CH19 - Problem 1 -- Statement of Activities—Hospital
The following events were recorded on the books of Mercy Hospital for the year ended December 31, 2008.
1. Revenue from patient services totaled $16,000,000. The allowance for uncollectibles was established at $3,400,000. Of the $16,000,000 revenue, $6,000,000 was recognized under cost reimbursement agreements. This revenue is subject to audit and retroactive adjustment by third-party payers (estimated adjustments are included in the allowance account).
2. Patient service revenue is accounted for at established rates on the accrual basis.
3. Other operating revenue totaled $346,000, of which $160,000 was from specific purpose funds.
4. Mercy received $410,000 in unrestricted gifts and bequests. They are recorded at fair market value when received.
5. Endowment funds earned $160,000 in unrestricted income.
6. Board designated funds earned $82,000 in income.
7. Mercy’s operating expenses for the year amounted to $13,370,000. This included $500,000 in straight-line depreciation.
Prepare a statement of activities for Mercy Hospital for the year ended December 31, 2008.
Click here for the solution: The following events were recorded on the books of Mercy Hospital for the year ended December 31, 2008
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Wednesday, October 14, 2015
White Lightning Inc. reported income from continuing operations before income taxes of $626,000 for the year ended December 31, 2004
1. White Lightning Inc. reported income from continuing operations before income taxes of $626,000 for the year ended December 31, 2004. During October of 2004, White Lightning elected to phase out a segment of its business. That segment reported a net loss prior to the measurement date of $74,000. White Lightning expects to incur additional losses of $35,000 during the phase out period. Management estimates a loss on the sale of the assets associated with the segment of $85,000. The income tax rate for White Lightning is 30 percent. Prepare the portion of the income statement beginning with "income from continuing operations before income tax" for the year ended December 31, 2004.
Click here for the solution: White Lightning Inc. reported income from continuing operations before income taxes of $626,000 for the year ended December 31, 2004
Click here for the solution: White Lightning Inc. reported income from continuing operations before income taxes of $626,000 for the year ended December 31, 2004
Wednesday, October 7, 2015
The following transactions were completed by The Bronze gallery during the current fiscal year ended December 31
PR 9-1A The following transactions were completed by The Bronze gallery during the current fiscal year ended December 31:
June 6: Reinstated the account of Ian Netti, which had been written off in the preceding year as uncollectible. Journalized the receipt of $1945 cash in full payment of Ian's account.
July 19: Wrote off the $11,150 balance owed by Rancho Rigging Co., which is bankrupt.
August 13: Received 35% of the $20,000 balance owed by Santori Co., a bankrupt business, and wrote off the remainder as uncollectible.
Sept 2: Reinstated the account for Sheryl Capers, which had been written off 2 years earlier as uncollectible. Recorded the receipt of $3,170 cash in full payment.
Dec 31: Wrote off the following accounts as uncollectible (compound entry): Jacoba Co., $8390; Garcia Co., $2500; Summit Furniture, $6400; Jill DePuy, $1800.
Dec 31: Based on an analysis of the $960,750 of accounts receivable, it was estimated that $4200 will be uncollectible. Journalized the adjusting entry.
Instructions
1. Record the January 1 credit balance of $40000 in a T account for allowances for doubtful accounts.
2. Journalize the transactions. Post each entry that affects the following T accounts and determine new balances:
(allowance for doubtful accounts and bad debt expense) --
3. Determine the expected net realizable value of the accounts receivable as of Dec 31. --
4. Assuming that instead of basing the provision for uncollectible accounts on an estimated expense of 3/4 of 1% of the net sales of $6,000,000 for the year, determine the following: (a) bad debt expense for the year (b) balance in the allowance account after the adjustment of Dec 31 (c) expected net realizable value of the accounts receivable as of December 31
Click here for the solution: The following transactions were completed by The Bronze gallery during the current fiscal year ended December 31
June 6: Reinstated the account of Ian Netti, which had been written off in the preceding year as uncollectible. Journalized the receipt of $1945 cash in full payment of Ian's account.
July 19: Wrote off the $11,150 balance owed by Rancho Rigging Co., which is bankrupt.
August 13: Received 35% of the $20,000 balance owed by Santori Co., a bankrupt business, and wrote off the remainder as uncollectible.
Sept 2: Reinstated the account for Sheryl Capers, which had been written off 2 years earlier as uncollectible. Recorded the receipt of $3,170 cash in full payment.
Dec 31: Wrote off the following accounts as uncollectible (compound entry): Jacoba Co., $8390; Garcia Co., $2500; Summit Furniture, $6400; Jill DePuy, $1800.
Dec 31: Based on an analysis of the $960,750 of accounts receivable, it was estimated that $4200 will be uncollectible. Journalized the adjusting entry.
Instructions
1. Record the January 1 credit balance of $40000 in a T account for allowances for doubtful accounts.
2. Journalize the transactions. Post each entry that affects the following T accounts and determine new balances:
(allowance for doubtful accounts and bad debt expense) --
3. Determine the expected net realizable value of the accounts receivable as of Dec 31. --
4. Assuming that instead of basing the provision for uncollectible accounts on an estimated expense of 3/4 of 1% of the net sales of $6,000,000 for the year, determine the following: (a) bad debt expense for the year (b) balance in the allowance account after the adjustment of Dec 31 (c) expected net realizable value of the accounts receivable as of December 31
Click here for the solution: The following transactions were completed by The Bronze gallery during the current fiscal year ended December 31
Sunday, September 27, 2015
Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows
PR 10-6A Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:
a. On December 31, the company determined that $20,000,000 of goodwill was impaired.
b. Governmental and legal costs of $675,000 were incurred on June 30 in obtaining a patent with an estimated economic life of 10 years. Amortization is to be for one-half year.
c. Timber rights on a tract of land were purchased for $1,665,000 on February 16. The stand of timber is estimated at 9,000,000 board feet. During the current year, 2,400,000 board feet of timber were cut and sold.
Instructions
1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items.
2. Journalize the adjusting entries to record the amortization, depletion, or impairment for each item.
Click here for the solution: Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows
a. On December 31, the company determined that $20,000,000 of goodwill was impaired.
b. Governmental and legal costs of $675,000 were incurred on June 30 in obtaining a patent with an estimated economic life of 10 years. Amortization is to be for one-half year.
c. Timber rights on a tract of land were purchased for $1,665,000 on February 16. The stand of timber is estimated at 9,000,000 board feet. During the current year, 2,400,000 board feet of timber were cut and sold.
Instructions
1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items.
2. Journalize the adjusting entries to record the amortization, depletion, or impairment for each item.
Click here for the solution: Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows
You are provided with the following information for Pavey Inc. for the month ended October 31, 2008
P6-5A You are provided with the following information for Pavey Inc. for the month ended October 31, 2008. Pavey uses a periodic method for inventory.
Date Description Units Unit Cost or Selling Price
October 1 Beginning inventory 60 $25
October 9 Purchase 120 26
October 11 Sale 100 35
October 17 Purchase 70 27
October 22 Sale 60 40
October 25 Purchase 80 28
October 29 Sale 110 40
Instructions
(a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit rate under each of the following methods.
(b) Compare results for the three cost flow assumptions. What cost flow results in the lowest inventory value. What cost flow results in the lowest cost of goods sold. What cost flow results in the lowest gross profit. What cost flow results in the lowest gross profit rate.
Click here for the solution: You are provided with the following information for Pavey Inc. for the month ended October 31, 2008
Date Description Units Unit Cost or Selling Price
October 1 Beginning inventory 60 $25
October 9 Purchase 120 26
October 11 Sale 100 35
October 17 Purchase 70 27
October 22 Sale 60 40
October 25 Purchase 80 28
October 29 Sale 110 40
Instructions
(a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit rate under each of the following methods.
(b) Compare results for the three cost flow assumptions. What cost flow results in the lowest inventory value. What cost flow results in the lowest cost of goods sold. What cost flow results in the lowest gross profit. What cost flow results in the lowest gross profit rate.
Click here for the solution: You are provided with the following information for Pavey Inc. for the month ended October 31, 2008
(Case-It Co) The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010
PR 6-1A The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010:
Cash $37,700 Sales Returns and Allowances $37,800
Accounts Receivable 111,600 Sale Discounts 19,800
Merchandise Inventory 180,000 Cost of Merchandise Sold 1,926,000
Office Supplies 5,000 Sales Salaries Expense 378,000
Prepaid Ins. 12,000 Advertising Expense 50,900
Office Equipment 115,200 Depreciation Exp - Store Equip 8,300
Accumulated Depreciation - Office Equip 49,500 Misc Selling Expense 2,000
Store Equipment 311,500 Office Salaries Expense 73,800
Accumulated Depreciation - Store Equip 87,500 Rent Expense 39,900
A/P 48,600 Insurance Expense 22,950
Salaries Payable 3,600 Depreciation Expense - Office Equip 16,200
Note Payable (final payment due 2025) 54,000 Office Supplies Expense 1,650
Gina Hennessy, Capital 454,800 Misc Admin Exp 1,900
Gina Hennessy, Drawing 45,000 Interest Expense 4,400
Sales 2,703,600
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner's equity.
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $8,000
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report form and account form balance sheets differ.
Click here for the solution: The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010
Cash $37,700 Sales Returns and Allowances $37,800
Accounts Receivable 111,600 Sale Discounts 19,800
Merchandise Inventory 180,000 Cost of Merchandise Sold 1,926,000
Office Supplies 5,000 Sales Salaries Expense 378,000
Prepaid Ins. 12,000 Advertising Expense 50,900
Office Equipment 115,200 Depreciation Exp - Store Equip 8,300
Accumulated Depreciation - Office Equip 49,500 Misc Selling Expense 2,000
Store Equipment 311,500 Office Salaries Expense 73,800
Accumulated Depreciation - Store Equip 87,500 Rent Expense 39,900
A/P 48,600 Insurance Expense 22,950
Salaries Payable 3,600 Depreciation Expense - Office Equip 16,200
Note Payable (final payment due 2025) 54,000 Office Supplies Expense 1,650
Gina Hennessy, Capital 454,800 Misc Admin Exp 1,900
Gina Hennessy, Drawing 45,000 Interest Expense 4,400
Sales 2,703,600
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner's equity.
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $8,000
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report form and account form balance sheets differ.
Click here for the solution: The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010
Friday, September 25, 2015
The following data for Enrichment Industries, Inc. relate to the payroll for the week ended December 10, 2010
PR 11-5A The following data for Enrichment Industries, Inc. relate to the payroll for the week ended December 10, 2010:
Fed U.S. Accumulated
Employee Hours Worked Hourly Rate Weekly Salary Income Tax Savings Bonds Earnings Dec 3
Beilein 32 $16.00 $102.40 10 $24,576
Calhoun 32 32.00 369.60 10 84,480
Calipari 40 28.00 240.80 20 53,760
Knight 42 32.00 316.48 66,048
Odom $3,400 748.00 90 163,200
Olson 1,600 384.00 76,800
Pitino 34 18.00 91.80 29,376
Ryan 44 34.00 297.16 20 75,072
Thompson 40 26.00 218.40 35 49,920
Employees Olson and Odom are office staff, and all of the other employees are sales personnel. All sales personnel are paid 1.5 times the regular rate for all hours in excess of 40 hours per week. The social security tax rate is 6.0% on the first 100,000 of each employee's annual earnings, and Medicare tax is 1.5% of each employee's annual earnings. The next payroll check to used is No. 345.
1. Prepare a payroll register for Enrichment Industries, Inc for the week ended December 10, 2010. Use the following columns for the payroll register: Name, Total Hours, Reg Earnings, Overtime Earnings, Total Earnings, Social Security tax, Medicare Tax, Federal Income Tax, U.S. Savings Bonds, Total Deductions, Net Pay, Ck. No, Sales Salaries Expense, and Office Salaries Expense.
2. Journalize the entry to record the payroll sales for the week.
Click here for the solution: The following data for Enrichment Industries, Inc. relate to the payroll for the week ended December 10, 2010
Fed U.S. Accumulated
Employee Hours Worked Hourly Rate Weekly Salary Income Tax Savings Bonds Earnings Dec 3
Beilein 32 $16.00 $102.40 10 $24,576
Calhoun 32 32.00 369.60 10 84,480
Calipari 40 28.00 240.80 20 53,760
Knight 42 32.00 316.48 66,048
Odom $3,400 748.00 90 163,200
Olson 1,600 384.00 76,800
Pitino 34 18.00 91.80 29,376
Ryan 44 34.00 297.16 20 75,072
Thompson 40 26.00 218.40 35 49,920
Employees Olson and Odom are office staff, and all of the other employees are sales personnel. All sales personnel are paid 1.5 times the regular rate for all hours in excess of 40 hours per week. The social security tax rate is 6.0% on the first 100,000 of each employee's annual earnings, and Medicare tax is 1.5% of each employee's annual earnings. The next payroll check to used is No. 345.
1. Prepare a payroll register for Enrichment Industries, Inc for the week ended December 10, 2010. Use the following columns for the payroll register: Name, Total Hours, Reg Earnings, Overtime Earnings, Total Earnings, Social Security tax, Medicare Tax, Federal Income Tax, U.S. Savings Bonds, Total Deductions, Net Pay, Ck. No, Sales Salaries Expense, and Office Salaries Expense.
2. Journalize the entry to record the payroll sales for the week.
Click here for the solution: The following data for Enrichment Industries, Inc. relate to the payroll for the week ended December 10, 2010
Friday, September 18, 2015
Rick Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows
7. Rick Company’s beginning inventory and purchases during the fiscal
year ended December 31, 2012, were as follows: (Note: The company uses a
perpetual system of inventory.)
Units Unit Price Total Cost
January 1—Beginning inventory 18 $24 $432
March 12—Sold 13
April 11—Purchase 45 $29 $1,305
June 20—Sold 33
Aug 16—Purchase 35 $27 $945
Sept 11—Sold 29
Total Cost of Inventory
Ending inventory is 23 units. $2,682
What is the cost of goods sold for Rick Company for 2012 using LIFO?
Click here for the solution: Rick Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows
Units Unit Price Total Cost
January 1—Beginning inventory 18 $24 $432
March 12—Sold 13
April 11—Purchase 45 $29 $1,305
June 20—Sold 33
Aug 16—Purchase 35 $27 $945
Sept 11—Sold 29
Total Cost of Inventory
Ending inventory is 23 units. $2,682
What is the cost of goods sold for Rick Company for 2012 using LIFO?
Click here for the solution: Rick Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows
Sunday, September 13, 2015
Rembrandt Paint Company had the following income statement items for the year ended December 31, 2011 ($ in 000s)
P4-6 Income statement presentation
Rembrandt Paint Company had the following income statement items for the year ended December 31, 2011 ($ in 000s):
In addition, during the year the company completed the disposal of its plastics business and incurred a loss from operations of $1.6 million and a gain on disposal of the component's assets of $2 million. 500,000 shares of common stock were outstanding throughout 2011. Income tax expense has not yet been accrued. The income tax rate is 30% on all items of income (loss).
Required:
Prepare a multiple-step income statement for 2011, including EPS disclosures.
Click here for the solution: Rembrandt Paint Company had the following income statement items for the year ended December 31, 2011
Rembrandt Paint Company had the following income statement items for the year ended December 31, 2011 ($ in 000s):
In addition, during the year the company completed the disposal of its plastics business and incurred a loss from operations of $1.6 million and a gain on disposal of the component's assets of $2 million. 500,000 shares of common stock were outstanding throughout 2011. Income tax expense has not yet been accrued. The income tax rate is 30% on all items of income (loss).
Required:
Prepare a multiple-step income statement for 2011, including EPS disclosures.
Click here for the solution: Rembrandt Paint Company had the following income statement items for the year ended December 31, 2011
Friday, September 11, 2015
Allison, CPA has completed the audit of the financial statements of Optima Corporation as of and for the year ended December 31, 2009
Auditing P 3-27 Allison, CPA has completed the audit of the financial
statements of Optima Corporation as of and for the year ended December
31, 2009. Allison also audited and reported on the Optima financial
statements for the prior year. Allison drafted the following report for
2009.
We have audited the balance sheet and statements of income and retained earnings of Optima Corporation as of December 31, 2009. We conducted our audit in accordance with generally accepted accounting standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of misstatement.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly the financial position of Optima Corporation as of December 31, 2009, and the results of its operations for the year then ended in conformity with generally accepted auditing standards, applied on a basis consistent with those of the preceding year.
Allison, CPA
(signed)
Other Information
-Optima is presenting comparative financial statements.
-Optima does not wish to present a statement of cash flows for either year.
-During 2009, Optima changed its method of accounting for long-term construction contracts and properly reflected the effect of the change in the current year's financial statements and restated the prior year's statements. Allison is satisfied with Optima's justification for making the change. The change is discussed in footnote 12.
- Allison was unable to perform normal accounts receivable confirmation procedures, but alternative procedures were used to satisfy Allison as to the existence of the receivables.
-Optima Corporation is the defendant in a litigation, the outcome of which is highly uncertain. If the case is settled in favor of the plaintiff, Optima will be required to pay a substantial amount of cash, which might require the sale of certain fixed assets. The litigation and the possible effects have been properly disclosed in footnote 11.
-Optima issued debentures on January 31, 2008, in the amount of $10 million. The funds obtained from the issuance were used to finance the expansion of plant facilities. The debenture agreement restricts the payment of future cash dividends to earnings after December 31, 2013. Optima declined to disclose this essential data in the footnotes to the financial statements.
Required:
a. Identify and explain any items included in "Other Information" that need not be part of the auditor's report.
b. Explain the deficiencies in Allison's report as drafted.
Click here for the solution: Allison, CPA has completed the audit of the financial statements of Optima Corporation as of and for the year ended December 31, 2009
We have audited the balance sheet and statements of income and retained earnings of Optima Corporation as of December 31, 2009. We conducted our audit in accordance with generally accepted accounting standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of misstatement.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly the financial position of Optima Corporation as of December 31, 2009, and the results of its operations for the year then ended in conformity with generally accepted auditing standards, applied on a basis consistent with those of the preceding year.
Allison, CPA
(signed)
Other Information
-Optima is presenting comparative financial statements.
-Optima does not wish to present a statement of cash flows for either year.
-During 2009, Optima changed its method of accounting for long-term construction contracts and properly reflected the effect of the change in the current year's financial statements and restated the prior year's statements. Allison is satisfied with Optima's justification for making the change. The change is discussed in footnote 12.
- Allison was unable to perform normal accounts receivable confirmation procedures, but alternative procedures were used to satisfy Allison as to the existence of the receivables.
-Optima Corporation is the defendant in a litigation, the outcome of which is highly uncertain. If the case is settled in favor of the plaintiff, Optima will be required to pay a substantial amount of cash, which might require the sale of certain fixed assets. The litigation and the possible effects have been properly disclosed in footnote 11.
-Optima issued debentures on January 31, 2008, in the amount of $10 million. The funds obtained from the issuance were used to finance the expansion of plant facilities. The debenture agreement restricts the payment of future cash dividends to earnings after December 31, 2013. Optima declined to disclose this essential data in the footnotes to the financial statements.
Required:
a. Identify and explain any items included in "Other Information" that need not be part of the auditor's report.
b. Explain the deficiencies in Allison's report as drafted.
Click here for the solution: Allison, CPA has completed the audit of the financial statements of Optima Corporation as of and for the year ended December 31, 2009
Sunday, September 6, 2015
Accountants for Johnson, Inc., have assembled the following data for the year ended December 31, 2012
P14-25A Johnson Inc Preparing the statement of cash flows—indirect method
Accountants for Johnson, Inc., have assembled the following data for the year ended December 31, 2012:
December 31,
2012 2011
Current Accounts:
Current assets:
Cash and cash equivalents $ 92,100 $ 17,000
Accounts receivable 64,500 69,200
Inventories 87,000 80,000
Current liabilities:
Accounts payable 57,900 56,200
Income tax payable 14,400 17,100
Transaction Data for 2012:
Issuance of common stock for cash----------------------- $ 40,000
Depreciation expense -------------------------------------- 25,000
Purchase of equipment ------------------------------------- 75,000
Acquisition of land by issuing long-term note payable--- 122,000
Cost basis of building sold---------------------------------- 53,000
Payment of note payable----------------------------------- $48,100
Payment of cash dividends--------------------------------- 54,000
Issuance of note payable to borrow cash----------------- 67,000
Gain on sale of building------------------------------------- 5,500
Net income--------------------------------------------------- 70,500
Requirement
1.Prepare Johnson's statement of cash flows using the indirect method. Include an accompanying schedule of noncash investing and financing activities.
Click here for the solution: Accountants for Johnson, Inc., have assembled the following data for the year ended December 31, 2012
Accountants for Johnson, Inc., have assembled the following data for the year ended December 31, 2012:
December 31,
2012 2011
Current Accounts:
Current assets:
Cash and cash equivalents $ 92,100 $ 17,000
Accounts receivable 64,500 69,200
Inventories 87,000 80,000
Current liabilities:
Accounts payable 57,900 56,200
Income tax payable 14,400 17,100
Transaction Data for 2012:
Issuance of common stock for cash----------------------- $ 40,000
Depreciation expense -------------------------------------- 25,000
Purchase of equipment ------------------------------------- 75,000
Acquisition of land by issuing long-term note payable--- 122,000
Cost basis of building sold---------------------------------- 53,000
Payment of note payable----------------------------------- $48,100
Payment of cash dividends--------------------------------- 54,000
Issuance of note payable to borrow cash----------------- 67,000
Gain on sale of building------------------------------------- 5,500
Net income--------------------------------------------------- 70,500
Requirement
1.Prepare Johnson's statement of cash flows using the indirect method. Include an accompanying schedule of noncash investing and financing activities.
Click here for the solution: Accountants for Johnson, Inc., have assembled the following data for the year ended December 31, 2012
Following are transactions and events of the General Fund of the City of Springfield for the fiscal year ended December 30, 2012
3-12 Following are transactions and events of the General Fund of the City of Springfield for the fiscal year ended December 30, 2012.
1. Estimated revenues (legally budgeted)
Property taxes $5,000,000
Sales taxes 4,000,000
Licenses and permits 1,500,000
Miscellaneous 500,000
2. Appropriations
General government 5,000,000
Culture and recreation 4,500,000
Health and welfare 1,000,000
3. Revenues received (cash)
Property taxes $4,783,541
Sales taxes 4,501,009
Licenses and permits 1,700,000
Miscellaneous 800,000
4. Encumbrances issued (includes salaries and other recurring items)
Estimated
General government 5,100,000
Culture and recreation 4,650,000
Health and welfare 905,000
5. Goods and services received (paid in cash)
Estimated Actual
General government 5,100,000 $5,035,450
Culture and recreation 4,650,000 4,610,000
Health and welfare 905,000 891,550
6. Budget revisions
Increase appropriations:
General government $100,000
Culture and recreation 150,000
7. Fund balance-Unrestricted on January 1 , 2012, was $735,000. There were no outstanding encumbrances at that date.
A. Record the transactions using the appropriate journal entries.
B. Prepare a budgetary comparison schedule for the General Fund.
Click here for the solution: Following are transactions and events of the General Fund of the City of Springfield for the fiscal year ended December 30, 2012
1. Estimated revenues (legally budgeted)
Property taxes $5,000,000
Sales taxes 4,000,000
Licenses and permits 1,500,000
Miscellaneous 500,000
2. Appropriations
General government 5,000,000
Culture and recreation 4,500,000
Health and welfare 1,000,000
3. Revenues received (cash)
Property taxes $4,783,541
Sales taxes 4,501,009
Licenses and permits 1,700,000
Miscellaneous 800,000
4. Encumbrances issued (includes salaries and other recurring items)
Estimated
General government 5,100,000
Culture and recreation 4,650,000
Health and welfare 905,000
5. Goods and services received (paid in cash)
Estimated Actual
General government 5,100,000 $5,035,450
Culture and recreation 4,650,000 4,610,000
Health and welfare 905,000 891,550
6. Budget revisions
Increase appropriations:
General government $100,000
Culture and recreation 150,000
7. Fund balance-Unrestricted on January 1 , 2012, was $735,000. There were no outstanding encumbrances at that date.
A. Record the transactions using the appropriate journal entries.
B. Prepare a budgetary comparison schedule for the General Fund.
Click here for the solution: Following are transactions and events of the General Fund of the City of Springfield for the fiscal year ended December 30, 2012
Wednesday, September 2, 2015
You are auditing payroll for the Goodview Manufacturing Company for the year ended September 30, 2009
Auditing P 8-32 You are auditing payroll for the Goodview Manufacturing company for the year ended September 30, 2009. Included next are amounts from the clients trial balance, along with comparative audited information for the prior year.
AND SO ON
You have obtained the following information to help you perform preliminary analytical procedures for the payroll account balances.
1. There has been a significant increase in the demand for Goodview's products. The increase in sales was due to both an increase in the average selling price of 10% and an increase in units sold that resulted from the increased demand and an increased marketing effort.
2. Even though sales volume increased there was no addition of executives, factory supervisors, or office personnel.
3. All employees including executives, but excluding commission salespeople, received a 3% salary increase starting October 1, 2008. Commission salespeople receive their increased compensation through the increase in sales.
4. The increased number of factory hourly employees was accomplished by recalling employees that had been laid off. They receive the same wage rate as existing employees. Goodview does not permit overtime.
5. Commission salespeople receive a 6% commission on all sales on which a commission is given. Approximately 78% of sales earn sales commission. The other 25% are "call-ins", for which no commission is given. Commissions are paid in the month following the month they are earned.
Required:
a. Use the final balances for the prior year and the information in items 1 thru 5 to develop an expected value for each account included on the preceding page, except sales.
b. Calculate the difference between your expectation and the client's recorded amount a percentage using the formula (expected value-recorded amount)/expected value.
Click here for the solution: You are auditing payroll for the Goodview Manufacturing Company for the year ended September 30, 2009
AND SO ON
You have obtained the following information to help you perform preliminary analytical procedures for the payroll account balances.
1. There has been a significant increase in the demand for Goodview's products. The increase in sales was due to both an increase in the average selling price of 10% and an increase in units sold that resulted from the increased demand and an increased marketing effort.
2. Even though sales volume increased there was no addition of executives, factory supervisors, or office personnel.
3. All employees including executives, but excluding commission salespeople, received a 3% salary increase starting October 1, 2008. Commission salespeople receive their increased compensation through the increase in sales.
4. The increased number of factory hourly employees was accomplished by recalling employees that had been laid off. They receive the same wage rate as existing employees. Goodview does not permit overtime.
5. Commission salespeople receive a 6% commission on all sales on which a commission is given. Approximately 78% of sales earn sales commission. The other 25% are "call-ins", for which no commission is given. Commissions are paid in the month following the month they are earned.
Required:
a. Use the final balances for the prior year and the information in items 1 thru 5 to develop an expected value for each account included on the preceding page, except sales.
b. Calculate the difference between your expectation and the client's recorded amount a percentage using the formula (expected value-recorded amount)/expected value.
Click here for the solution: You are auditing payroll for the Goodview Manufacturing Company for the year ended September 30, 2009
The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year ended September 30, 2012
2-9 The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year ended September 30, 2012:
Revenues:
Property taxes $27,000,000
Sales taxes 13, 216,000
Fees and fines 1,124,000
Licenses and permits 1,921,000
Intergovernmental 868,000
Investment earnings 654,000
Expenditures:
Current:
General government 8,192,000
Public safety 24,444,000
Public works 6,211,000
Health and sanitation 1,693,000
Culture and recreation 2,154,000
Debt service – principal 652,000
Debt service – interest 821,000
Proceeds of long-term, capital-related debt 2,210,000
Transfer to special revenue fund 1,119,000
Special item – proceeds from sale of land 821,000
Fund balance, October 1, 2011
From the information given above, prepare, in good form, a General Fund Statement of Revenue, Expenditures, and Changes in Fund Balances for the City of Eastern Shores General Fund for the Year Ended September 30, 2012.
Click here for the solution: The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year ended September 30, 2012
Revenues:
Property taxes $27,000,000
Sales taxes 13, 216,000
Fees and fines 1,124,000
Licenses and permits 1,921,000
Intergovernmental 868,000
Investment earnings 654,000
Expenditures:
Current:
General government 8,192,000
Public safety 24,444,000
Public works 6,211,000
Health and sanitation 1,693,000
Culture and recreation 2,154,000
Debt service – principal 652,000
Debt service – interest 821,000
Proceeds of long-term, capital-related debt 2,210,000
Transfer to special revenue fund 1,119,000
Special item – proceeds from sale of land 821,000
Fund balance, October 1, 2011
From the information given above, prepare, in good form, a General Fund Statement of Revenue, Expenditures, and Changes in Fund Balances for the City of Eastern Shores General Fund for the Year Ended September 30, 2012.
Click here for the solution: The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year ended September 30, 2012
The following information is available for the preparation of the government-wide financial statements for the city of Northern Pines for the year ended June 30, 2012
2-8. The following information is available for the preparation of the government-wide financial statements for the city of Northern Pines for the year ended June 30, 2012:
Expenses:
General government $10,300,000
Public safety 22,900,000
Public works 11,290,000
Health and sanitation 6,210,000
Culture and recreation 4,198,000
Interest on long-term debt, governmental type 621,000
Water and sewer system 11,550,000
Parking system 419,000
Revenues:
Charges for services, general government 1,110,000
Charges for services, public safety 210,000
Operation grant, public safety 698,000
Charges for services, health and sanitation 2,555,000
Operating grant, health and sanitation 1,210,000
Charges for services, culture and recreation 2,198,000
Charges for services, water and sewer 12,578,000
Charges for services, parking system 398,000
Property taxes 27,112,000
Sales taxes 20,698,000
Investment earnings, business-type 319,000
Special item – gain on sale of unused land,
Governmental type 1,250,000
Transfer from governmental activities to
Business-type activities 688,000
Net assets, July 1, 2011, governmental activities 11,222,000
Net assets, July 1, 2011, business-type activities 22,333,000
From the previous information, prepare, in good form, a Statement of Activities for the city of Northern Pines for the year ended June 30, 2012. Northern Pines has no component units.
Click here for the solution: The following information is available for the preparation of the government-wide financial statements for the city of Northern Pines for the year ended June 30, 2012
Expenses:
General government $10,300,000
Public safety 22,900,000
Public works 11,290,000
Health and sanitation 6,210,000
Culture and recreation 4,198,000
Interest on long-term debt, governmental type 621,000
Water and sewer system 11,550,000
Parking system 419,000
Revenues:
Charges for services, general government 1,110,000
Charges for services, public safety 210,000
Operation grant, public safety 698,000
Charges for services, health and sanitation 2,555,000
Operating grant, health and sanitation 1,210,000
Charges for services, culture and recreation 2,198,000
Charges for services, water and sewer 12,578,000
Charges for services, parking system 398,000
Property taxes 27,112,000
Sales taxes 20,698,000
Investment earnings, business-type 319,000
Special item – gain on sale of unused land,
Governmental type 1,250,000
Transfer from governmental activities to
Business-type activities 688,000
Net assets, July 1, 2011, governmental activities 11,222,000
Net assets, July 1, 2011, business-type activities 22,333,000
From the previous information, prepare, in good form, a Statement of Activities for the city of Northern Pines for the year ended June 30, 2012. Northern Pines has no component units.
Click here for the solution: The following information is available for the preparation of the government-wide financial statements for the city of Northern Pines for the year ended June 30, 2012
Monday, August 31, 2015
For the year ended 2010, Jocelyn Morris, CPA, has been engaged to audit Rogers, Inc., which is a continuing client
Problem 15-40 For the year ended 2010, Jocelyn Morris, CPA, has been engaged to audit Rogers, Inc., which is a continuing client. Jocelyn has assessed the control risk for the company at the maximum for all financial statement assertions involving investments. Consequently, the ICFR audit report will indicate material weaknesses and rather than relying on ICFR during the financial statement audit, all audit evidence will come from substantive procedures. Jocelyn determines that Rogers is unable to exercise significant influence over any investee and there are no related parties.
Morris receives an investment analysis from Rogers’s management revealing the following:
• There is a notation indicating that all securities either are in the treasurer’s safe or held by an independent bank custodian.
• Investments are classified as current or non-current.
• The beginning and ending balances are shown at cost and market.
• Unamortized premiums or discounts are associated with bonds.
• The face amount of bonds or number of shares of stock are given for the beginning and ending of the year.
• Accrued investment income for each investment at the beginning and ending of the year is presented.
• Investment income earned and collected is presented.
• Valuation allowances at the beginning and ending of the year are shown.
• Any sales or additions to portfolios for the year include date, number of shares, face amount of bonds, proceeds, cost, and realized gain/loss.
Required: Explain the audit objective for each of the listed management financial statement assertions relative to investments.
Assertion Audit Objective
1. Existence
2. Completeness
3. Rights
4. Valuation/allocation
Presentation and Disclosure
Click here for the solution: For the year ended 2010, Jocelyn Morris, CPA, has been engaged to audit Rogers, Inc., which is a continuing client
Morris receives an investment analysis from Rogers’s management revealing the following:
• There is a notation indicating that all securities either are in the treasurer’s safe or held by an independent bank custodian.
• Investments are classified as current or non-current.
• The beginning and ending balances are shown at cost and market.
• Unamortized premiums or discounts are associated with bonds.
• The face amount of bonds or number of shares of stock are given for the beginning and ending of the year.
• Accrued investment income for each investment at the beginning and ending of the year is presented.
• Investment income earned and collected is presented.
• Valuation allowances at the beginning and ending of the year are shown.
• Any sales or additions to portfolios for the year include date, number of shares, face amount of bonds, proceeds, cost, and realized gain/loss.
Required: Explain the audit objective for each of the listed management financial statement assertions relative to investments.
Assertion Audit Objective
1. Existence
2. Completeness
3. Rights
4. Valuation/allocation
Presentation and Disclosure
Click here for the solution: For the year ended 2010, Jocelyn Morris, CPA, has been engaged to audit Rogers, Inc., which is a continuing client
Monday, August 17, 2015
Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 2004
Analytical Procedures
5.58. Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 2004. In planning the audit, Marilyn is attempting to develop expectations for planning analytical procedures based on the financial information for prior years and her knowledge of the business and the industry, including:
1. Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend.
2. Based on her knowledge of industry trends, she believes that the gross profit for 20X4 should be about 2 percent less than the percentage for 20X3.
3. Based on her knowledge of regulations, she is aware that the effective tax rate for the company for 20X4 has been reduced by 5 percent from that in 20X3.
4. Based on a review of the general ledger, she determined that average depreciable assets have increased by 10 percent.
5. Based on her knowledge of economic conditions, she is aware that the effective interest rate On the company’s line of credit for20X4wasapproximately12percent. The average outstanding balance of the line of credit is $2,300,000. This line of credit is the company’s only interest-bearing debt.
6. Based on her discussions with management and her knowledge of the industry, she believes that the amount of other expenses should
. Review the income statement for Uden Supply Company and answer the following:
• Describe the purpose of analytical procedures performed in the planning stage of the audit.
• Uden Supply has projected its 2004 gross profit at 31% of sales despite expectation for some shrinkage in margins. On the basis of Uden's operating performance in years 2001 - 2003 project your best guess for 2004. Project 2004 based on the incremental changes for each line item over the last three years.
• Uden’s unaudited financial statements for the current year show a 31 percent gross profit rate. Assuming that this represents a misstatement from the amount that you developed as an expectation, calculate the estimated effect of this misstatement on net income before taxes for 20X4.
• Indicate whether you belive that the difference calculated in part (c) is material. Explain your answer.
Click here for the solution: Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 2004
5.58. Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 2004. In planning the audit, Marilyn is attempting to develop expectations for planning analytical procedures based on the financial information for prior years and her knowledge of the business and the industry, including:
1. Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend.
2. Based on her knowledge of industry trends, she believes that the gross profit for 20X4 should be about 2 percent less than the percentage for 20X3.
3. Based on her knowledge of regulations, she is aware that the effective tax rate for the company for 20X4 has been reduced by 5 percent from that in 20X3.
4. Based on a review of the general ledger, she determined that average depreciable assets have increased by 10 percent.
5. Based on her knowledge of economic conditions, she is aware that the effective interest rate On the company’s line of credit for20X4wasapproximately12percent. The average outstanding balance of the line of credit is $2,300,000. This line of credit is the company’s only interest-bearing debt.
6. Based on her discussions with management and her knowledge of the industry, she believes that the amount of other expenses should
. Review the income statement for Uden Supply Company and answer the following:
• Describe the purpose of analytical procedures performed in the planning stage of the audit.
• Uden Supply has projected its 2004 gross profit at 31% of sales despite expectation for some shrinkage in margins. On the basis of Uden's operating performance in years 2001 - 2003 project your best guess for 2004. Project 2004 based on the incremental changes for each line item over the last three years.
• Uden’s unaudited financial statements for the current year show a 31 percent gross profit rate. Assuming that this represents a misstatement from the amount that you developed as an expectation, calculate the estimated effect of this misstatement on net income before taxes for 20X4.
• Indicate whether you belive that the difference calculated in part (c) is material. Explain your answer.
Click here for the solution: Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 2004
Friday, August 14, 2015
The following transactions were completed by Axiom Management Company during the current fiscal year ended December 31
PR 9-1A Entries related to uncollectible accounts
The following transactions were completed by Axiom Management Company during the current fiscal year ended December 31:
Feb. 17. Received 25% of the $30,000 balance owed by Gillespie Co., a bankrupt business, and wrote off the remainder as uncollectible.
Apr. 11. Reinstated the account of Colleen Bertram, which had been written off in the preceding year as uncollectible. Journalized the receipt of $4,250 cash in full payment of Colleen’s account.
July 6. Wrote off the $9,000 balance owed by Covered Wagon Co., which has no assets.
Nov. 20. Reinstated the account of Dugan Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $5,900 cash in full payment of the account.
Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Kipp Co., $3,000; Moore Co., $4,000; Butte Distributors, $8,000; Parker Towers, $6,700.
31. Based on an analysis of the $1,200,000 of accounts receivable, it was estimated that $60,000 will be uncollectible. Journalized the adjusting entry.
Instructions
1. Record the January 1 credit balance of $40,000 in a T account for Allowance for Doubtful Accounts.
2. Journalize the transactions. Post each entry that affects the following selected T accounts and determine the new balances:
Allowance for Doubtful Accounts
Bad Debt Expense
3. Determine the expected net realizable value of the accounts receivable as of December 31.
4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of ¾ of 1% of the net sales of $7,500,000 for the year, determine the following:
a. Bad debt expense for the year.
b. Balance in the allowance account after the adjustment of December 31.
c. Expected net realizable value of the accounts receivable as of December 31.
Click here for the solution: The following transactions were completed by Axiom Management Company during the current fiscal year ended December 31
The following transactions were completed by Axiom Management Company during the current fiscal year ended December 31:
Feb. 17. Received 25% of the $30,000 balance owed by Gillespie Co., a bankrupt business, and wrote off the remainder as uncollectible.
Apr. 11. Reinstated the account of Colleen Bertram, which had been written off in the preceding year as uncollectible. Journalized the receipt of $4,250 cash in full payment of Colleen’s account.
July 6. Wrote off the $9,000 balance owed by Covered Wagon Co., which has no assets.
Nov. 20. Reinstated the account of Dugan Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $5,900 cash in full payment of the account.
Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Kipp Co., $3,000; Moore Co., $4,000; Butte Distributors, $8,000; Parker Towers, $6,700.
31. Based on an analysis of the $1,200,000 of accounts receivable, it was estimated that $60,000 will be uncollectible. Journalized the adjusting entry.
Instructions
1. Record the January 1 credit balance of $40,000 in a T account for Allowance for Doubtful Accounts.
2. Journalize the transactions. Post each entry that affects the following selected T accounts and determine the new balances:
Allowance for Doubtful Accounts
Bad Debt Expense
3. Determine the expected net realizable value of the accounts receivable as of December 31.
4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of ¾ of 1% of the net sales of $7,500,000 for the year, determine the following:
a. Bad debt expense for the year.
b. Balance in the allowance account after the adjustment of December 31.
c. Expected net realizable value of the accounts receivable as of December 31.
Click here for the solution: The following transactions were completed by Axiom Management Company during the current fiscal year ended December 31
Thursday, August 13, 2015
Presented below are the closing entries for Lee College, a private not-for-profit, for the year ended December 31, 2012
11-8 Presented below are the closing entries for Lee College, a private not-for-profit, for the year ended December 31, 2012.
Debits Credits
Revenues-Unrestricted-Tuition & Fees $11,200,000
Revenue-Unrestricted-Unrestricted Income on Endowment investment 40,000
Revenue-Unrestricted-Sales & Service of Auxiliary Enterprises 5,000,000
Revenues-Unrestricted-Contributions 100,000
Reclassifications to Unrestricted Net Assets-Satisfaction of Program Restrictions 640,000
Reclassifications to Unrestricted Net Assets-Satisfaction of Plant Acquisition Restrictions 1,160,000
Tuition Discount-Unrestricted-Student Aid 110,000
Instruction Expense 7,000,000
Research Expense 4,500,000
Public Service Expense 1,200,000
Institutional Support Expense 700,000
Student Service Expense 150,000
Auxiliary Enterprise Expense 3,500,000
Net Assets-Unrestricted-Undesignated 980,000
Revenues-Temporarily Restricted-Contributions 1,500,000
Revenues-Temporarily Restricted-Grants 950,000
Reclassification from Temporarily Restricted
Net Assets-Satisfaction of Program Restrictions 640,000
Reclassification from Temporarily Restricted NetAssets-Satisfaction of Plant Acquisition Restrictions 1,160,000
Net Assets-Temporarily Restricted 650,000
Revenues-Permanently Restricted-Contributions 2,540,000
Gains on Long Term Investments 750,000
Net Assets-Permanently Restricted 3,290,000
Assume the January 1, 2012, net asset balances are as follows: $1,000,000 unrestricted net assets, $300,000 temporarily restricted net assets; and $1,700,000 permanently restricted net assets.
A. Prepare a Statement of Activities using the format presented in Illustration 10-1.
B. Prepare a Statement of Unrestricted Revenues, Expenses, and Other Changes in Unrestricted Net Assets together with a Statement of Changes in Net assets.
Click here for the solution: Presented below are the closing entries for Lee College, a private not-for-profit, for the year ended December 31, 2012
Debits Credits
Revenues-Unrestricted-Tuition & Fees $11,200,000
Revenue-Unrestricted-Unrestricted Income on Endowment investment 40,000
Revenue-Unrestricted-Sales & Service of Auxiliary Enterprises 5,000,000
Revenues-Unrestricted-Contributions 100,000
Reclassifications to Unrestricted Net Assets-Satisfaction of Program Restrictions 640,000
Reclassifications to Unrestricted Net Assets-Satisfaction of Plant Acquisition Restrictions 1,160,000
Tuition Discount-Unrestricted-Student Aid 110,000
Instruction Expense 7,000,000
Research Expense 4,500,000
Public Service Expense 1,200,000
Institutional Support Expense 700,000
Student Service Expense 150,000
Auxiliary Enterprise Expense 3,500,000
Net Assets-Unrestricted-Undesignated 980,000
Revenues-Temporarily Restricted-Contributions 1,500,000
Revenues-Temporarily Restricted-Grants 950,000
Reclassification from Temporarily Restricted
Net Assets-Satisfaction of Program Restrictions 640,000
Reclassification from Temporarily Restricted NetAssets-Satisfaction of Plant Acquisition Restrictions 1,160,000
Net Assets-Temporarily Restricted 650,000
Revenues-Permanently Restricted-Contributions 2,540,000
Gains on Long Term Investments 750,000
Net Assets-Permanently Restricted 3,290,000
Assume the January 1, 2012, net asset balances are as follows: $1,000,000 unrestricted net assets, $300,000 temporarily restricted net assets; and $1,700,000 permanently restricted net assets.
A. Prepare a Statement of Activities using the format presented in Illustration 10-1.
B. Prepare a Statement of Unrestricted Revenues, Expenses, and Other Changes in Unrestricted Net Assets together with a Statement of Changes in Net assets.
Click here for the solution: Presented below are the closing entries for Lee College, a private not-for-profit, for the year ended December 31, 2012
Tuesday, August 4, 2015
The following selected accounts and their current balances appear in the ledger of Carpet Land Co. for the fiscal year ended October 31, 2012
Problem 6-1A Multiple-Step Income Statement and Report-Form of Balance Sheet
The following selected accounts and their current balances appear in the ledger of Carpet Land Co. for the fiscal year ended October 31, 2012:
AND SO ON
Instructions
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner's equity.
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $16,000.
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report form and account-form balance sheets differ.
Check: 1. Net Income: $775,000
Click here for the solution: The following selected accounts and their current balances appear in the ledger of Carpet Land Co. for the fiscal year ended October 31, 2012
The following selected accounts and their current balances appear in the ledger of Carpet Land Co. for the fiscal year ended October 31, 2012:
AND SO ON
Instructions
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner's equity.
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $16,000.
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report form and account-form balance sheets differ.
Check: 1. Net Income: $775,000
Click here for the solution: The following selected accounts and their current balances appear in the ledger of Carpet Land Co. for the fiscal year ended October 31, 2012
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