Question 1
Complete the Inventory audit section: 1- Write the inventory memo based upon yours and Bradley?s observation. 2- Tie in Bradley?s test counts on the client?s count sheets to Apollo?s Inventory Warehouse Report. 3- Tie the Inventory Warehouse Report to Apollo?s Inventory Status Report supplied by Karina last week. 4- Next, judgmentally sample a number of unit costs from recent invoices and tie them to the Inventory Status Report. If the numbers agree, tie the Inventory Status Report into the Inventory Lead Schedule. Lastly, tie the lead schedule into the Trial Balance. Review the Planning section with emphasis on the Workpaper Indexing, Trial Balances, and Apollo Shoes Minutes and the Accounts Receivable section with emphasis on the Audit of Accounts Receivable ? confirmations. ++++++++++++++++++Workpaper Indexing++++++++++++++ Date: Mon, 29 OCT 2007 06:42:35 +0000 From: "Darlene Wardlaw" Subject: Upcoming Apollo Shoes Engagement Apollo denied our request to speak with the predecessor auditors because of ?litigation concerns.? I?ve looked at the 8-K filed by Apollo and the auditors referenced in the 10-K. I didn?t attach a copy because it didn?t say much, just something about ?incongruent goals,? blah, blah, blah. Against my advice, Arnold decided to accept the engagement anyway. Keep your eyes open! The good news is that the predecessor auditors, Smith and Smith, CPAs, have a good reputation, so you can use last year?s audited numbers from the 10-K. The bad news is that we don?t have access to prior year working papers. You?ll need to come up with programs for the substantive audit procedures for each of the functional balance sheet areas (indicated with an asterisk (*) below). You can download copies of the audit programs from AuditNet (www.auditnet.org) under ?Auditors Sharing Audit Programs? or get them from an old auditing textbook. My preference is to place the audit programs at the beginning of each section. Label the sections as follows: GA series (GA-1, GA-2, etc.) General and Administrative (Planning) ICC series Revenue/Collection Cycle Internal Control Evaluation ICD series Purchasing/Disbursements Internal Control Evaluation ICP series Payroll Internal Control Evaluation A series Trial Balance/Financial Statements/Adjustments/Footnotes B series* Cash Substantive Workpapers C series* Accounts Receivable Substantive Workpapers D series* Inventory Substantive Workpapers E series* Prepaids Substantive Workpapers F series* Property, Plant and Equipment Substantive Workpapers I series* Other Assets Substantive Workpapers L series* Current Liabilities Substantive Workpapers N series* Notes Payable Substantive Workpapers Q series* Stockholders? Equity Substantive Workpapers R series* Revenue Substantive Workpapers X series* Expenses Substantive Workpapers Because we are so understaffed during busy season, you are going to have to perform the bulk of the audit yourself. I was only able to get you a spring intern (Bradley Crumpler) from Caledonia State University (heck, I didn?t even know they had an accounting program!). He is the only unassigned person in the office right now. Because I am unsure of his training, I suggest that you only use him for ?grunt work.? Also, I checked into the background and experience of Karina Ramirez, Apollo?s Internal Auditor. Apparently, she was an auditor with a Big 4 firm for 8 years before coming to Apollo and has served on the state CPA society?s ethics committee. I also went through her workpapers; they appear to be top-notch. Lastly, she reports directly to the Audit Committee, so we can rely on her to be objective. I think we can rely on her work during our engagement. DW P.S. Thanks for drafting the engagement letter. I only had to make a couple of changes before Arnold signed it. ++++++++++++++++++Trial Balances++++++++++++++ Is attached ++++++++++++++++++Apollo Shoes Minutes++++++++++++++ Date: Mon, 7 JAN 2008 12:45:39 +0000 From: "Darlene Wardlaw" Subject: Apollo Shoes minutes Attachments: <><><> Hope the inventory observation went well. I saw Bradley in the office working on some inventory stuff. He said that he would e-mail it to you when it was completed. Sorry I haven?t made it out to Apollo yet. I did meet with Jeff Chestnutt (Apollo?s corporate secretary) who allowed me to copy the minutes of the Board of Directors. The board of directors met twice during the period under audit, January 1 through December 31, and once more last week. I have attached copies. Study these minutes ? they provide a history of every important event and transaction that Apollo has undergone during the past year. Make notes in the form below for the audit working papers of matters relevant for the audit of the 2007 financial statements. Prepare a working paper (GA-3) for my review with proper headings and these two columns: Information Relevant to 2007 Audit Audit Action Recommended You may want to stick a copy of the minutes in the workpapers (GA-3-1, GA-3-2, etc.) behind your memo when you are done with them. DW MEETING HELD JANUARY 3, 2007 Larry Lancaster, incoming chairman of the board, presided over the first meeting of the year, beginning at 3 P.M. The meeting was conducted in the boardroom of Apollo?s new global headquarters. All members were present: Larry Lancaster Josephine Mandeville** Fritz Brenner** Ivan Gorr* Theodore Horstmann** Harry Baker* Eric Unum * Outside director ** Outside director and member of the audit committee. The minutes of the December 15, 2006 meeting were reviewed and approved. Reporting on the annual meeting of shareholders, Mr. Lancaster welcomed the new or reelected board members: Josephine C. Mandeville, Professor of Accountancy and Typing at the Graduate School of Business and Clerical Skills; Ivan W. Gorr, President and CEO of Far More Drugs; Harry R. Baker, Executive Vice President and Treasurer of the Iguana Growers of America Inc., Theodore Horstmann, Minister of Commerce of Anglonesia; and Fritz Brenner, President of The Widget Corporation Mr. Unum presented the forecast for the year, attached. Sales are expected to increase 10 percent, with costs of goods sold and general expenses bearing about the same relationships as experienced last year. Mr. Lancaster stated, ?Well, they better increase by that much, or heads will roll!? Mr. Lancaster?s plan to move production to within the company was discussed. Over Mr. Horstmann?s vehement disagreement, the board authorized purchase of equipment totaling $1.3 million to facilitate internal production of Apollo products by a vote of 6-1. Mr. Unum reported that the Company?s short-term line of credit was refinanced as of January 2, 2007 and rolled into a long-term note payable with the Twenty-First National Bank of Maine, due January 1, 2008. Mr. Brenner moved a declaration of dividends for the year ended the previous December 31. The motion died for lack of a second. Mr. Unum moved, and Mr. Lancaster seconded, officers? salary increases of 10 percent for 2007. The board approved these salaries by a 4-3 vote: President and CEO, Larry Lancaster $2,750,000 Exec Sr. VP and CFO, Joe Bootwell 1,320,000 VP Marketing, Fred Durkin 1,100,000 VP Finance, Eric Unum 649,000 VP Legal Affairs, Sue Fultz 1,650,000 VP Operations, Daisy Gardner 450,000 Internal Audit Director, Karina Ramirez 235,000 Treasurer, Mary Costain 222,000 Controller, Samuel Carboy 214,000 Mr. Lancaster encouraged everyone to watch the 2007 Superbowl to watch for Apollo?s 15- second commercial. He noted that the cost of the commercial time rose approximately 10% from last year. The cost of production and airing the ad is now approaching $1,000,000. Meeting ended 5:30 P.M. /s/ Jeff Chesnut, Secretary AudComMins?010307.doc MEETING HELD JUNE 30, 2007 Larry Lancaster, chairman of the board, presided over the second meeting of the year, beginning at 3 P.M. All members were present: Larry Lancaster Josephine Mandeville** Fritz Brenner** Ivan Gorr* Theodore Horstmann** Harry Baker* Eric Unum * Outside director ** Outside director and member of the audit committee. The minutes of the January 3 meeting were reviewed and approved. Mr. Lancaster reported on damage caused by a ?Nor?easter? storm that hit Shoetown in April. Damages amounted to approximately $50,000, just under the insurance deductible. Mr. Unum reported that sales revenues are not meeting expectations, primarily because of parents? growing disenchantment with spoiling their children; parents were no longer willing to buy $300 premium shoes for their kids as they did in previous years. Mr. Gorr concurred and mentioned something about ?not sparing the rod.? In order to compensate for decreased sales, the Company has raised prices by about 10% with respect to product costs. Mr. Lancaster lamented that the quality of Apollo products was too high?the shoes were just not wearing out fast enough. Mr. Lancaster also stated that because of the strength of current product lines and as a cost-cutting measure, he decided to stop research and development efforts on the Phoneshoe, thereby eliminating Research and Development expense for the current year. The development lab will be modified in 2008 to house a personal gym for corporate executives. Scientists working in the lab have been reassigned to maintenance duties elsewhere in the company. The Company has also saved postage and telephone expense through increased use of e-mail. In other business, the board authorized the write-off of one account receivable for $8,810.13 for an account that had been outstanding for over a year. Mr. Lancaster noted that he did not anticipate any other write-offs during the year, or that ?heads would roll!? Mr. Unum moved that Apollo advance $1,000,000 to Mr. Lancaster as a personal loan to cover personal legal expenses related to his previous employer. Mr. Unum further suggested that the promissory note plus accrued interest of 1% per year be due on June 30, 2045. Mr. Lancaster suggested that it be recorded in ?other receivables,? rather than ?employee advances? so as to not trouble shareholders with needless details. After general agreement among the board that similar options be made available to other board members in the future on an as needed basis, the advance was approved unanimously. Mr. Lancaster asked Mr. Unum to have the check drawn to him immediately at the conclusion of the board meeting. The board unanimously supported Ernst Hathaway?s promotion from Director of MIS to VP-Information Systems. He reported on the plans for the purchase and installation of a new information system. The board authorized up to $1.2 million for the purchase of the new computer system. Ms. Mandeville offered to consult on the purchase and installation. To fund the purchase and pay other expenses, Mr. Unum requested that the board authorized a draw of $44,053,000 on the Company?s line of credit on July 1. This proposal was unanimously approved. Meeting ended 7:30 P.M. /s/ Jeff Chesnut, Secretary AudComMins?063007.doc ? MEETING HELD JANUARY 3, 2008 Larry Lancaster, chairman of the board, presided over the regular meeting, beginning at 2 P.M. All members were present: Larry Lancaster Josephine Mandeville** Fritz Brenner** Ivan Gorr* Theodore Horstmann** Harry Baker* EricUnum * Outside director ** Outside director and member of the audit committee. The minutes of the June 30 meeting were reviewed and approved. The selection by the audit committee of Anderson, Olds & Watershed as auditors was ratified. The $750,000 fee was approved for the 2007 audit. Ms. Mandeville moved, and Mr. Gorr seconded, a proposal to declare retroactively a cash dividend of $810,000 payable March 1 to stockholders of record on December 31. Approved by a vote of 5?2. Ms. Fultz, VP-Legal affairs, stated that on January 2, 2008 (yesterday), a class action suit alleging gross negligence and violation of warranty of merchantability was brought against Apollo for $12,000,000. The action stems from the use of one of the Company's products in an aquatic environment, which may have caused severe electrical shock to the wearer(s). She is working closely with Apollo?s legal counsel, Perley Stebbins, to vigorously defend Apollo?s good name. Ms.Fultz stated that the company?s current insurance does not cover these types of actions. Mr. Baker inquired as to the status of the machinery purchased in early 2006. Mr. Lancaster replied that the machinery would be set up ?soon.? Mr. Lancaster moved and Mr. Unum seconded the approval of officers? bonuses for the year just ended December 31. Approved by a 4?3 vote. President, Larry Lancaster $200,000 VP Marketing, Fred Durkin 50,000 VP Finance, Eric Unum 50,000 VP Information Systems, Ernst Hathaway 50,000 VP Legal Affairs, Sue Fultz 50,000 VP Operations, Daisy Gardner 50,000 The Board approved the Company?s contribution to the Employee Benefits program. Mr. Unum stated that the contribution was increased by $300,000 for 2007, up 10% over the past several years to appease growing employee dissatisfaction. Given the company?s plans to automate the distribution process, Mr. Unum stated that employee benefits will decrease significantly in future years. Mr. Unum noted also that the company decided not to air a Superbowl ad this year. Meeting ended 8:30 P.M. /s/ Jeff Chesnut, Secretary AudComMins?010308.doc ++++++++++++++++Audit of Accounts Receivable++++++++++ Date: Mon, 28 JAN 2008 15:37:42 +0000 From: "Darlene Wardlaw" Subject: Audit of Accounts Receivable We received a number of account receivable (and one pre-paid insurance) confirmations that I put on your desk when I stopped by to talk to Samuel Carboy this morning. With the good response rate on the positive confirmations, you can probably start working on A/R now. While I think of it, you need to prepare a memo (C-2-1) addressing the following issues: 1. Describe the two forms of accounts receivable confirmation requests that you used and indicate the factors that you considered in determining which type to use. 2. What ?alternative procedures? are you going to use to verify the existence of these accounts and the gross value of the receivables if the customers who receive positive confirmations never reply, even to a second request? Put the confirmations in the workpapers (C-2-2, C-2-3, C-2-4, etc.). Address any discrepancies between the client and the customer and propose adjustments as necessary. It would also be helpful to indicate the payments received by Apollo on the Aged Trial Balance Schedule (C-2). You can get these off of any early January deposits slips. If you get copies from the client, be sure to tie the totals into deposits indicated on the cutoff bank statement received directly from the bank. Lastly, the allowance for doubtful accounts looks pretty low. A/R goes up, but the allowance goes down? I need a separate workpaper (C-3) addressing the reasonableness of Apollo?s Allowance for Doubtful Accounts. You can specifically identify troubled accounts, look at subsequent cash collections, look at what Apollo?s competitors do, look at what Apollo has done in the past (bad debt expense as a % of sales, allowance for doubtful accounts as a % of total receivables) to develop your estimate of what should be in the allowance. Also consider current and previous A/R Turnover and Days? Sales in A/R ratios. DW Apollo Shoes, Inc. Shoetown, ME Neutralizer 1359 Central Boulevard Derma, MS 39530 Attn: Accounts Payable Dept. Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements. Part of this audit includes direct verification of customer balances. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. This is not a request for payment. Please do not send your remittance to our auditors. Your prompt attention to this request will be appreciated. Samuel Carboy ______________________ Samuel Carboy, Controller The balance due Apollo Shoes as of December 31, 2007, is $3,051,755.48 Purchases from Apollo Shoes during the year 2007 totaled $3,051,755.48 This balance is correct except as noted below: Our records indicate that we owe $1388.75 more than indicated above. We wrote a check to Apollo on 12/28 for $3,053,144.23 for 10 pallets of shoes. Date: 1/24/08 By: __Rudy Robinson______________________ Title: _Accounts Payable ______________ Apollo Shoes, Inc. Shoetown, ME Mall-Warts 146 Boardwalk Drive Atlantic City, NJ 08401 Attn: Accounts Payable Dept. Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements. Part of this audit includes direct verification of customer balances. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. This is not a request for payment. Please do not send your remittance to our auditors. Your prompt attention to this request will be appreciated. Samuel Carboy ______________________ Samuel Carboy, Controller The balance due Apollo Shoes as of December 31, 2007, is $20,549,225.88 Purchases from Apollo Shoes during the year 2007 totaled $122,826,158.60 These amounts are correct except as noted below: The amounts appear right, but we entered into involuntary bankruptcy on November 3. We told Apollo about this back at that time. We don?t know why they shipped us so many pairs in late December (including over 1600 pairs of size 23?s that we can?t even give away!)! We didn?t order them and we can?t afford to send them back! Date: 1/18/08 By: __Action Jackson____________ Title: _Liquidation Coordinator______ Apollo Shoes, Inc. Shoetown, ME Run for Your Life Shoes Attn: Accounts Payable Dept. 5110 Speedway Drive Los Angeles, CA 90035 Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements. Part of this audit includes direct verification of customer balances. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. This is not a request for payment. Please do not send your remittance to our auditors. Your prompt attention to this request will be appreciated. Samuel Carboy ______________________ Samuel Carboy, Controller The balance due Apollo Shoes as of December 31, 2007, is $2,165,500.55 Purchases from Apollo Shoes during the year 2007 totaled $2,165,500.55 This balance is correct except as noted below: Yes, we made one purchase from Apollo during the year, but we paid the entire amount on 1/8. Date: 1/18/08 By: __Justin Thompson_____________________ Title: _Accounts Payable Coordinator___________ Apollo Shoes, Inc. Shoetown, ME Tread Attn: Accounts Payable Dept. Highway 67 French Lick, IN 47432 Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements. Part of this audit includes direct verification of customer balances. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND COMPARE THEM TO YOUR RECORDS OF YOUR ACCOUNT WITH US. IF THE INFORMATION IS NOT IN AGREEMENT WITH YOUR RECORDS, PLEASE STATE ANY DIFFERENCES BELOW AND RETURN DIRECTLY TO OUR AUDITORS IN THE RETURN ENVELOPE PROVIDED. IF THE INFORMATION IS CORRECT, NO REPLY IS NECESSARY. This is not a request for payment. Please do not send your remittance to our auditors. Your prompt attention to this request will be appreciated. Samuel Carboy ______________________ Samuel Carboy, Controller The balance due Apollo Shoes as of December 31, 2007, is $1,388.75 Purchases from Apollo Shoes during the year 2007 totaled $3,091,017.74 This balance is correct except as noted below: We were told in November that our account had already been credited for the amount listed above for a return of 5 pairs of defective shoes. Total purchases agree with our records though. Date: __1/18/08 By: __Shoeless Joe Johanson____ Title: _President, Tread Shoes___ Apollo Shoes, Inc. Shoetown, ME Paul Bunion Footwear Attn: Accounts Payable Dept. Lone Mountain Trail P.O. Box 10558 Big Sky, MT 59717 Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements. Part of this audit includes direct verification of customer balances. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. This is not a request for payment. Please do not send your remittance to our auditors. Your prompt attention to this request will be appreciated. Samuel Carboy ______________________ Samuel Carboy, Controller The balance due Apollo Shoes as of December 31, 2007, is $10,458,847.58 Purchases from Apollo Shoes during the year 2007 totaled $29,270,632.63 This balance is correct except as noted below: No problems noted. Date: 1/25/08 By: __Kevin Bunion_______________________ Title: _VP-Finance, PBS ______________ Apollo Shoes, Inc. Shoetown, ME Sassy Shoes Attn: Accounts Payable Dept. 440 W. 53rd Street New York, NY 10018 Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements. Part of this audit includes direct verification of customer balances. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. This is not a request for payment. Please do not send your remittance to our auditors. Your prompt attention to this request will be appreciated. Samuel Carboy ______________________ Samuel Carboy, Controller The balance due Apollo Shoes as of December 31, 2007, is $5,765,081.85 Purchases from Apollo Shoes during the year 2007 totaled $15,178,041.85 This balance is correct except as noted below: Yes, we owed it. This is the third letter that we?ve received from you people!!! Our sales are just running a little slowly this year, but we paid on the tenth, so quit hassling us! Date: __1/26/08_______________ By: __Sassy Spinelli______________ Title: _Founder, Sassy Shoes_?______ Apollo Shoes, Inc. Shoetown, ME International Soccer Federation Attn: Accounts Payable Dept. Birmingham Road Stratford-upon-Avon Warwickshire CV34 6LT England Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements. Part of this audit includes direct verification of customer balances. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. This is not a request for payment. Please do not send your remittance to our auditors. Your prompt attention to this request will be appreciated. Samuel Carboy ______________________ Samuel Carboy, Controller The balance due Apollo Shoes as of December 31, 2007, is $1,222,359.56 Purchases from Apollo Shoes during the year 2007 totaled $3,228,779.92 This balance is correct except as noted below: The amounts are correct as stated. I don?t think we are going to buy any more though. The sirens keep going off prematurely and it?s causing our fans to riot. Date: 1/25/08 By: __Foots McKinney____________________ Title: _Equipment Manager, ISF _____________
Question 2
Question 1 Which of the following best describes an "opportunity cost"? The distribution of all products to be sold Costs that were incurred in the past and cannot be changed Benefits foregone by not choosing an alternative course of action Expected future costs that differs among alternatives Question 2 What is the name given to choosing among different alternative investments due to limited resources? Capital rationing Resource allocation Capital investing Resource rationing Question 3 The practice of directing executive attention to important deviations from budgeted amounts is called management by: analysis. exception. objective. control. Question 4 The Mad Hatter Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year. End of current year End of prior year Net sales revenue (all credit) $ 1,200,000 Cost of goods sold $ 725,000 Gross profit $ 475,000 Selling/general expenses $ 280,000 Interest expense $ 42,000 Net Income $ 153,000 Current assets $ 112,000 $ 82,000 Long-term assets $ 505,000 $ 440,000 Total assets $ 617,000 $ 522,000 Current liabilities $ 57,000 $ 52,000 Long-term liabilities $ 275,000 $ 245,000 Common stockholders' equity $ 415,000 $ 225,000 Total liabilities and stockholders' equity $ 617,000 $ 522,000 Inventory and prepaid expenses account for $30,000 of the current year's current assets. Average inventory for the current year is $25,000. Average net accounts receivable for the current year is $45,000. There are 40,000 shares of common stock outstanding. Total dividends paid during the current year were $37,000. The market price per share of common stock is $20. What is the earnings per share for the current year? $3.83 $4.64 $10.38 $5.23 Question 5 Return on investment and revenue growth would be examples of: financial perspective. customer perspective. internal business perspective. learning and growth perspective. Question 6 Glow Sticks Corporation manufactures and sells glow-in-the-dark necklaces for $10 each. The company has the capacity to produce 25,000 necklaces in a year, but is currently producing and selling 20,000 necklaces per year. The company currently is incurring the following costs at its current production level of 20,000 necklaces: Variable manufacturing costs $ 60,000 Fixed manufacturing costs $ 90,000 Variable selling and administrative costs $ 75,000 Fixed selling and administrative costs $ 50,000 An amusement park is interested in purchasing the excess capacity of 5,000 necklaces if it can receive a special price. This special order would not affect Glow Sticks Corporation's regular sales or its cost structure. Glow Sticks Corporation's profits would increase from this special order if the special order price per necklace is greater than: $13.75. $6.75. $5.40. $7.50. Question 7 Roberts Corporation has an ROI of 23%, total assets of $5,250,000, and current liabilities of $950,000. What is Roberts Corporation's operating income? $4,130,435 $218,500 $1,207,500 $22,826,087 Question 8 The following information relates to Bonny Unlimited for the past two years. Account Current year Prior year Net sales (all credit) $250,000 $180,000 Cost of goods sold $115,000 $110,000 Gross profit $135,000 $ 70,000 Income from operations $ 32,000 $ 30,000 Interest expense $ 4,000 $ 7,000 Net income $ 24,000 $ 18,000 Cash $ 16,000 $ 14,000 Accounts receivable, net $ 20,000 $ 31,000 Inventory $ 52,000 $ 44,000 Prepaid expenses $ 2,000 $ 1,000 Total current assets $ 90,000 $ 90,000 Total long-term assets $100,000 $120,000 Total current liabilities $ 60,000 $ 90,000 Total long-term liabilities $ 22,000 $ 78,000 Common stock, no par, 2,000 shares, market value $90 per share $ 40,000 $ 40,000 Retained earnings $ 68,000 $ 2,000 What is the current ratio for the current year? 1.00 1.50 2.40 7.00 Question 9 Gutierrez Company budgeted 10,000 pounds of direct materials costing $21.50 per pound to make 5,000 units of product. The company actually used 10,200 pounds of direct materials costing $24.00 per pound to make the 5,000 units. What is the direct materials efficiency variance? $4,800 favorable $4,300 unfavorable $4,800 unfavorable $4,300 favorable Question 10 Which of the following types of analysis include common-sized financial statements? Horizontal analysis Trend analysis Vertical analysis Ratio analysis Question 11 Which of the following goals of a performance evaluation system is accomplished when a company's actual results are compared to the results of competitors? Motivating unit managers Communicating expectations Benchmarking Promoting goal congruence Question 12 Outdoor Creations sells its patio heaters for $300 each. Its variable cost is $220 per heater. Fixed costs are $40,000 per month for volumes up to 1,000 patio heaters. Above 1,000 heaters, monthly fixed costs are $62,000. What is the budgeted operating income at a level of 1,300 heaters per month? $64,000 $104,000 $328,000 $42,000 Question 13 (Present value tables are needed.) Miami Marine Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model. Financial data about the two choices follows. B14 Model F54 Model Investment $ 320,000 $ 240,000 Useful life (years) 8 8 Estimated annual net cash inflows for useful life $ 75,000 $ 40,000 Residual value $ 30,000 $ 10,000 Depreciation method Straight-line Straight-line Required rate of return 14% 10% What is the total present value of future cash inflows from the B14 Model? $38,455 $218,070 $358,455 $410,655 Question 14 Zany Brainy projected current year sales of 50,000 units at a unit sale price of $20.00. Actual current year sales were 55,000 units at $22.00 per unit. Actual variable costs, budgeted at $15.00 per unit, totaled $14.00 per unit. Budgeted fixed costs totaled $400,000, while actual fixed costs amounted to $420,000. What is the sales volume variance for total revenue? $110,000 unfavorable $100,000 favorable $110,000 favorable $100,000 unfavorable Question 15 Which department listed below would most likely be responsible for a "direct material price variance"? Marketing department Personnel department Production department Purchasing department Question 16 Green Garden Supply budgeted three hours of direct labor per unit at $10.00 per hour to produce 500 units of product. The 500 units were completed using 1,600 hours of direct labor at $10.50 per hour. What is the direct labor efficiency variance? $1,050 favorable $1,000 favorable $1,000 unfavorable $1,050 unfavorable Question 17 Which term below best describes "the comprehensive budget"? Sensitivity analysis Responsibility center Master budget Operating budget Question 18 Rong Company expects cash sales for July of $15,000, and a 20% monthly increase during August and September. Credit sales of $6,000 in July should be followed by 10% decreases during August and September. What are budgeted cash sales and budgeted credit sales for September? $12,150 and $8,640 $18,000 and $5,400 $21,600 and $4,860 $13,500 and $7,200 Question 19 Operating activities resulting from the sales of goods and services relate to: the income statement. retained earnings reported on the balance sheet. assets and liabilities reported on the balance sheet. net income on the retained earnings statement. Question 20 Vera Enterprises has in its inventory 1,000 damaged handbags that cost $20,000. The handbags can be sold in their present condition for $12,000, or repaired at a cost of $13,000 and sold for $31,000. What is the opportunity cost of selling the handbags in their present condition? $18,000 $25,000 $32,000 $44,000 Question 21 If a company decides to outsource and then has freed capacity, the decision on what to do with that freed capacity would be based upon: unavoidable fixed costs. opportunity costs. avoidable fixed costs. none of the above. Question 22 Which of the following is the correct order of the sections on a statement of cash flows? Operating, financing, investing Investing, operating, financing Financing, investing, operating Operating, investing, financing Question 23 Richol Corporation is considering an investment in new equipment costing $180,000. The equipment will be depreciated on a straight-line basis over a five-year life and is expected to generate net cash inflows of $45,000 the first year, $65,000 the second year, and $90,000 every year thereafter until the fifth year. What is the payback period for this investment? The equipment has no residual value. 2.00 years 2.37 years 2.78 years 4.00 years Question 24 The Tandem division of the Great Adventures Cycles Company had the following results last year (in thousands). Sales $ 4,000,000 Operating income $ 480,000 Total assets $ 2,000,000 Current liabilities $ 300,000 Management's target rate of return is 10% and the weighted average cost of capital is 8%. Its effective tax rate is 40%. What is the Tandem division's Return on Investment (ROI)? 24.00% 7.50% 12.00% 200.00% Question 25 Horvath Corporation had beginning inventory of 22,000 units and expects sales of 76,500 units during the year. Desired ending inventory is 19,500 units. How many units should Horvath Corporation produce? 79,000 units 35,000 units 74,000 units 118,000 units,I really hope you can help me with this material I am so lost..
Question 3
The "double taxation" of corporate income refers to the fact that corporate income is taxed at both the entity-level and the shareholder-level. Question 1 options: a) True b) False Save Question 2 (6 points) A distribution from a corporation to a shareholder will always be treated as a dividend for tax purposes. Question 2 options: a) True b) False Save Question 3 (6 points) A corporation's "earnings and profits" account is equal to the company's "retained earnings" account on its balance sheet. Question 3 options: a) True b) False Save Question 4 (6 points) A distribution from a corporation to a shareholder will only be treated as a dividend for tax purposes if the distribution is paid out of current or accumulated earnings and profits. Question 4 options: a) True b) False Save Question 5 (6 points) The term "earnings and profits" is well-defined in the Internal Revenue Code. Question 5 options: a) True b) False Save Question 6 (6 points) Income earned by flow-through entities is usually taxed once at the entity level. Question 6 options: a) True b) False Save Question 7 (6 points) Partnerships tax rules incorporate both the entity and aggregate approaches. Question 7 options: a) True b) False Save Question 8 (6 points) The term "outside basis" refers to the partnership's basis in its assets; whereas, the term "inside basis" refers an individual partner's basis in her partnership interest. Question 8 options: a) True b) False Save Question 9 (6 points) A partnership can elect to amortize organization and startup costs; however, syndication costs are not deductible. Question 9 options: a) True b) False Save Question 10 (6 points) Nonrecourse debt is generally allocated according to the profit-sharing ratios of the partnership. Question 10 options: a) True b) False Save Question 11 (6 points) A partner's debt relief from the sale of a partnership interest will decrease his outside basis. Question 11 options: a) True b) False Save Question 12 (6 points) In the sale of a partnership interest, a selling partner will recognize ordinary income (rather than capital gain) when the partnership assets include cash and land held for 5 years as an investment. Question 12 options: a) True b) False Save Question 13 (6 points) Hot assets include assets except cash, capital assets and ?1231 assets. Question 13 options: a) True b) False Save Question 14 (6 points) Operating distributions terminate a partner's interest in the partnership. Question 14 options: a) True b) False Save Question 15 (6 points) In an operating distribution, when a partnership distributes property other than money with a basis that exceeds the partner's outside basis, the partner assigns a carryover basis to the distributed assets and recognizes a gain. Question 15 options: a) True b) False Save Question 16 (6 points) Jaime has a basis in her partnership interest of $50,000 when the partnership distributes (in an operating distribution) two parcels of land to Jaime, each valued at $30,000. The basis in parcel A is $40,000 and the basis in parcel B is $20,000. Jaime allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B. Question 16 options: a) True b) False Save Question 17 (6 points) A partner recognizes gain when he receives cash in excess of his outside basis in a liquidating distribution. Question 17 options: a) True b) False Save Question 18 (6 points) S corporations offer the same legal protection to owners as C corporations. Question 18 options: a) True b) False Save Question 19 (6 points) The S corporation rules are less complex for S corporations that have earnings and profits from prior C corporation years than for S corporations that do not have earnings and profits from prior C corporation years. Question 19 options: a) True b) False Save Question 20 (6 points) The same exact requirements for forming and contributing property govern S corporations and partnerships. Question 20 options: a) True b) False Save Question 21 (6 points) S corporations may have no more than 50 shareholders, but members of the same family only count as one shareholder. Question 21 options: a) True b) False Save Question 22 (6 points) Differences in voting powers are permissible across shares of S corporation stock as long as the shares have identical distribution and liquidation rights. Question 22 options: a) True b) False Save Question 23 (6 points) Publicly traded corporations cannot be treated as S corporations. Question 23 options: a) True b) False Save Question 24 (6 points) To make an S election effective as of the beginning of the current year, an S corporation must file Form 2553 within 3 ? months after the beginning of the year. Question 24 options: a) True b) False Save Question 25 (6 points) An S corporation may be voluntarily or involuntarily terminated. Question 25 options: a) True b) False Save Question 26 (6 points) Inventory is substantially appreciated if the fair market value of all inventory items exceeds 100% of their basis to the partnership. Question 26 options: a) True b) False Save Question 27 (6 points) Partners must generally treat the value of profits interests they receive in exchange for services as ordinary income. Question 27 options: a) True b) False Save Question 28 (6 points) Tax elections are rarely made at the partnership level. Question 28 options: a) True b) False Save Question 29 (6 points) Only income and deductions included on a corporation's income tax return are included in the computation of current earnings and profits. Question 29 options: a) True b) False Save Question 30 (6 points) Stock dividends are always tax-free to the recipient. Question 30 options: a) True b) False Save Question 31 (6 points) Gain or loss is always recognized when realized for tax purposes. Question 31 options: a) True b) False Save Question 32 (6 points) A taxpayer's tax basis in property always begins with its cost to the taxpayer. Question 32 options: a) True b) False Save Question 33 (6 points) Control as it relates to a section 351 transaction is strictly defined to be 80 percent or more of the voting power of the stock of the corporation to which property is transferred. Question 33 options: a) True b) False Save Question 34 (6 points) The definition of property as it relates to a section 351 transaction includes money. Question 34 options: a) True b) False Save Question 35 (6 points) A taxpayer must receive voting common stock to be eligible for deferral in a section 351 exchange. Question 35 options: a) True b) False Save Question 36 (6 points) M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. The assumed liability will be treated as boot received by Jane. Question 36 options: a) True b) False Save Question 37 (6 points) Tax considerations always are the primary reason for how an acquisition is structured. Question 37 options: a) True b) False Save Question 38 (6 points) The tax basis of property received by a noncorporate shareholder in a complete liquidation will be the property's fair market value. Question 38 options: a) True b) False Save Question 39 (6 points) Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder? Question 39 options: a) The distribution is a dividend to the extent of the corporation's earnings and profits, then a return of capital, and finally gain from sale of stock. b) The distribution is a return of capital, then a dividend to the extent of the corporation's earnings and profits, and finally gain from sale of stock. c) The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation's earnings and profits. d) The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation's earnings and profits or a return of capital, followed by gain from sale of stock. Save Question 40 (6 points) A calendar-year corporation has negative current E&P of $500 and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true? Question 40 options: a) $500 of the distribution will be a dividend because total earnings and profits is $500. b) $0 of the distribution will be a dividend because current earnings and profits is negative. c) $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000. d) Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution. Save Question 41 (6 points) Which of the following statements best describes the tax law approach to recognizing gain or loss realized in an exchange? Question 41 options: a) Gain and loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code. b) Gain and loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code. c) Gain realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code. d) Loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but gain realized is not recognized unless specifically stated otherwise in the Internal Revenue Code. Save Question 42 (6 points) Roberta transfers property with a tax basis of $400 and a fair market value of $500 to a corporation in exchange for stock with a fair market value of $350 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $150 on the property transferred. What is the amount realized by Roberta in the exchange? Question 42 options: a) $500 b) $400 c) $350 d) $250 Save Question 43 (6 points) Which of these items is not an adjustment to taxable income or net loss to compute current E&P? Question 43 options: a) Dividends received deduction b) Tax-exempt income c) Net capital loss carryforward from the prior year tax return d) Refund of prior year taxes for an accrual method taxpayer Save Question 44 (6 points) Gerald received a 33% capital and profit (loss) interest in XYZ Limited Partnership (LP). In exchange for this interest, Gerald contributed a building with a FMV of $30,000. His adjusted basis in the building was $15,000. In addition, the building was encumbered with a $9,000 nonrecourse mortgage that XYZ, LP assumed at the time the property was contributed. What is Gerald's outside basis immediately after his contribution? Question 44 options: a) $6,000 b) $9,000 c) $21,000 d) $24,000 Save Question 45 (6 points) Under general circumstances, debt is allocated from the partnership to each partner in the following manner: Question 45 options: a) Recourse - profit sharing ratios; nonrecourse - profit sharing ratios b) Recourse - capital ratios; nonrecourse - capital ratios c) Recourse - to partners with the ultimate responsibility for paying the debt; nonrecourse - profit sharing ratios d) Recourse - profit sharing ratios; nonrecourse - to partners with the ultimate responsibility for paying the debt Save Question 46 (6 points) When must a partnership file its return? Question 46 options: a) By the 15th day of the 4th month after the partnerships tax year end b) By the six month after the original due date if an extension is filed c) By the 15th day of the 3rd month after the partnerships tax year end d) A and B e) B and C Save Question 47 (6 points) Which of the following statements regarding the sale of a partnership interest is false? Question 47 options: a) The seller's primary tax concern in a partnership interest sale is calculating the amount and character of gain or loss on the sale. b) The selling partner determines the gain or loss as the difference between the amount realized and her outside basis in the partnership. c) Hot assets change the character of a gain on the sale from ordinary income to capital gain. d) Any debt relief increases the amount the partner realizes from the sale. Save Question 48 (6 points) Which of the following assets would not be classified as hot assets? Question 48 options: a) Inventory b) Depreciation recapture c) Cash d) Accounts receivable for a cash method taxpayer. Save Question 49 (6 points) Which of the following is prohibited from being an S corporation shareholder? Question 49 options: a) Foreign citizens that are U.S. residents. b) U.S. citizens. c) Corporations. d) 51 unrelated individuals. e) None of the above. Save Question 50 (6 points) If Annie and Andy (each a 30% shareholder) file a revocation on February 10, 2010 to terminate their S corporation's S election, what is the effective date of the S corporation termination (assuming they do not specify one)? Question 50 options: a) January 1, 2010. b) February 10, 2010. c) January 1, 2011. d) February 10, 2011. e) None of the above.,Just curious is it almost done just want to check the work i've done already. Thanks.,ive just checked the first 15 and i have different answers for #4, 5, 8, 9, 10, 14, and 15 im pretty sure i have the right answers could you explain those to me.
Question 4
At the time of his death, Nick owned the following property: ? Land held by Nick and his sister Ellen, as joint tenants with right of survivorship. The fair market value of the land on the date of Nick?s death was $600,000, and the land was purchased by Nick for himself and his sister 20 years before his death for $150,000. ? Land held by Nick and Amy as tenants by the entirety. The fair market value of the land on the date of Nick?s death was $800,000, and the land was purchased by Amy for Nick and Amy five years before Nick?s death for $450,000. ? A one-half undivided interest in land held with Lance as tenant in common. The fair market value of the land on the date of Nick?s death was $400,000, and the land was purchased by Lance for Nick and Lance four years before Nick?s death for $300,000. ? City of Dayton bonds worth $500,000 purchased by Nick five years before his death, and titled in Nick?s sole name. What amount is includible in Nick?s gross estate assuming alternate valuation is not available to Nick?s estate? Answer A. $800,000. B. $1,100,000. C. $1,200,000. D. $1,700,000.
Question 5
Theme Comprehensive Case Analysis based on the course material Description Your instructor will assign a major publicly traded corporation from a nonregulated industry where you can obtain complete financial statements for the most recent 5 years. The instructor will post the company in the Announcements section by the end of Unit 1. The company that has been selected for you to study for your final project is "International Game Technology" Ticker "IGT" . This is a NYSE traded company that produces gaming machines for the casino industry. Let's really dig into this company and find out how it ticks. Based on these statements and other information you will prepare a financial statement analysis report. You will work on this project throughout the term. Do not wait until the last week to begin. Directions For your Term Project, turn to page 648 in our textbook, and complete the assignment under Case CC-1, Comprehensive Financial Analysis. The final analysis should be set up as a research paper with the following sequence: ? Cover page with your name, course number, your instructor, date, subject, and a brief statement that you (and you alone) produced the paper and all references are mentioned. ? Executive Summary (max. ? page in Bold) ? Table of Contents ? Introduction ? Body (8-12 pages) ? Conclusion and Recommendation(s) ? References Submit your Final Project by the end of Unit 9.,Attached is the Comprehensive Case including the required document. Just a note this must be at the least 12 pages. 8 only receives partial credit for the assignment.,sorry
