these assets' actual life? Trade publications show an average depreciation period of 12 years.
Required:
1. How would increasing the depreciation period affect American Movieplex's income?
2. Does revising the estimate pose an ethical dilemma?
3. Who would be affected if Person's suggestion is followed?
Click here for the solution: American Movieplex, a large movie theater chain, leases most of its theater facilities
American Movieplex, a large movie theater chain, leases most of its theater facilities. In conjunction with recent operating leases, the company spent $28 million for seats and carpeting. The question being discussed over breakfast on Wednesday morning was the length of the depreciation period for these leasehold improvements. The company controller, Sarah Keene, was surprised by the suggestion of Larry Person, her new assistant.
Keene: Why 25 years? We've never depreciated leasehold improvements for such a long period.
Person: I noticed that in my review of back records. But during our expansion to the Midwest, we don't need expenses to be any higher than necessary.
Keene: But isn't that a pretty rosy estimate of these assets' actual life? Trade publications show an average depreciation period of 12 years.
Required:
1. How would increasing the depreciation period affect American Movieplex's income?
2. Does revising the estimate pose an ethical dilemma?
3. Who would be affected if Person's suggestion is followed?
Click here for the solution: American Movieplex, a large movie theater chain, leases most of its theater facilities
Wednesday, September 23, 2015
Toyco, a retail toy chain, honors two bank credit cards and makes daily deposits of credit card sales in two credit card bank accounts
12-42 Toyco, a retail toy chain, honors two bank credit cards and makes
daily deposits of credit card sales in two credit card bank accounts.
(Bank A and Bank B). Each day, Toyco batches its credit card sales
slips, bank deposit slips and authorized sales return documents and
sends them to data processing for data entry. Each week detailed
computer printouts of the general ledger credit card cash accounts are
prepared. Credit card banks have been instructed to make an automatic
weekly transfer of cash to Toyco's general bank account. The credit card
banks charge back deposits that include sales to holders of stolen or
expired cards.
The auditor examining Toyco financial statements has obtained copies of the detailed general ledger cash account printouts, a summary of the bank statements and the manually prepared bank reconciliations, all for the week of December 31, as shown here. (see attachment)
Required:
Review the December 31 bank reconciliation and the related information contained in the following schedules and describe what actions the auditor should take to obtain satisfaction for each item on the bank reconciliation. Assume that all amounts are material and that all computations are accurate. Organize your answer sheet as follows, using the code contained on the bank reconciliation:
Code Number Actions to Be Taken by the Auditor to Gain Satisfaction
Click here for the solution: Toyco, a retail toy chain, honors two bank credit cards and makes daily deposits of credit card sales in two credit card bank accounts
The auditor examining Toyco financial statements has obtained copies of the detailed general ledger cash account printouts, a summary of the bank statements and the manually prepared bank reconciliations, all for the week of December 31, as shown here. (see attachment)
Required:
Review the December 31 bank reconciliation and the related information contained in the following schedules and describe what actions the auditor should take to obtain satisfaction for each item on the bank reconciliation. Assume that all amounts are material and that all computations are accurate. Organize your answer sheet as follows, using the code contained on the bank reconciliation:
Code Number Actions to Be Taken by the Auditor to Gain Satisfaction
Click here for the solution: Toyco, a retail toy chain, honors two bank credit cards and makes daily deposits of credit card sales in two credit card bank accounts
Sunday, September 20, 2015
Cheaney Corporation owns a number of cruise ships and a chain of hotels
P14-8A Cheaney Corporation owns a number of cruise ships and a chain of
hotels. The hotels, which have not been profitable, were discontinued on
September 1, 2008. The 2008 operating results for the company were as
follows.
Operating revenues $12,850,000
Operating expenses 8,700,000
Operating income $ 4,150,000
Analysis discloses that these data include the operating results of the hotel chain, which were: operating revenues $2,000,000 and operating expenses $2,400,000. The hotels were sold at a gain of $200,000 before taxes. This gain is not included in the operating results. During the year, Cheaney suffered an extraordinary loss of $800,000 before taxes, which is not included in the operating results. In 2008, the company had other revenues and gains of $100,000, which are not included in the operating results. The corporation is in the 30% income tax bracket.
Instructions
Prepare a condensed income statement.
Click here for the solution: Cheaney Corporation owns a number of cruise ships and a chain of hotels
Operating revenues $12,850,000
Operating expenses 8,700,000
Operating income $ 4,150,000
Analysis discloses that these data include the operating results of the hotel chain, which were: operating revenues $2,000,000 and operating expenses $2,400,000. The hotels were sold at a gain of $200,000 before taxes. This gain is not included in the operating results. During the year, Cheaney suffered an extraordinary loss of $800,000 before taxes, which is not included in the operating results. In 2008, the company had other revenues and gains of $100,000, which are not included in the operating results. The corporation is in the 30% income tax bracket.
Instructions
Prepare a condensed income statement.
Click here for the solution: Cheaney Corporation owns a number of cruise ships and a chain of hotels
Tuesday, September 15, 2015
Cheaney Corporation owns a number of cruise ships and a chain of hotels
P15-8A Cheaney Corporation owns a number of cruise ships and a chain of
hotels. The hotels, which have not been profitable, were discontinued on
September 1, 2008. The 2008 operating results for the company were as
follows.
Operating revenues $12,850,000
Operating expenses 8,700,000
Operating income $ 4,150,000
Analysis discloses that these data include the operating results of the hotel chain, which were: operating revenues $2,000,000 and operating expenses $2,400,000. The hotels were sold at a gain of $200,000 before taxes. This gain is not included in the operating results. During the year, Cheaney suffered an extraordinary loss of $800,000 before taxes, which is not included in the operating results. In 2008, the company had other revenues and gains of $100,000, which are not included in the operating results. The corporation is in the 30% income tax bracket.
Instructions
Prepare a condensed income statement.
Click here for the solution: Cheaney Corporation owns a number of cruise ships and a chain of hotels
Operating revenues $12,850,000
Operating expenses 8,700,000
Operating income $ 4,150,000
Analysis discloses that these data include the operating results of the hotel chain, which were: operating revenues $2,000,000 and operating expenses $2,400,000. The hotels were sold at a gain of $200,000 before taxes. This gain is not included in the operating results. During the year, Cheaney suffered an extraordinary loss of $800,000 before taxes, which is not included in the operating results. In 2008, the company had other revenues and gains of $100,000, which are not included in the operating results. The corporation is in the 30% income tax bracket.
Instructions
Prepare a condensed income statement.
Click here for the solution: Cheaney Corporation owns a number of cruise ships and a chain of hotels
Sunday, September 6, 2015
Grande Stores is a large discount catalog department store chain
Auditing P 7-41 Grande Stores is a large discount catalog department store chain. The company has recently expanded from 6 to 43 stores by borrowing from several large financial institutions and from a public offering of common stock. A recent investigation has disclosed that Grande materially overstated net income. This was accomplished by understating accounts payable and recording fictitious supplier credits that further reduced accounts payable. An SEC investigation was critical of the evidence gathered by Grandes audit firm, Montgomery & Ross, in testing accounts payable and the supplier credits.
The following is a description of some of the fictitious supplier credits and unrecorded amounts in accounts payable, as well as the audit procedures.
AND SO ON
Required:
Identify deficiencies in the sufficiency and appropriateness of the evidence gathered in the audit of accounts payable of Grande Stores.
Click here for the solution: Grande Stores is a large discount catalog department store chain
The following is a description of some of the fictitious supplier credits and unrecorded amounts in accounts payable, as well as the audit procedures.
AND SO ON
Required:
Identify deficiencies in the sufficiency and appropriateness of the evidence gathered in the audit of accounts payable of Grande Stores.
Click here for the solution: Grande Stores is a large discount catalog department store chain
Evergreen Industries operates a chain of lumber stores
Evergreen Industries operates a chain of lumber stores. In 2010, corporate management examined industry-level data and determined the following performance targets for lumber retail stores:
Asset turnover 1.9
Profit margin 7.0%
The actual 2010 results for the company’s lumber retail stores are as follows:
Total assets at the beginning of year $10,200,000
Total assets at end of year 12,300,000
Sales 28,250,000
Operating expenses 25,885,000
a. For 2010, how did the lumber retail stores perform relative to their industry norms?
b. Which, as indicated by the performance measures, are the most likely areas to improve performance in the retail lumber stores?
c. What are the advantages and disadvantages of setting a performance target at the start of the year compared with one that is determined at the end of the year based on actual industry performance?
Click here for the solution: Evergreen Industries operates a chain of lumber stores
Asset turnover 1.9
Profit margin 7.0%
The actual 2010 results for the company’s lumber retail stores are as follows:
Total assets at the beginning of year $10,200,000
Total assets at end of year 12,300,000
Sales 28,250,000
Operating expenses 25,885,000
a. For 2010, how did the lumber retail stores perform relative to their industry norms?
b. Which, as indicated by the performance measures, are the most likely areas to improve performance in the retail lumber stores?
c. What are the advantages and disadvantages of setting a performance target at the start of the year compared with one that is determined at the end of the year based on actual industry performance?
Click here for the solution: Evergreen Industries operates a chain of lumber stores
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