Comprehensive Questions 11-21 (Assessing Control Risk) An auditor is required to obtain a sufficient understanding of each of the components of an entity’s system of internal control to plan the audit of the entity’s financial statements and to assess control risk for the assertions embodied in the account balance, transaction class, and disclosure components of the financial statements.
Required
a. Explain the reasons an auditor may assess control risk at the maximum level for one or more assertions embodied in an account balance.
b. What must an auditor do to support assessing control risk at less than the maximum level when the auditor has determined that controls have been placed in operation?
c. What should an auditor consider when seeking a further reduction in the planned assessed level of control risk?
d. What are an auditor’s documentation requirements concerning an entity’s system of internal control and the assessed level of control risk?
AICPA (adapted)
Click here for the solution: Comprehensive Questions 11-21 (Assessing Control Risk) An auditor is required to obtain a sufficient understanding of each of the components
Showing posts with label components. Show all posts
Showing posts with label components. Show all posts
Tuesday, November 10, 2015
Identify the five components that comprise pension expense
Chapter 20: Question 10
Identify the five components that comprise pension expense. Briefly explain the nature of each component.
Click here for the solution: Identify the five components that comprise pension expense
Identify the five components that comprise pension expense. Briefly explain the nature of each component.
Click here for the solution: Identify the five components that comprise pension expense
Wednesday, October 14, 2015
What is a CAFR? What are its main components?
12. What is a CAFR? What are its main components?
Click here for the solution: What is a CAFR? What are its main components?
Click here for the solution: What is a CAFR? What are its main components?
Friday, October 9, 2015
Presented here are the components in Korinek Company’s income statement
ACC 290 Week 5 Assignment
BE5-1 Presented here are the components in Korinek Company’s income statement. Determine the missing amounts.
Sales Cost of Gross Operating Net
Revenue Goods Sold Profit Expenses Income
$ 71,200 (b) $ 30,000 (d) $12,100
$108,000 $70,000 (c) (e) $29,500
(a) $71,900 $109,600 $46,200 (f )
Click here for the solution: Presented here are the components in Korinek Company’s income statement
BE5-1 Presented here are the components in Korinek Company’s income statement. Determine the missing amounts.
Sales Cost of Gross Operating Net
Revenue Goods Sold Profit Expenses Income
$ 71,200 (b) $ 30,000 (d) $12,100
$108,000 $70,000 (c) (e) $29,500
(a) $71,900 $109,600 $46,200 (f )
Click here for the solution: Presented here are the components in Korinek Company’s income statement
Wednesday, September 23, 2015
The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones
Product costing in an ABC system (9th Edition)
The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones. Consider the following data regarding component T24:
The activities required to build the component follow:
Requirements
1. Complete the missing items for the two tables.
2. Why might managers favor this ABC system instead of August's older system, which allocated all conversion costs on the basis of direct labor?
Click here for the solution: The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones
The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones. Consider the following data regarding component T24:
The activities required to build the component follow:
Requirements
1. Complete the missing items for the two tables.
2. Why might managers favor this ABC system instead of August's older system, which allocated all conversion costs on the basis of direct labor?
Click here for the solution: The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones
Friday, August 21, 2015
Garth Brooks Specialty Company, a division of Fresh Horses Inc., manufactures three models of gear shift components for bicycles
P9-9 (Statement and Note Disclosure, LCM, and Purchase Commitment) Garth Brooks Specialty Company, a division of Fresh Horses Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets. Since beginning operations in 1975, Brooks has used normal absorption costing and has assumed a first-in, first-out cost flow in its perpetual inventory system. The balances of the inventory accounts at the end of Brooks’s fiscal year, November 30, 2007, are shown below. The inventories are stated at cost before any year-end adjustments.
Finished goods $647,000
Work-in-process 112,500
Raw materials 240,000
Factory supplies 69,000
The following information relates to Brooks’s inventory and operations.
1. The finished goods inventory consists of the items analyzed below.
Cost Market
Down tube shifter
Standard model $ 67,500 $ 67,000
Click adjustment model 94,500 87,000
Deluxe model 108,000 110,000
Total down tube shifters 270,000 264,000
Bar end shifter
Standard model 83,000 90,050
Click adjustment model 99,000 97,550
Total bar end shifters 182,000 187,600
Head tube shifter
Standard model 78,000 77,650
Click adjustment model 117,000 119,300
Total head tube shifters 195,000 196,950
Total finished goods $647,000 $648,550
2. One-half of the head tube shifter finished goods inventory is held by catalog outlets on consignment.
3. Three-quarters of the bar end shifter finished goods inventory has been pledged as collateral for a bank loan.
4. One-half of the raw materials balance represents derailleurs acquired at a contracted price 20 percent above the current market price. The market value of the rest of the raw materials is $127,400.
5. The total market value of the work-in-process inventory is $108,700.
6. Included in the cost of factory supplies are obsolete items with an historical cost of $4,200. The market value of the remaining factory supplies is $65,900.
7. Brooks applies the lower-of-cost-or-market method to each of the three types of shifters in finished goods inventory. For each of the other three inventory accounts, Brooks applies the lower-of-cost-or-market method to the total of each inventory account.
8. Consider all amounts presented above to be material in relation to Brooks’ financial statements taken as a whole.
Instructions
(a) Prepare the inventory section of Brooks’s balance sheet as of November 30, 2007, including any required note(s).
(b) Without prejudice to your answer to (a), assume that the market value of Brooks’ inventories is less than cost. Explain how this decline would be presented in Brooks’ income statement for the fiscal year ended November 30, 2007.
(c) Assume that Brooks has a firm purchase commitment for the same type of derailleur included in the raw materials inventory as of November 30, 2007, and that the purchase commitment is at a contracted price 15% greater than the current market price. These derailleurs are to be delivered to Brooks after November 30, 2007. Discuss the impact, if any, that this purchase commitment would have on Brooks’s financial statements prepared for the fiscal year ended November 30, 2007.
Click here for the solution: Garth Brooks Specialty Company, a division of Fresh Horses Inc., manufactures three models of gear shift components for bicycles
Friday, August 14, 2015
Following are components of the M1 money supply at the end of last year
4. Following are components of the M1 money supply at the end of last year. What will be the size of the M1 money supply at the end of next year if currency grows by 10 percent, demand deposits grow by 5 percent, other checkable deposits grow by 8 percent, and the
amount of traveler’s checks stays the same?
Currency $700 billion
Demand deposits $300 billion
Other checkable deposits $300 billion
Traveler’s checks $10 billion
Click here for the solution: Following are components of the M1 money supply at the end of last year
amount of traveler’s checks stays the same?
Currency $700 billion
Demand deposits $300 billion
Other checkable deposits $300 billion
Traveler’s checks $10 billion
Click here for the solution: Following are components of the M1 money supply at the end of last year
Thursday, July 30, 2015
Presented here are the components in Pedersen Company’s income statement
BE5-1 Presented here are the components in Pedersen Company’s income statement. Determine the missing amounts.
Cost of Gross Operating Net
Sales Goods Sold Profit Expenses Income
$ 71,200 (b) $ 30,000 (d) $10,800
$108,000 $70,000 (c) (e) $29,500
(a) $71,900 $109,600 $46,200 (f )
Click here for the solution: Presented here are the components in Pedersen Company’s income statement
Cost of Gross Operating Net
Sales Goods Sold Profit Expenses Income
$ 71,200 (b) $ 30,000 (d) $10,800
$108,000 $70,000 (c) (e) $29,500
(a) $71,900 $109,600 $46,200 (f )
Click here for the solution: Presented here are the components in Pedersen Company’s income statement
Saturday, July 25, 2015
Maddox Specialty Company, a division of Lost World Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets
P9-9 (Statement and Note Disclosure, LCM, and Purchase Commitment) Maddox Specialty Company, a division of Lost World Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets. Since beginning operations in 1978, Maddox has used normal absorption costing and has assumed a first-in, first-out cost flow in its perpetual inventory system. The balances of the inventory accounts at the end of Maddox's fiscal year, November 30, 2010, are shown below. The inventories are stated at cost before any year-end adjustments.
Finished goods $647,000
Work-in-process 112,500
Raw materials 264,000
Factory supplies 69,000
AND SO ON
a. Prepare the inventory section of Maddox's balance sheet as of November 30, 2010.
b. Without prejudice to your answer to P9-9 (a), assume that the market value of Maddox's inventories is less than cost. Explain how this decline would be presented in Maddox's income statement for the fiscal year ended November 30, 2010.
c. Assume that Maddox has a firm purchase commitment for the same type of derailleur included in the raw materials inventory as of November 30, 2010, and that the purchase commitment is at a contracted price 15% greater than the current market price. These derailleurs are to be delivered to Maddox after November 30, 2010. Discuss the impact, if any, that this purchase commitment would have on Maddox's financial statements prepared for the fiscal year ended November 30, 2010.
Click here for the solution: Maddox Specialty Company, a division of Lost World Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets
Finished goods $647,000
Work-in-process 112,500
Raw materials 264,000
Factory supplies 69,000
AND SO ON
a. Prepare the inventory section of Maddox's balance sheet as of November 30, 2010.
b. Without prejudice to your answer to P9-9 (a), assume that the market value of Maddox's inventories is less than cost. Explain how this decline would be presented in Maddox's income statement for the fiscal year ended November 30, 2010.
c. Assume that Maddox has a firm purchase commitment for the same type of derailleur included in the raw materials inventory as of November 30, 2010, and that the purchase commitment is at a contracted price 15% greater than the current market price. These derailleurs are to be delivered to Maddox after November 30, 2010. Discuss the impact, if any, that this purchase commitment would have on Maddox's financial statements prepared for the fiscal year ended November 30, 2010.
Click here for the solution: Maddox Specialty Company, a division of Lost World Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets
Saturday, June 20, 2015
(Disclosures Required in Various Situations) Rem Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems
Case 24-2 (CA24-2) (Disclosures Required in Various Situations) Rem Inc.
produces electronic components for sale to manufacturers of radios,
television sets, and digital sound systems. In connection with her
examination of Rem’s financial statements for the year ended December
31, 2007, Maggie Zeen, CPA, completed field work 2 weeks ago. Ms. Zeen
now is evaluating the significance of the following items prior to
preparing her auditor’s report. Except as noted, none of these items
have been disclosed in the financial statements or notes.
Item 1
A 10-year loan agreement, which the company entered into 3 years ago, provides that dividend payments may not exceed net income earned after taxes subsequent to the date of the agreement. The balance of retained earnings at the date of the loan agreement was $420,000. From that date through December 31, 2007, net income after taxes has totaled $570,000 and cash dividends have totaled $320,000. On the basis of these data, the staff auditor assigned to this review concluded that there was no retained earnings restriction at December 31, 2007.
Item 2
Recently Rem interrupted its policy of paying cash dividends quarterly to its stockholders. Dividends were paid regularly through 2006, discontinued for all of 2007 to finance purchase of equipment for the company’s new plant, and resumed in the first quarter of 2008. In the annual report dividend policy is to be discussed in the president’s letter to stockholders.
Item 3
A major electronics firm has introduced a line of products that will compete directly with Rem’s primary line, now being produced in the specially designed new plant. Because of manufacturing innovations, the competitor’s line will be of comparable quality but priced 50% below Rem’s line. The competitor announced its new line during the week following completion of field work. Ms. Zeen read the announcement in the newspaper and discussed the situation by telephone with Rem executives. Rem will meet the lower prices that are high enough to cover variable manufacturing and selling expenses but will permit recovery of only a portion of fixed costs.
Item 4
The company’s new manufacturing plant building, which cost $2,400,000 and has an estimated life of 25 years, is leased from Ancient National Bank at an annual rental of $600,000. The company is obligated to pay property taxes, insurance, and maintenance. At the conclusion of its 10-year noncancellable lease, the company has the option of purchasing the property for $1. In Rem’s income statement the rental payment is reported on a separate line.
Instructions
For each of the items above discuss any additional disclosures in the financial statements and notes that the auditor should recommend to her client. (The cumulative effect of the four items should not be considered.)
Click here for the solution: (Disclosures Required in Various Situations) Rem Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems
Item 1
A 10-year loan agreement, which the company entered into 3 years ago, provides that dividend payments may not exceed net income earned after taxes subsequent to the date of the agreement. The balance of retained earnings at the date of the loan agreement was $420,000. From that date through December 31, 2007, net income after taxes has totaled $570,000 and cash dividends have totaled $320,000. On the basis of these data, the staff auditor assigned to this review concluded that there was no retained earnings restriction at December 31, 2007.
Item 2
Recently Rem interrupted its policy of paying cash dividends quarterly to its stockholders. Dividends were paid regularly through 2006, discontinued for all of 2007 to finance purchase of equipment for the company’s new plant, and resumed in the first quarter of 2008. In the annual report dividend policy is to be discussed in the president’s letter to stockholders.
Item 3
A major electronics firm has introduced a line of products that will compete directly with Rem’s primary line, now being produced in the specially designed new plant. Because of manufacturing innovations, the competitor’s line will be of comparable quality but priced 50% below Rem’s line. The competitor announced its new line during the week following completion of field work. Ms. Zeen read the announcement in the newspaper and discussed the situation by telephone with Rem executives. Rem will meet the lower prices that are high enough to cover variable manufacturing and selling expenses but will permit recovery of only a portion of fixed costs.
Item 4
The company’s new manufacturing plant building, which cost $2,400,000 and has an estimated life of 25 years, is leased from Ancient National Bank at an annual rental of $600,000. The company is obligated to pay property taxes, insurance, and maintenance. At the conclusion of its 10-year noncancellable lease, the company has the option of purchasing the property for $1. In Rem’s income statement the rental payment is reported on a separate line.
Instructions
For each of the items above discuss any additional disclosures in the financial statements and notes that the auditor should recommend to her client. (The cumulative effect of the four items should not be considered.)
Click here for the solution: (Disclosures Required in Various Situations) Rem Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems
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