Ethics Case 1-8 The auditors’ responsibility
It is the responsibility of management to apply accounting standards when communicating with investors and creditors through financial statements. Another group, auditors, serves as an independent intermediary to help ensure that management has in fact appropriately applied GAAP in preparing the company's financial statements. Auditors examine (audit) financial statements to express a professional, independent opinion. The opinion reflects the auditors' assessment of the statements' fairness, which is determined by the extent to which they are prepared in compliance with GAAP.
Some feel that it is impossible for an auditor to give an independent opinion on a company's financial statement because the auditors' fees for performing the audit are paid for by the company. In addition to the audit fee, quite often the auditor performs other services for the company such as preparing the company's income tax returns.
How might an auditor's ethics be challenged while performing an audit?
Click here for the solution: Ethics Case: It is the responsibility of management to apply accounting standards when communicating with investors and creditors through financial statements
Showing posts with label apply. Show all posts
Showing posts with label apply. Show all posts
Tuesday, April 12, 2016
Tuesday, November 10, 2015
(ACC 423 Week 5) The following defined pension data of Doreen Corp. apply to the year 2008
ACC 423 Week Five (Week 5)
Exercise 20-7 (E20-7) (Basic Pension Worksheet) The following defined pension data of Doreen Corp. apply to the year 2008.
Projected benefit obligation, 1/1/08 (before amendment) $560,000
Plan assets, 1/1/08 546,200
Prepaid/accrued pension cost (credit) 13,800
On January 1, 2008, Doreen Corp., through plan amendment, grants prior service benefits having a present value of 100,000
Settlement rate 9%
Service cost 58,000
Contributions (funding) 55,000
Actual (expected) return on plan assets 52,280
Benefits paid to retirees 40,000
Prior service cost amortization for 2008 17,000
Instructions
For 2008, prepare a pension worksheet for Doreen Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
Click here for the solution: (ACC 423 Week 5) The following defined pension data of Doreen Corp. apply to the year 2008
Exercise 20-7 (E20-7) (Basic Pension Worksheet) The following defined pension data of Doreen Corp. apply to the year 2008.
Projected benefit obligation, 1/1/08 (before amendment) $560,000
Plan assets, 1/1/08 546,200
Prepaid/accrued pension cost (credit) 13,800
On January 1, 2008, Doreen Corp., through plan amendment, grants prior service benefits having a present value of 100,000
Settlement rate 9%
Service cost 58,000
Contributions (funding) 55,000
Actual (expected) return on plan assets 52,280
Benefits paid to retirees 40,000
Prior service cost amortization for 2008 17,000
Instructions
For 2008, prepare a pension worksheet for Doreen Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
Click here for the solution: (ACC 423 Week 5) The following defined pension data of Doreen Corp. apply to the year 2008
Thursday, September 24, 2015
The following transactions apply to Artesia Co for 2012 its first year of operations
P7-26 The following transactions apply to Artesia Co for 2012 its first year of operations.
1. Received 40,000 cash from the issue of a short term note with a five percent interest rate and a one year maturity. The note was issued on April 1, 2012.
2. Received 120,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of six percent.
3. Paid 72,000 cash for other operating expenses during the year.
4. Paid the sales tax due on 100,000 of the services revenue for the year. Sales tax balance on the balance of the revenue is not due until 2013.
5. Recognized the accrued interest at December 31, 2012.
The following transactions apply to Artesia Co for 2013.
1. Paid the balance of the sales tax due for 2012.
2. Received $145,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of 6 percent.
3. Repaid the principal of the note and applicable interest on April 1, 2013.
4. Paid $85,000 of other operating expenses during the year.
5. Paid the sales tax due on $120,000 of the services revenue. The sales tax on the balance of the revenue is not due until 2014.
Required
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare an income statement, a statement of changes in stockholders equity a balance sheet and a statement of cash flow for 2012 and 2013.
Click here for the solution: The following transactions apply to Artesia Co for 2012 its first year of operations
1. Received 40,000 cash from the issue of a short term note with a five percent interest rate and a one year maturity. The note was issued on April 1, 2012.
2. Received 120,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of six percent.
3. Paid 72,000 cash for other operating expenses during the year.
4. Paid the sales tax due on 100,000 of the services revenue for the year. Sales tax balance on the balance of the revenue is not due until 2013.
5. Recognized the accrued interest at December 31, 2012.
The following transactions apply to Artesia Co for 2013.
1. Paid the balance of the sales tax due for 2012.
2. Received $145,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of 6 percent.
3. Repaid the principal of the note and applicable interest on April 1, 2013.
4. Paid $85,000 of other operating expenses during the year.
5. Paid the sales tax due on $120,000 of the services revenue. The sales tax on the balance of the revenue is not due until 2014.
Required
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare an income statement, a statement of changes in stockholders equity a balance sheet and a statement of cash flow for 2012 and 2013.
Click here for the solution: The following transactions apply to Artesia Co for 2012 its first year of operations
Sunday, August 23, 2015
GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types
MULTIPLE CHOICE
1. GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types?
2. In the Statement of Net Assets for proprietary funds, GASB requires a classified format where current assets, noncurrent assets, current liabilities and noncurrent liabilities are presented:
3. Funds that are used to account for activities similar to those often engaged in by profit-seeking businesses are:
4. The operations of agency funds will be included in which of the following statements?
Click here for the solution: GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types
1. GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types?
2. In the Statement of Net Assets for proprietary funds, GASB requires a classified format where current assets, noncurrent assets, current liabilities and noncurrent liabilities are presented:
3. Funds that are used to account for activities similar to those often engaged in by profit-seeking businesses are:
4. The operations of agency funds will be included in which of the following statements?
Click here for the solution: GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types
Friday, August 21, 2015
The following defined pension data of Rydell Corp. apply to the year 2010
The following defined pension data of Rydell Corp. apply to the year 2010. For 2010, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
Projected benefit obligation, 1/1/10 (before amendment) $560,000
Plan assets, 1/1/10 546,200
Pension liability 13,800
On January 1, 2010, Rydell Corp., through plan amendment,
grants prior service benefits having a present value of 120,000
Settlement rate 9%
Service cost 58,000
Contributions (funding) 65,000
Actual (expected) return on plan assets 52,280
Benefits paid to retirees 40,000
Prior service cost amortization for 2010 17,000
Instructions:
For 2010, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
Click here for the solution: The following defined pension data of Rydell Corp. apply to the year 2010
Projected benefit obligation, 1/1/10 (before amendment) $560,000
Plan assets, 1/1/10 546,200
Pension liability 13,800
On January 1, 2010, Rydell Corp., through plan amendment,
grants prior service benefits having a present value of 120,000
Settlement rate 9%
Service cost 58,000
Contributions (funding) 65,000
Actual (expected) return on plan assets 52,280
Benefits paid to retirees 40,000
Prior service cost amortization for 2010 17,000
Instructions:
For 2010, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
Click here for the solution: The following defined pension data of Rydell Corp. apply to the year 2010
Saturday, August 1, 2015
Apply the controlled and affiliated group rules to determine whether a parent-subsidiary controlled group
Apply the controlled and affiliated group rules to determine whether a parent-subsidiary controlled group or an affiliated group exists in each of the following independent situations. Circle Y for yes and N for no.
Situation Parent- Subsidiary Controlled Group? Affiliated Group?
Throughout the year, Parent owns 65% of the stock of SubCo. Y N Y N
Parent owns 70% of SubCo. The other 30% of SubCo stock is owned by Senior, a wholly owned subsidiary of Parent. Y N Y N
For 11 months, Parent owns 75% of the stock of SubCo. For the last month of the tax year, Parent owns 100% of the SubCo stock. Y N Y N
Click here for the solution: Apply the controlled and affiliated group rules to determine whether a parent-subsidiary controlled group
Situation Parent- Subsidiary Controlled Group? Affiliated Group?
Throughout the year, Parent owns 65% of the stock of SubCo. Y N Y N
Parent owns 70% of SubCo. The other 30% of SubCo stock is owned by Senior, a wholly owned subsidiary of Parent. Y N Y N
For 11 months, Parent owns 75% of the stock of SubCo. For the last month of the tax year, Parent owns 100% of the SubCo stock. Y N Y N
Click here for the solution: Apply the controlled and affiliated group rules to determine whether a parent-subsidiary controlled group
Wednesday, June 17, 2015
The following transactions apply to Puretz Consulting for 2010, the first year of operation
Problem 5-17 Accounting for uncollectible accounts-two cycles using the percent of revenue allowance method
The following transactions apply to Puretz Consulting for 2010, the first year of operation.
1. Recognized $75,000 of service revenue earned on account.
2. Collected $62,000 from accounts receivable.
3. Adjusted accounts to recognize uncollectible accounts expense. Puretz uses the allowance method of accounting for uncollectible accounts and estimates that uncollectible accounts expense will be 2 percent of sales on account.
The following transactions apply to Puretz Consulting for 2011.
1. Recognized $86,500 of service revenue on account.
2. Collected $85,000 from accounts receivable.
3. Determined that $1,120 of the accounts receivable were uncollectible and wrote them off.
4. Collected $500 of an account that had been previously written off.
5. Paid $52,600 cash for operating expenses.
6. Adjusted accounts to recognize uncollectible accounts expense for 2011. Puretz estimates that uncollectible accounts expense will be 1 percent of sales on account.
Required
Complete all the following requirements for 2010 and 2011. Complete all requirements for 2010 prior to beginning the requirements for 2011.
a. Identify the type of each transaction (asset source, asset use, asset exchange, or claims exchange).
b. Show the effect of each transaction on the elements of the financial statements, using a horizontal statements model like the one shown here. Use + for increase, - for decrease, and NA for not affected. Also, in the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example. (Hint: Closing entries do not affect the statements model.)
c. Organize the transaction data in accounts under an accounting equation.
d. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows.
Check:
c. Ending Accounts Receivable, 2010: $13,000
d. Net Income, 2011: $33,035
Click here for the solution: The following transactions apply to Puretz Consulting for 2010, the first year of operation
The following transactions apply to Puretz Consulting for 2010, the first year of operation.
1. Recognized $75,000 of service revenue earned on account.
2. Collected $62,000 from accounts receivable.
3. Adjusted accounts to recognize uncollectible accounts expense. Puretz uses the allowance method of accounting for uncollectible accounts and estimates that uncollectible accounts expense will be 2 percent of sales on account.
The following transactions apply to Puretz Consulting for 2011.
1. Recognized $86,500 of service revenue on account.
2. Collected $85,000 from accounts receivable.
3. Determined that $1,120 of the accounts receivable were uncollectible and wrote them off.
4. Collected $500 of an account that had been previously written off.
5. Paid $52,600 cash for operating expenses.
6. Adjusted accounts to recognize uncollectible accounts expense for 2011. Puretz estimates that uncollectible accounts expense will be 1 percent of sales on account.
Required
Complete all the following requirements for 2010 and 2011. Complete all requirements for 2010 prior to beginning the requirements for 2011.
a. Identify the type of each transaction (asset source, asset use, asset exchange, or claims exchange).
b. Show the effect of each transaction on the elements of the financial statements, using a horizontal statements model like the one shown here. Use + for increase, - for decrease, and NA for not affected. Also, in the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example. (Hint: Closing entries do not affect the statements model.)
c. Organize the transaction data in accounts under an accounting equation.
d. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows.
Check:
c. Ending Accounts Receivable, 2010: $13,000
d. Net Income, 2011: $33,035
Click here for the solution: The following transactions apply to Puretz Consulting for 2010, the first year of operation
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