Your professor has asked you to complete a research paper concerning the link between the auditing profession and financial reporting standard setters and regulators

Problem 1-34 Your professor has asked you to complete a research paper concerning the link between the auditing profession and financial reporting standard setters and regulators.

Required:
For each independent situation, determine which regulating or standard-setting body you should research:
(a) The entity that sets accounting standards for the government sector.
(b) The entity that decides what is required to become a licensed CPA and conduct work as a CPA.
(c) The entity that sets standards for audits of publicly traded companies.
(d) The entity that sets financial reporting standards in the U.S.
(e) The entity that prepares and administers the Uniform CPA Exam.
(f) The entity that has ultimate authority over public company reports as well as accounting and reporting standards.


Click here for the solution: Your professor has asked you to complete a research paper concerning the link between the auditing profession and financial reporting standard setters and regulators

Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012

E15-18 Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012. To answer this question, you gather the following data:

2012 2011
Cash $ 58,000 $ 57,000
Short-term investments 31,000 —
Net receivables 110,000 132,000
Inventory 247,000 297,000
Total assets 585,000 535,000
Total current liabilities 255,000 222,000
Long-term note payable 46,000 48,000
Income from operations 180,000 153,000
Interest expense 52,000 39,000

Requirement
• 1.Compute the following ratios for 2012 and 2011:
o a.Current ratio
o b.Acid-test ratio
o c.Debt ratio
o d.Debt to equity ratio


Click here for the solution: Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012

A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each

A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each. The normal selling price of this product is $48.00 each. The normal unit product cost of product M97 is computed as follows:

Direct Materials..............$18.50
Direct Labor......................$1.20
Variable Manufacturing Overhead.......$8.40

Unit Product Cost= $32.00

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product M97 that would increase the variable costs by $5.70 per unit and that would require a one-time investment of $31,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.

Required:
Determine the effect on the company's total net operating income of accepting the special order.


Click here for the solution: A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each

The management of Tritt Company has asked its accounting department

P8-7 (Financial Statement Effects of FIFO and LIFO) The management of Tritt Company has asked its accounting department to describe the effect upon the company's financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2010 and 2011. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2010, and that the initial LIFO base would have been the inventory value on December 31, 2009. Presented below are the company's financial statements and other data for the years 2010 and 2011 when the FIFO method was employed.

Other data:
1. Inventory on hand at December 31, 2009, consisted of 40,000 units valued at $3.00 each.
2. Sales (all units sold at the same price in a given year):
2010—150,000 units @ $6.00 each
2011—180,000 units @ $7.50 each
3. Purchases (all units purchased at the same price in given year):
2010—150,000 units @ $3.50 each
2011—180,000 units @ $4.40 each
4. Income taxes at the effective rate of 40% are paid on December 31 each year.

Instructions
Name the account(s) presented in the financial statements that would have different amounts for 2011 if LIFO rather than FIFO had been used, and state the new amount for each account that is named.

Click here for the solution: The management of Tritt Company has asked its accounting department

Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts

10. Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts:

Cash = $5 million
Government securities = $7 million
Mortgage loans = $30 million
Other loans = $50 million
Fixed assets = $10 million
Intangible assets = $4 million
Loan-loss reserves = $5 million
Owners’ equity = $5 million
Trust-preferred securities = $3 million

Cash assets and government securities are not considered risky. Loans secured by real estate have a 50 percent weighting factor. All other loans have a 100 percent weighting factor in terms of riskiness.

a. Calculate the equity capital ratio.
b. Calculate the Tier 1 Ratio using risk-adjusted assets.
c. Calculate the Total Capital (Tier 1 plus Tier 2) Ratio using risk-adjusted assets.

Click here for the solution: Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts

(Real interest rates: financial analyst’s method) The CFO of your firm has asked you for an approximate answer to this question

(Real interest rates: financial analyst’s method) The CFO of your firm has asked you for an approximate answer to this question: What was the increase in real purchasing power associated with both 3-month Treasury bills and 30-year Treasury bonds? Assume that the current 3-month Treasury bill rate is 4.34 percent, the 30-year Treasury bond rate is 7.33 percent, and the inflation rate is 2.78 percent. Also, the chief financial officer wants a short explanation should the 3-month real rate turn out to be less than the 30-year real rate.

Click here for the solution: (Real interest rates: financial analyst’s method) The CFO of your firm has asked you for an approximate answer to this question

Patrick Ross, the president of Ross's Wild Game Company, has asked for information about the cost behavior of manufacturing overhead costs

Patrick Ross, the president of Ross's Wild Game Company, has asked for information about the cost behavior of manufacturing overhead costs. Specifically, he wants to know how much overhead cost is fixed and how much is variable. The following data are the only records available:

Month Machine-hours Overhead Costs
February 1,700 $20,500
March 2,800 22,250
April 1,000 19,950
May 2,500 21,500
June 3,500 23,950

Using the high-low method, determine the overhead cost equation. Use machine-hours as your cost driver.

Click here for the solution: Patrick Ross, the president of Ross's Wild Game Company, has asked for information about the cost behavior of manufacturing overhead costs

An investment center in Shellforth Corporation was asked to identify three proposals for its capital budget

An investment center in Shellforth Corporation was asked to identify three proposals for its capital budget. Details of those proposals are:

Capital Budget Proposals

A B C

Capital Required $80,000 $50,000 $150,000

Annual Operating Return 24,000 16,000 15,000

Shellforth uses residual income to evaluate all capital budgeting projects. Its minimum required return is 12 percent.

a. Assume you are the investment center manager. Which project do you prefer? Why?

b. Assume your investment center’s current ROI is 18 percent and that the president of Shellforth is thinking about using ROI for the investment center’s evaluation. Would your preferences for the projects listed above change? Why?

Click here for the solution: An investment center in Shellforth Corporation was asked to identify three proposals for its capital budget