The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence

E11-18 (Impairment) The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2007. On December 31, 2007, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future.

Instructions
(a) Prepare the journal entry (if any) to record the impairment at December 31, 2007.
(b) Where should the gain or loss (if any) on the write-down be reported in the income statement?
(c) At December 31, 2008, the equipment’s fair value increased to $260,000. Prepare the journal entry (if any) to record this increase in fair value.
(d) What accounting issues did management face in accounting for this impairment?


Click here for the solution: The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence

Sam is a senior auditor on the integrated audit of the Patriots Dynasty Corporation and is in charge of designing tests for the ICFR and financial statement audits

Problem 13-31 Sam is a senior auditor on the integrated audit of the Patriots Dynasty Corporation and is in charge of designing tests for the ICFR and financial statement audits. You are the staff auditor on the engagement. Sam asks you to make a start on the audit program for the human resources and payroll tests.

Required: Create a chart with two columns. Column A (shown below) lists different types of tests the team can utilize for testing ICFR and financial statement audits. In Column B give one example for each type of test listed in Column (a).

Column A Column B
Tests of controls for human resources transactions
Tests of controls for payroll cash disbursements
Dual purpose tests for human resources transactions
Dual purpose tests for payroll disbursements
Substantive analytical procedures for payroll-related expenses
Substantive analytical procedures for payroll-related liabilities
Tests of details of balances for payroll-related expenses
Tests of details of balances for payroll-related liabilities


Click here for the solution: Sam is a senior auditor on the integrated audit of the Patriots Dynasty Corporation and is in charge of designing tests for the ICFR and financial statement audits