Jeffrey Vaughn, president of Frame-It Company, was just concluding a budget meeting with his senior staff

Comprehensive Master Budget
Accounting 2302

Jeffrey Vaughn, president of Frame-It Company, was just concluding a budget meeting with his senior staff. It was November of 20x0, and the group was discussing preparation of the firm’s master budget for 20x1. “I’ve decided to go ahead and purchase the industrial robot we’ve been talking about. We’ll make the acquisition on January 2 of next year, and I expect it will take most of the year to train the personnel and reorganize the production process to take full advantage of the new equipment.”

AND SO ON

Prepare Frame-It Company’s master budget for 20x1 by completing the following schedules and statements.

1. Sales budget:
2. Cash receipts budget:
3. Production budget:
4. Direct-material budget
5. Cash disbursements budget:
6. Summary cash budget:
7. Prepare a budgeted schedule of cost of goods manufactured and sold for the year 20x1. Note: Budgeted and actual MOH will be equal.
8. Prepare Frame-It’s budgeted income statement for 20x1. (Ignore income taxes.)
9. Prepare Frame-It’s budgeted statement of retained earnings for 20x1.
10. Prepare Frame-It’s budgeted balance sheet as of December 31, 20x1.

Click here for the solution: Jeffrey Vaughn, president of Frame-It Company, was just concluding a budget meeting with his senior staff

The following conclusions were taken from a staff auditor’s summary worksheet for fixed assets and the worksheet for prepaid insurance

13-33 (Audit Evidence and Conclusions) The following conclusions were taken from a staff auditor’s summary worksheet for fixed assets and the worksheet for prepaid insurance.

Audit Conclusions or Situations

1. The choice of eight years for straight-line depreciation of the company’s trucks appears unreasonable. I would suggest that the client change to a six-year life and use DDB depreciation.

2. Insurance coverage appears to be inadequate, because the client has chosen to carry only liability insurance on the cement trucks. There is no provision for collision or damage done to the trucks.

3. The client acquired a substantial piece of real estate from the town of Baraboo to build a warehouse in the town’s new industrial complex. The land was donated to the company provided it maintains operations for a minimum of ten years and pays real estate taxes on its appraised
value. The land is carried on the books at the fair market value at the time of donation of $250,000.

4. Several pieces of idle equipment were noted. It is recommended that the equipment be written down to the scrap value of $50,000 from the current net book value of $185,000.

5. The company has self-constructed the warehouse located in the town of Baraboo.

It has capitalized all payroll expense directly related to construction of the project. The adjusting entry debited Building for $73,000 and credited Payroll Expense for the same amount.

6. The company completely overhauled ten of its trucks at a significant cost. The overhaul should extend the life of the trucks by at least three years. Because the company performs similar overhauls each year, the cost has been properly charged to repairs and maintenance.

7. The company sold 15 of its old trucks to Virgin Distributors, a new company owned by the brother of the company’s chief executive officer. The equipment was old, and a gain of $70,000 on the sale was credited to income.

Required
a. For each conclusion or situation listed, identify the type of audit evidence needed to support the auditor’s conclusion.
b. Briefly indicate the audit implications if the auditor’s conclusion is justified.


Click here for the solution: The following conclusions were taken from a staff auditor’s summary worksheet for fixed assets and the worksheet for prepaid insurance

Gene is a new staff-level auditor on the audit of CalPower, a publicly traded energy and utility company

Problem 16-22 Gene is a new staff-level auditor on the audit of CalPower, a publicly traded energy and utility company. On his first day, his senior informs him that the engagement team is scheduled to have lunch with the internal auditor to discuss ways to improve this year’s audit. While Gene has heard a lot about internal auditing in school and has some friends who recently began working as internal auditors, he is unfamiliar with exactly what internal auditors do and how internal and external auditors can work together to improve the audit process. Gene decides to take a look at last, year’s internal audit report prepared by CalPower’s internal auditors. He notices that the report includes a sentence that reads, “CalPower’s Internal Audit group maintains a high level of independence from management.” Because Gene is intimately familiar with the extensive independence requirements of his own firm, he cannot figure out how CalPower’s internal audit group can possibly assert their own independence.

What is meant by independence from management for internal auditors?


Click here for the solution: Gene is a new staff-level auditor on the audit of CalPower, a publicly traded energy and utility company