ARID Company

Income Statement

FYE 12/31

Assets					2015		2014
Current assets
	Cash				$       45,000		$       23,000
	Short-term investments				36,000		18,000
	Accounts receivable				94,000		89,000
	Inventory				82,000		68,000
		Total current assets			257,000		198,000
	Plant assets (net)				550,000		560,000
	Total assets				$807,000		$758,000
Liabilities and Stockholders' Equity
Current liabilities
	Accounts payable				140,000		120,000
	Income taxes payable				35,000		38,000
		Total current liabilities			175,000		158,000
Long-term liabilities
	Bonds payable				160,000		170,000
		Total liabilities			335,000		328,000
Stockholders' equity
	Common stock ($5 par)				195,000		185,000
	Retained earnings				277,000		245,000
		Total stockholders' equity			472,000		430,000
Total liabilities and stockholders'					$807,000		$758,000
Additional data:
The common stock recently sold at $20.00 per share

Compute the following ratios for 2015:

(a) Current ratio=

Working Capital=

(b) Acid-test ratio=

(c)Accounts receivable turnover=

Average Collection Period (Average Days to Collect)=

(d) Inventory turnover=

Days in inventory (Average Days to Sell)=

Operating Cycle = Average Days to Sell + Average Days to Collect

'(e ) Profit Margin =

(f) Asset turnover =

(g) Return on Assets =

(h) Return on Common

Stockholders' Equity =

Background Information Note the following:

• Acme Corporation is a publicly listed company

• ACME’s Fiscal year end is December 31

• In addition to the cash account being reconcile here; ACME has a separate Revolving Credit account.

  This is a revolving credit facility where interest is accrued on the average balance outstanding during the month. The interest amount is required to be paid on a monthly basis. The correct is amount calculated and taken from the account automatically by the bank.

• The facility has an annual interest rate of 4%

• Management has set-out in the Financial Statements that the average balance outstanding in this

  revolving credit facility is normally at around $ 150,000.

• The Audit Committee has also informed the Partner that the CRA audited ACME in the previous year

  and levied a penalty of $50,000 and has informed the Board that they plan continue their audit in the new year.

  Required

  Part 1

1. a) From the information provided in EXHIBIT A, perform and document a Bank Reconciliation. - 20 marks

2. b) From the Background info. provided above, identify potential errors and disclosure requirements - 5 marks

Part 2

1. a) Identify the financial assertions relating to the Cash account addressed by the Bank Reconciliation and explain how. – 5 marks

2. b) Identify what type of activity the Bank Reconciliation is. – 5 marks

3. c) Identify the 6 possible characteristics (of the activity above) and which apply to the Bank Rec. – 5 marks

BONUS
How would the Auditor test the identified characteristics. – 4 marks

EXHIBIT A

ABC Bank Statement Exerpt for Acme Corporartion Bank Account
for December 201X
Date	Description	Cash Out	Cash In	Balance
January 7, 2021	Cheque 1415	$ 2,500.00		$ 103,390.00
January 6, 2021	Cheque 1416	$ 3,000.00		$ 105,890.00
January 5, 2021	Cheque 1414	$ 2,000.00		$ 108,890.00
January 4, 2021				$ 110,890.00
January 3, 2021	EFT	$ 7,500.00		$ 110,890.00
January 2, 2021	EFT	$ 6,000.00		$ 118,390.00
January 1, 2021	Foreign Wire		$ 5,250.00	$ 124,390.00
December 31, 2020	Loan Interest - Dec.	$ 1,500.00		$ 119,140.00
December 30, 2020	Bank Charges - Dec.	$ 250.00		$ 120,640.00
December 29, 2020	Returned Cheque 1412		$ 500.00	$ 120,890.00
December 28, 2020	Cheque 1413	$ 1,500.00		$ 120,390.00
December 27, 2020	CRA Appropriation	$ 50,000.00		$ 121,890.00
December 26, 2020	Cheque 1412	$ 500.00		$ 171,890.00
December 25, 2020				$ 172,390.00
December 24, 2020				$ 172,390.00
		$ 74,750.00	$ 5,750.00	$ 172,390.00
Acme Corporation
General Ledger Cash Account Excerpt
Date	Transaction Detail	Type	Debit	Credit	GL Acct. Balance
January 7, 2021					$ 103,390.00
January 6, 2021	Payment to Supplier #11	Cheque 1418			$ 103,390.00
January 5, 2021	Payment to Supplier #12	Cheque 1417			$ 103,390.00
January 4, 2021	Loan Interest - Re: Dec.	Taken by Bank		$ 1,500.00	$ 103,390.00
January 3, 2021	CRA Appropriation	Taken by CRA		$ 50,000.00	$ 104,890.00
January 2, 2021	Returned Cheque (Supplier Account Closed)	Cheque 1412	$ 500.00		$ 154,890.00
January 1, 2021	Bank Charges - Re: Dec.	Taken by Bank		$ 250.00	$ 154,390.00
December 31, 2020	Payment to Supplier #4	EFT		$ 6,000.00	$ 154,640.00
December 30, 2020	Payment to Supplier #5	Cheque 1416		$ 3,000.00	$ 160,640.00
December 29, 2020	Payment to Supplier #1	EFT		$ 7,500.00	$ 163,640.00
December 28, 2020	Payment to Supplier #2	Cheque 1415		$ 2,500.00	$ 171,140.00
December 27, 2020	Receipt from Customer B	Foreign Wire	$ 5,250.00		$ 173,640.00
December 26, 2020	Receipt from Customer A	Cheque 1414		$ 2,000.00	$ 168,390.00
December 25, 2020	Payment to Supplier #2	Cheque 1413		$ 1,500.00	$ 170,390.00
December 24, 2020	Payment to Supplier #3	Cheque 1412		$ 500.00	$ 171,890.00
			$ 5,750.00	$ 74,750.00	$ 172,390.00

Clayton Company bought real estate, on which there was an old office building, for $300,000. It paid $50,000 in cash as a down payment and signed a 10% mortgage for the remainder. It immediately had the old building razed at a net cost of $35,000. Attorneys were paid $6,000 in connection with the land purchase and an additional $3,000 in connection with permits and zoning variances necessary for Patton's new office building. $20,000 was paid for excavation for the basement of the new building, $1,400,000 was paid for construction of the new building, and $75,000 was paid for a parking lot and necessary walkways and driveways.

1. The new office building should be recorded at a

. $1,400,000. b. $1,423,000. c. $1,420,000. d. $1,458,000.

2. Land should be recorded at a cost of

a. $335,000. b. $341,000. c. $364,000. d. $361,000

3. Mac Creamy Bakery purchased machinery for $60,000 eight years ago. It was expected to have a useful life of ten years, no salvage value, and was depreciated using the straight-line method. At the end of its eighth year of use, it was retired from service and given to a junk dealer. The entry to record the retirement includes a

a. debit to Loss on Disposal for $12,000. b. credit to Depreciation Expense for $6,000. c. debit to Machinery for $60,000. d. credit to Accumulated Depreciation—Machinery for $48,000.

4. Which of the following should not be included in the plant assets (property, plant, and equipment) classification?

a. Land on which warehouse sits b. Building housing corporate headquarters c. Parking lot used by visitors d. All of the above should be included

5. Salvage (residual) value is deducted in the computation of depreciation expense in all of the following methods with the exception of

a. straight-line. b. units-of-activity. c. declining-balance. d. All of the above include a deduction of salvage value.

6. When recording exchanges of assets that have commercial substance,

a. both gains and losses are recognized immediately. b. the gain or loss on the old asset is the difference between its cost and its fair market value. c. gains are treated as increases in the cost of the new asset. d. none of the above.

7. The cost of a patent should be amortized over

a. 20 years. b. the shorter of its legal life or its useful life. c. the longer of its legal life or its useful life. d. its useful life

8. On June 30, 2015, Fox Enterprises sold equipment with an original cost of $495,000 for $200,000. The equipment was purchased January 1, 2014, and was depreciated using the straight-line method assuming a five-year useful life and $45,000 salvage value. The necessary entries for 2015 include a

a. debit to Accumulated Depreciation—Equipment for $90,000. b. credit to Gain on Sale of Equipment for $160,000. c. credit to Cash for $200,000. d. debit to Depreciation Expense for $45,000

Complete the Following Problems (Show All Calculations)

9. Milan Company purchased land and an office building on March 1 for a combined cash price of $1,600,000. The land had a cost of $940,000 and the building had a book value of $200,000 on the seller's books. The land and building had fair market values of $1,040,000 and $560,000, respectively on March 1. Milan made the following entry at acquisition: Land ........................................................................................... 940,000 Building ...................................................................................... 1,000,000 Gain on Purchase .............................................................. 140,000 Accumulated Depreciation ................................................. 200,000 Cash .................................................................................. 1,600,000

In the space below, prepare the correct entry for the acquisition.

10. Northern Company bought machinery on January 1, 2009 at a cost of $500,000. The machinery had an estimated life of ten years and salvage value of $50,000. On January 1, 2011, Northern estimates that the machinery will have a life of only five more years and a $60,000 salvage value. Northern uses straight-line depreciation. Compute the revised annual depreciation.

11. Bagley Company bought equipment on July 1, 2014 at a total cost of $500,000. The equipment has an estimated useful life of 5 years and salvage value of $100,000. Bagley uses the double-declining-balance method of depreciation. Compute depreciation for 2013 and 2014.

12. Westlake Construction gave up a used crane and $224,000 cash for a new crane. The old crane cost $336,000, had $126,000 of accumulated depreciation, and a fair market value of $238,000. The exchange had commercial substance. In recording this exchange, the new crane should be recorded at

Assignment 1.

Nonpersonnel expenses: you have been tasked with computing baseline budget targets for the upcoming budget cycle. Using table 12.2 as your starting point, make the following adjustments.

TABLE 12.2

Expense Type	FY 2014
General Supplies	$69,532
Utilities	152,227
Leased Space	720,000
Fuel	50,571
Inspection Supplies	327,595
Inspection Start-up	125,000
Total Nonpersonnel	$1444,925

1. Solar panels have been installed with an expected 5% decrease in utility cost, for a savings of about $7,611.

2. The inspection program was started in FY 2014 and had funding for three fourths of the year. All of the start-up costs were incurred in FY 2014. The annualized value of the inspection supplies for the remaining one fourth of the year is $81,899.

3. Inflation is expected to be 2% expect for utilities, which will see no increase, and for leased space, which contract will have a 3% inflationary increase.

4. The number of service unites will not change

5. All departments are expected to achieve a 1% improvement in efficiency on all lines of cost and in all programs.

6. Budget baselines are not given out with cents, so round to the nearest dollar.

Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2013 through 2016 except for differences in depreciation on an operational asset. The asset cost $160,000 and is depreciated for income tax purposes in the following amounts:

2013	$	52,800
2014		70,400
2015		24,000
2016		12,800

The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes.

Income amounts before depreciation expense and income taxes for each of the four years were as follows.

	2013			2014			2015			2016
Accounting income before taxes and depreciation	$	90,000		$	110,000		$	100,000		$	100,000

Assume the average and marginal income tax rate for 2013 and 2014 was 30%; however, during 2014 tax legislation was passed to raise the tax rate to 40% beginning in 2015. The 40% rate remained in effect through the years 2015 and 2016. Both the accounting and income tax periods end December 31.

Required:

Prepare the journal entries to record income taxes for the years 2013 through 2016. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Asset Building #1    Building #2 Equipment

Date acquired	1/1/13	1/1/14	1/1/13
Cost	$55,000	$20,000	$7,500
Salvage Value	$4000	$1000	$500
Estimated useful Life	15 yrs	5 yrs	4 yrs

This assignment has no beginning student file. You are to create Rosey’s fixed

asset depreciation worksheets from a blank worksheet using the straight-line depreciation method and based on the information in the preceding table. No summary sheet is required. Individual assets must show depreciation over their entire useful life. Follow the text examples for formatting. Label each worksheet Building #1 SL, Building #2 SL, and Equipment SL. In the same workbook, create Rosey’s fixed asset depreciation worksheets using the double declining balance method and based on the same table. No summary sheet is required. Individual assets must show depreciation over their entire useful life. Follow the text examples for formatting. Label each worksheet Building #1 DDB, Building #2 DDB, and Equipment DDB. In the same workbook, create Rosey’s fixed asset depreciation worksheets using the sum-of-the-year’s-digits method and based on the same table. No summary sheet is required. Individual assets must show depreciation over theirentire useful life. Follow the text examples for formatting. Label each worksheet Building #1 SYD, Building #2 SYD, and Equipment SYD. In the same workbook, you should now create a chart of each asset’s depre- ciation that compares the straight-line, double declining balance, and sum-of- the-year’s-digits methods of calculating depreciation. Label each worksheet Building #1 Chart, Building #2 Chart, and Equipment Chart. Choose any line chart and chart layout that you like.

Show Your Work (Formulas in excel)

Koufax Materials Corporation produces plastic products for home appliances and electronics. The financial department has produced the following information for the year ended December 31.

Administrative salaries	$	2,645,000
Depreciation on the administrative building		1,162,000
Depreciation on the manufacturing plant		1,770,000
Direct labor		4,712,500
Direct materials inventory, January 1		1,089,200
Direct materials inventory, December 31		1,255,000
Direct materials purchased during the year		8,976,000
Distribution costs		677,000
Finished goods inventory, January 1		1,662,000
Finished goods inventory, December 31		1,389,500
Indirect labor		562,000
Insurance (on manufacturing plant)		73,200
Legal fees		516,300
Maintenance (on the manufacturing plant)		235,400
Manufacturing plant utiities		804,100
Marketing costs		769,250
Other manufacturing plant costs		650,880
Sales revenue		22,674,920
Taxes (on manufacturing plant and property)		235,600
Work-in-process inventory, January 1		423,250
Work-in-process inventory, December 31		416,700

Required:

a. Prepare a cost of goods manufactured and sold statement.

b. Prepare an income statement.

repare a cost of goods manufactured and sold statement.

	KOUFAX MATERIALS CORP. Cost of Goods Manufactured and Sold Statement For the Year Ending December 31 Manufacturing costs: Direct materials: Manufacturing overhead: Total overhead Total manufacturing costs Total cost of work-in-process during the year Costs of goods manufactured this year Cost of goods available for sale Cost of goods sold (to income statement)

Prepare an income statement. (Loss amounts should be indicated with a minus sign.)

	KOUFAX MATERIALS CORP. Income Statement For the Year Ending December 31 Total operating costs

Required:

a. Prepare a cost of goods manufactured and sold statement.

b. Prepare an income statement.

1. fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $356,000; the partnership assumes responsibility for a $128,000 note secured by a mortgage on the property. Monroe invests $103,000 in cash and equipment that has a market value of $78,000. For the partnership, the amounts recorded for total assets and for total capital account are:

2. Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $354,000; the partnership assumes responsibility for a $127,000 note secured by a mortgage on the property. Monroe invests $102,000 in cash and equipment that has a market value of $77,000. For the partnership, the amounts recorded for Fontaine's Capital account and for Monroe's Capital account are:

subject: company accounting

Discuss the advantages for stakeholders where companies provide segment information in their financial reports under AASB 8 Operating Segments. What are the criticisms of the standard?  

Hyde Park Elementary has plans to build a new playground in 2017. They received a $120,000 government grant to be used for building the playground. They are hoping to break ground in May 2017 and complete the project by the start of school in September. Before they can start the project, however, they must dismantle the existing playground that has become unsafe based on current safety standards. They are also planning to complete soil testing once the existing playground is dismantled as a number of residential properties in the community have tested positive for soil contamination. Due to recent news articles, parents are very concerned about the potential for soil contamination and are demanding a full test to ensure their kids are not playing on a contaminated playground.

Sonya Muhammed, the school principal, has compiled the following estimates related to the new playground:

Cost for dismantling existing equipment	$22,000
Salvage value from the metal from existing equipment	$7,000
Soil testing	$18,000
New playground equipment	$45,000
Cost of installation	$16,000
Cost of resurfacing play area in rubber	$55,000
Cost of landscaping (including $5,000 for gravel)	$22,000
Cost of removing and replacing soil	$73,000

The costs for installation, resurfacing, landscaping, and soil removal are the costs quoted by professional contractors. Sonya was approached by the president of the student council, Josh Schwinn, who has volunteered the council’s time for installing and landscaping the new playground. This will save the school approximately $25,000 in costs and Sonya has decided to accept this offer as two of the council members who will be helping are journeymen carpenters.

The school has two options in terms of dealing with the contaminated soil. The first option is to not partake in the soil testing and to simply resurface the play area with a poured-rubber matting that can cover the entire play surface. This will cost, as Sonya indicated in her estimates above, approximately $55,000 – a large chunk of the playground budget. The other option is to perform the soil testing. A municipal worker has estimated that there is a 40% chance that the soil is contaminated. If this is the case, the school will either need to resurface the area for $55,000 or it can have the contaminated soil removed and replaced for a hefty cost of $73,000 plus the cost of gravel. However, there is a 60% chance that the soil will not be contaminated. Sonya is wondering what they should do and has asked for your help.

REQUIRED

Prepare an analysis of the potential project costs for the following scenarios. Note: There is no need for gravel in the resurfacing scenario.

1. Resurface ground without doing soil testing .
   
2. Complete the soil testing. In this case there are two outcomes:

1. remove/replace the soil if contaminated.
2. resurface if contaminated.
   

Use the probabilities provided by the municipal worker to determine a weighted cost for each of these outcomes.

3. What option would you recommend for the school? Why? Are there other non-financial considerations that you need to include in your decision?

1. Write short notes on five issues that may be addressed by a company’s social responsibility report.

Johnson paid $325,000 to acquire 100% of Willis Corporation in a statutory merger. In addition, Johnson also agreed to pay the shareholders of Willis $0.40 in cash for every dollar in income from continuing operations of the combined entity over $75,000 in the first three years following acquisition. Johnson projects that there is a 20% (45%, 35%) probability that the income from continuing operations in the first three years following acquisition is $65,000 ($90,000, $115,000 respectively). Johnson uses a discount rate of 7%.

Information for Willis Corporation immediately before the merger was as follows:

	Book value	Fair value
Current assets	40,000	50,000
Plant assets	120,000	70,000
Liabilities	50,000	45,000

Previously unreported items identified as belonging to Willis:

	Fair value
Contracts under negotiation with potential customers	15,000
In-process research and development	12,000
Skilled workforce	23,000
Recent favorable press reports on Willis	2,000
Proprietary databases	8,000

1. Show your determination of the contingent consideration.
2. Show your determination the goodwill to be reported in this acquisition.

The following selected transactions are from Garcia Company.

2016
Dec.		16			Accepted a $20,400, 60-day, 12% note dated this day in granting Rita Griffin a time extension on his past-due account receivable.
		31			Made an adjusting entry to record the accrued interest on the Griffin note.

2017
Feb.		14			Received Griffin’s payment of principal and interest on the note dated December 16.
Mar.		2			Accepted a $9,000, 6%, 90-day note dated this day in granting a time extension on the past-due account receivable from Wright Co.
		17			Accepted a $7,200, 30-day, 10% note dated this day in granting Wang Lee a time extension on her past-due account receivable.
Apr.		16			Lee dishonored her note when presented for payment.
May		31			Wright Co. refused to pay the note that was due to Garcia Co. on May 31. Prepare the journal entry to charge the dishonored note plus accrued interest to Wright Co.’s accounts receivable.
July		16			Received payment from Wright Co. for the maturity value of its dishonored note plus interest for 46 days beyond maturity at 6%.
Aug.		7			Accepted a $22,000, 90-day, 10% note dated this day in granting a time extension on the past-due account receivable of Collins Co.
Sep.		3			Accepted a $11,400, 60-day, 10% note dated this day in granting Maria Gonzalez a time extension on his past-due account receivable.
Nov.		2			Received payment of principal plus interest from Gonzalez for the September 3 note.
Nov.		5			Received payment of principal plus interest from Collins for the August 7 note.
Dec.		1			Wrote off the Lee account against the Allowance for Doubtful Accounts.

• Requirement
• General Journal
• General Ledger
• Trial Balance
• Schedule of Receivables
• Calculation of Interest

Examine the duties of the management of a company and any company's auditors with regard to any company's financial statement.

State the basic purpose of financial Reporting standards and explain the fundamental concepts of accounting recognized by SSAP 2.