Wigs Plus Company supplies wigs and hair care products to beauty salons throughout California and the Pacific Northwest

PR 9-2A Wigs Plus Company supplies wigs and hair care products to beauty salons throughout California and the Pacific Northwest. The accounts receivable clerk for Wigs Plus prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 2009:

Customer Balance Not Past Due 1-30 31-60 61-90 91-120 Over 120
Alpha Beauty 20,000 20,000
Blonde Wigs 11,000 11,000
Zahn’s Beauty 2,900 2,900
Subtotals 900,000 498,600 217,250 98,750 33,300 29,950 22,150

The following accounts were unintentionally omitted from the aging schedule:
Customer Due Date Balance
Sun Coast Beauty May 30, 2009 $ 2850
Paradise Beauty Store Sept 15, 2009 6050
Helix Hair Products Oct 17, 2009 800
Hairy’s Hair Care Oct 20, 2009 2000
Surf Images Nov 18, 2009 700
Oh The Hair Nov 29, 2009 3500
Mountain Coatings Dec 1, 2009 2250
Lasting Images Jan 9, 2010 7400

Wigs Plus has a past history of uncollectible accounts by age category, as follows:

Age Class Percent Uncollectible
Not Past Due 2%
1-30 Days past due 4
31-60 days past due 10
61-90 days past due 15
91-120 days past due 35
Over 120 days 80

Instructions:
1. Determine the number of days past due for each of the preceding accounts.
2. Complete the aging of receivables schedule
3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.
4. Assume that the allowance for doubtful accounts for Wigs Plus has a credit balance of $1,710 before adjustment on December 31, 2009. Journalize the adjustment for uncollectible account.

Click here for the solution: Wigs Plus Company supplies wigs and hair care products to beauty salons throughout California and the Pacific Northwest

You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet aircraft

Ethics Case 17-6 401(k) plan contributions

You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet aircraft. VXI began a defined contribution pension plan three years ago. The plan is a so-called 401(k) plan (named after the Tax Code section that specifies the conditions for the favorable tax treatment of these plans) that permits voluntary contributions by employees. Employees' contributions are matched with one dollar of employer contribution for every two dollars of employee contribution. Approximately $500,000 of contributions is deducted from employee paychecks each month for investment in one of three employer-sponsored mutual funds.

While performing some preliminary audit tests, you happen to notice that employee contributions to these plans usually do not show up on mutual fund statements for up to two months following the end of pay periods from which the deductions are drawn. On further investigation, you discover that when the plan was first begun, contributions were invested within one week of receipt of the funds. When you question the firm's investment manager about the apparent change in the timing of investments, you are told, “Last year Mr. Maxwell (the CFO) directed me to initially deposit the contributions in the corporate investment account. At the close of each quarter, we add the employer matching contribution and deposit the combined amount in specific employee mutual funds.”

Required:
1. What is Mr. Maxwell's apparent motivation for the change in the way contributions are handled?
2. Do you perceive an ethical dilemma?


Click here for the solution: You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet aircraft

SSG Cycles manufactures and distributes motorcycle parts and supplies

E 19-8 Stock options

SSG Cycles manufactures and distributes motorcycle parts and supplies. Employees are offered a variety of share-based compensation plans. Under its nonqualified stock option plan, SSG granted options to key officers on January 1, 2011. The options permit holders to acquire 12 million of the company's $1 par common shares for $11 within the next six years, but not before January 1, 2014 (the vesting date). The market price of the shares on the date of grant is $13 per share. The fair value of the 12 million options, estimated by an appropriate option pricing model, is $3 per option.

Required:
1. Determine the total compensation cost pertaining to the incentive stock option plan.
2. Prepare the appropriate journal entries to record compensation expense on December 31, 2011, 2012, and 2013.
3. Record the exercise of the options if all of the options are exercised on May 11, 2015, when the market price is $14 per share.


Click here for the solution: SSG Cycles manufactures and distributes motorcycle parts and supplies

Cohen and Single, LLP, are auditing the ICFR and financial statements of Copley and Sons, a public company that sells supplies to government agencies

Problem 11-28 Cohen and Single, LLP, are auditing the ICFR and financial statements of Copley and Sons, a public company that sells supplies to government agencies. Copley and Sons has a 12/31 fiscal year end. Cohen and Single conclude that the financial statements for the current and prior year are fairly stated. However, they found a material weakness in ICFR. There is a lack of separation of duties because the companys’ CFO has the ability to change passwords on employee’s computer identification numbers and has unlimited access to a computer terminal through which any journal entry can be entered without approval and review. Management’s evaluation of ICFR is also as of 12/31, and management’s report states that ICFR is not effective due to the computer security problem causing the lack of separation of duties. Draft Cohen and Single’s combined audit report with opinions on the financial statements and ICFR as described.


Click here for the solution: Cohen and Single, LLP, are auditing the ICFR and financial statements of Copley and Sons, a public company that sells supplies to government agencies

On August 31, the balance sheet of Donahue Veterinary Clinic showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Equipment $6,000

On August 31, the balance sheet of Donahue Veterinary Clinic showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Equipment $6,000, Accounts Payable $3,600, Common Stock $13,000, and Retained Earnings $700. During September, the following transactions occurred.

1. Paid $2,900 cash for accounts payable due.
2. Collected $1,300 of accounts receivable.
3. Purchased additional office equipment for $2,100, paying $800 in cash and the balance on account.
4. Earned revenue of $7,300, of which $2,500 is paid in cash and the balance is due in October.
5. Declared and paid a $400 cash dividend
6. Paid salaries $1,700, rent for September $900, and advertising expense $200.
7. Incurred utilities expense for month on account $170.
8. Received $10,000 from Capital Bank on a 6-month note payable.

(a) Prepare a tabular analysis of the September transactions beginning with August 31 balances. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 1-8 for example.)
(b) Prepare an income statement for September, a retained earnings statement for September, and a balance sheet at September 30.

Click here for the solution: On August 31, the balance sheet of Donahue Veterinary Clinic showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Equipment $6,000