“If a person owns 80% of the shares in a company then they can make any changes they like to the company’s constitution.” REQUIRED: Critically discuss, stating whether you agree or disagree with the above
In: Accounting
The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The bank statement indicated a balance of $388,600 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:
A. | Checks outstanding totaled $61,280. |
B. | A deposit of $42,500, representing receipts of April 30, had been made too late to appear on the bank statement. |
C. | The bank collected $42,000 on a $40,000 note, including interest of $2,000. |
D. | A check for $7,600 returned with the statement had been incorrectly recorded by American Medical Co. as $760. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account. |
E. | A check drawn for $240 had been erroneously charged by the bank as $420. |
F. | Bank service charges for April amounted to $145. |
Instructions | |
1. | Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required. |
2. | Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles. |
3. | If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash? |
In: Accounting
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Question: Background You are an experienced audit manager at Samway Baker Fitzgerald (SBF), an accounting f...
Background
You are an experienced audit manager at Samway Baker Fitzgerald (SBF), an accounting firm with offices in Orange, Wagga Wagga, Tamworth, Port Macquarie and Albury in NSW, Toowoomba in Queensland and Ballarat in Victoria. In the next 18 months, you hope to be promoted to partner at the Orange office. Although a medium-sized firm by national standards, SBF includes Australia’s largest regionally-based auditing practice. Most of SBF’s audit clients are in the mining, manufacturing and agriculture industries. For various reasons all of those industries are currently under pressure: mining from a downturn in commodity prices, manufacturing from fierce overseas competition, and agriculture from a devastating drought that continues to grip Eastern Australia.
It is a cold Thursday evening in July 2019 and you are meeting with your audit team to finalise the 30 June 2019 year-end audit for Far Faraway Pastoral Limited (FFA), a major agricultural company based in Orange, listed on the Australian Stock Exchange (ASX), and one of SBF’s largest clients by fee revenue. During the meeting, three of your audit seniors each bring a potential issue to your attention.
Samantha Gabrielle was responsible for reviewing FFA’s corporate governance arrangements and reports that ‘at 30 June 2019 the board of FFA comprises: CEO Bruce Blanch, the CFO Alexandra Rose and three non-executive directors: Kevin Oliver (a former executive at Macquarie Bank who has an 11 percent shareholding in FFA and is Chair of the Board), Matthew James (a retired farmer who was a major supplier to FFA), and Jacqueline Grace (an Orange-based orthopaedic surgeon).’
Steve Barker was responsible for reviewing the revenue cycle and argues that ‘an ASIC report on their recent review of the financial statements of some major agricultural companies now means that FFA’s method for recognising revenues on its sale of cattle is very questionable’. In the 30 June 2019 financial year just ended, cattle sales constituted nearly 50% of all revenue recorded by FFA. Steve reports that he has already discussed the matter with the senior partner on the FFA audit, Skye Martin, who said that the method has been used for 10 years and that no adjustments to the 30 June 2019 financial statements were to be made. Steve reports that he then told Skye Martin he accepted her decision but wanted to include a dissenting statement in the audit working papers. She refused to permit such a statement in the working papers but offered to write a letter to you as the FFA audit manager acknowledging full responsibility for the 30 June 2019 audit. Steve alleges that as he left his meeting with Skye Martin, she made some negative comments about your chances of being promoted to partner in the near future.
Kate Hammond was responsible for reviewing the operations of an FFA subsidiary based in Western Australia (WA), called TRC, that sells rural and farm supplies. You are aware that whilst TRC is the market leader in WA and has a strong balance sheet, it was making losses for the past two years. During the previous financial year ended 30 June 2018, TRC significantly upgraded its accounting information system to more effectively manage inventory sales. TRC hired a well-regarded IT consultant to undertake the upgrade which was completed on 31 March 2018.
As SBF did not have offices in WA, you organised an independent expert based in Perth to review and evaluate the accounting information system. The independent expert concluded that the system appeared reliable and that the changeover was correctly carried out. At 30 June 2018 year-end, this new system had been in place for 3 months, and TRC management reported that they were happy with the way it was operating. In early 2019, given drought pressures on its core business in Eastern Australia, FFA accepted an offer from WA-based agricultural company McCarran Pastoral, who already owned 15% of TRC, to sell their remaining 85% interest to them. The agreed sale price was $45.8m, equivalent to FFA’s 85% share of TRC’s net assets. The sale was finalised on 15 April 2019, but half the sale price is not due to be paid until 15 August 2019, after the 30 June 2019 audit of FFA has been completed.
Kate reports that significant errors in the changeover of the accounting information system back in March 2018 have only just been discovered in July 2019, more than 15 months later. The errors resulted in the inventory at TRC stores being misstated by $16.6m and net assets by the same amount. As a result McCarran Pastoral is planning to withhold most of its remaining settlement payment to FFA, and FFA is planning to sue SBF for negligence for its loss of that payment.
Required:
Question
What should you do in response to the information provided by Steve Barker? With reference to the Code of Ethics for Professional Accountants, use the following American Accounting Association (AAA) Model template to guide your answer:
American Accounting Association Model |
Decision-making process |
1. Determine the facts |
The facts are ... |
2. Define the ethical issues |
|
3. Identify the major principles, rules, and values |
|
4. Specify the alternatives |
|
5. Compare values and alternatives |
|
6. Assess the consequences |
|
7. Make your decision |
In: Accounting
"Shareholders will always prefer a cash dividend to a share dividend while the company prefers the reverse". Why might this be the case?
(Think about the journal entry for both.)
In: Accounting
Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company’s estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: “My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $2.50 to determine the bid price. Since our average cost is only $2.01 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart.” To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based costing system follow: Activity Cost Pool Activity Measure Total Activity Removing asbestos Thousands of square feet 850 thousand square feet Estimating and job setup Number of jobs 400 jobs Working on nonroutine jobs Number of nonroutine jobs 100 nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Costs for the Year Wages and salaries $ 308,000 Disposal fees 706,000 Equipment depreciation 90,000 On-site supplies 50,000 Office expenses 210,000 Licensing and insurance 410,000 Total cost $ 1,774,000 Distribution of Resource Consumption Across Activities Removing Asbestos Estimating and Job Setup Working on Nonroutine Jobs Other Total Wages and salaries 60 % 10 % 20 % 10 % 100 % Disposal fees 70 % 0 % 30 % 0 % 100 % Equipment depreciation 40 % 5 % 25 % 30 % 100 % On-site supplies 70 % 20 % 10 % 0 % 100 % Office expenses 15 % 35 % 20 % 30 % 100 % Licensing and insurance 25 % 0 % 50 % 25 % 100 % Required: 1. Perform the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. a. A routine 1,000-square-foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job.
In: Accounting
You are a CPA paid to prepare tax returns for various clients. One of your newest clients is a “blended family”. Both adults are separated and each claims Head of household filing status. Each taxpayer also claims a different child for the HOH status. All individuals in this family use the same address. Discuss how you would handle this situation.
In: Accounting
1. Please describe the difference between an accounts receivable and a notes receivable.
2. There are times when businesses cannot collect the money that is owed to them by their customers. When this happens, businesses incur an expense. There are two methods for recording uncollectible receivables. They are the allowance method and the direct write off method. Please explain the difference between these two methods.
In: Accounting
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108 to purchase these supplies. For years, Worley believed that the 8% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (Number of deliveries) $ 595,000 7,000 deliveries Manual order processing (Number of manual orders) 380,000 5,000 orders Electronic order processing (Number of electronic orders) 273,000 13,000 orders Line item picking (Number of line items picked) 726,000 440,000 line items Other organization-sustaining costs (None) 680,000 Total selling and administrative expenses $ 2,654,000 Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $32,000 to buy from manufacturers): Activity Activity Measure University Memorial Number of deliveries 17 26 Number of manual orders 0 44 Number of electronic orders 14 0 Number of line items picked 160 210 Required: 1. Compute the total revenue that Worley would receive from University and Memorial. 2. Compute the activity rate for each activity cost pool. 3. Compute the total activity costs that would be assigned to University and Memorial. 4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $32,000 cost of goods sold that Worley incurred serving each hospital.)
In: Accounting
(1) Define attribute sampling and discuss why tests of controls tend to be attribute samples.
(2) define sampling risk and non-sampling risk as well as differentiate between these concepts.
(3) define each of the following parameters used in calculating sample size and explain how changes in each parameter affect sample size.
a. Confidence level
b. Tolerable deviation rate
c. Expected deviation rate
(4) What are some factors that auditors use in setting their confidence level?
In: Accounting
Privacy legislation applies specific conditions to the collection, solicitation, storage, access, alteration and disclosure of client information. What are they? 220–250 words
(Please note: Australian Tax)
In: Accounting
ABC Ltd acquired a machine for $750 000 on 1 July 2018. The machine had a useful life of five years and was depreciated on a straight-line basis with no disposal value. ABC Ltd adopts the cost model for accounting for assets in this class. ABC Ltd makes the following estimates of the value of the machine: Date Net selling price Value in use Fair Value 30 June 2019 $550 000 520 000 590 000 30 June 2020 $460 000 420 000 490 000 Indicators of impairment were identified on 30 June 2019, while indicators of a reversal of impairment were found on 30 June 2020.
REQUIRED: Prepare journal entries relating to this asset from 30 June 2019 to 30 June 2020. Show the steps of impairment (or reversal of impairment) tests. Show all working (step by step).
In: Accounting
ACCT Corp. is a manufacturer of truck trailers. On 1 January 2020, ACCT Corp. leased a trailer to a customer under a six-year lease agreement. The following information about the lease and the trailers is provided: 1. Equal annual payments of $10 816 are due on 31 December each year. The interest rate implicit in the lease is 8%. 2. The lease can be cancelled by the customer upon payment of a penalty of $40,000. 3. There is a purchase option that the customer will be able to exercise at the end of the sixth year, for $2 000. The estimated fair value of the trailer at the end of the sixth year is $10 000. 4. The fair value of the trailer is $51,260. The cost of a trailer to ACCT Corp. is $45,000. The trailer has an expected useful life of nine years.
REQUIRED: (1) What type of lease is this for the lessor? Provide explanation and justification for your classification considering AASB 16.
(2) Prepare the journal entries for the lessor from 1 January 2020 to 31 December 2020 (the reporting period end of ACCT Corp.) to record the lease arrangement.
In: Accounting
PA6-1 Calculating Contribution Margin, Contribution Margin Ratio, Break-Even Point [LO 6-1, 6-2]
Hermosa, Inc., produces one model of mountain bike. Partial
information for the company follows:
Number of bikes produced and sold | 520 | 820 | 1,000 | |||
Total costs | ||||||
Variable costs | $ | 123,240 | $ | ? | $ | ? |
Fixed costs per year | ? | ? | ? | |||
Total costs | ? | ? | ? | |||
Cost per unit | ||||||
Variable cost per unit | ? | ? | ? | |||
Fixed cost per unit | ? | ? | ? | |||
Total cost per unit | ? | $ | 524.75 | ? | ||
Required:
1. Complete the table. (Round
your "Cost per Unit" answers to 2 decimal
places.)
Number of bikes produced and sold | 520 units | 820 units | 1000 units |
Total Costs | |||
Variable Costs | $123,340 | ||
Fixed Costs per year | |||
Total Cost |
$123,240 | $0 | $0 |
Cost per unit | |||
Variable cost per unit | |||
Fixed cost per unit |
Total cost per unit | $0.00 | $574.75 | $0.0 |
2. Calculate Hermosa’s contribution margin ratio
and its total contribution margin at each sales level indicated in
the table assuming the company sells each bike for $800.
(Round your percentage answers to 2 decimal places. (i.e.
.1234 should be entered as 12.34%.))
520 units | 820 units | 1000 units | ||||
Contribution Margin Unit | % | % | % | |||
Total Contribution margin ratio |
4. Calculate Hermosa’s break-even point in units and sales revenue. (Round your answers to the nearest whole number.)
Break-even units | Bikes | |
Break-Even Sales Revenue |
In: Accounting
During the period, the mixing department completed 500 units and transferred then out to the baking department. at the end of the period there were 4000.00 units that are 40% complete as to direct material in the mixing department. the equivalent units of production for direct materials equal
In: Accounting
Absorption costing (also called the full cost method) treats all costs of production as product costs, regardless of whether they are variable or fixed. Since no distinction is made between variable and fixed costs, absorption costing is not well suited for CVP computations. Under absorption costing, the cost of a unit of product consists of direct materials, direct labor, and both variable and fixed overhead. Variable and fixed selling and administrative expenses are treated as period costs and are deducted from revenue as incurred.
Is the above statement true or false?
In: Accounting