The trial balance of pacillo security services inc as of January 1 2018 had the following normal balances

               Cash-                                                                                               $93,708

               Petty Cash-    100

               Accounts Receivable- 22,540

               Allowance for doubtful accounts- 1,334

               Supplies- 250

               Prepaid rent-    3,600

               Merchandise inventory (18@$285)-    5,130

               Land- 4,000

               Salaries Payable-    2,100

               Common Stock-    50,000

               Retained Earnings- 75,894

During 2018 Pacillo Security Services experienced the following transactions:

1. Paid the salaries payable from 2017
2. Purchased equipment and van for a lump sum of $36,000 cash on January 2, 2018. The equipment was appraised for $10,000 and the van was appraised for $30,000.
3. Paid $9,000 on May 1, 2018, for one year’s office rent in advance
4. Purchased $300 of supplies on account.
5. Purchased 120 alarm systems at a cost of $280 each. Paid cash for the purchase.
6. After numerous attempts to collect from customers, wrote off $2,350 of uncollectible accounts receivable.
7. Sold 115 alarm systems for $580 each. All sales were on account. (Be sure to compute cost of goods sold using the FIFO cost flow method.)
8. Billed $86,000 of monitoring services for the year. Credit card sales amounted to $36,000, and the credit card company charged a 4% fee. The remaining $50,000 were sales on account.
9. Replenished the petty cash fund on Jun 30. The fund had $12 cash and receipts of $45 for yard mowing, $28 for office supplies expense, and $11 for miscellaneous expenses.
10. Collected the amount due from the credit card company.
11. Paid installers and other employees a total of $52,000 cash for salaries.
12. Collected $115,500 of accounts receivable during the year.
13. Paid $12,500 of advertising expense during the year.
14. Paid $6,800 of utilities expense for the year.
15. Sold the land, which was purchased in 2011, for $12,000.
16. Paid the accounts payable.
17. Paid a dividend of $10,000 to shareholders

Adjustments

18. Determined that $180 of supplies were on hand at the end of the year.
19. Recognized the expired rent for both the old van and the office building for the year. The lease on the van was not renewed. Rent Paid on March 1, 2017, for the van was $4,800.
20. Recognized uncollectible accounts expense for the year using the allowance method. Pacilio estimates that 3% of sales on account will not be collected.
21. Recognized depreciation expense on the equipment and the van. The equipment has a five-year life and a $2,000 salvage value. The van has a four-year life and $6,000 salvage value. The company uses double-declining balance for the van and straight-straight line for the equipment.
22. Accrued salaries at December 31, 2018, were $1,500.

DIRECTIONS: PREPARE AN INCOME STATEMENT, A STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY, AND A BALANCE SHEET

1. Assume that Oceanview’s long term debt to owner’s equity makes you believe that it cannot remain in business for much longer and that it is discussed, along with management’s plans, in Note 8 of the financial statements. Type out the paragraph you would add to the Standard Report based on this information.
2. Assume that Oceanview has recorded sales of $70,000 at the end of the period that you believe should not have been recognized until the next fiscal year. Management refuses to adjust the financial statements, so you decide to issue a qualified opinion. Type out the two paragraphs that you would add to/modify in the Standard Report based on this information.

CSU, Inc., is a calendar year S corporation. CSU’s Form 1120S shows nonseparately stated ordinary income of $120,000 for the year. Taewon owns 30% of the CSU stock throughout the year. The following information is obtained from the corporate records.

1. Compute CSU’s taxable income or loss, showing the calculation (on a “white paper” schedule not on IRS forms). Taxable income should equal Form 1120S, Schedule K, line 18, which should be the same as Form 1120S, Schedule M-1, line 8. Assume the I.R.C. section 1374 and 1375 taxes do not apply. HINT: the refund of prior state income taxes is taxable other income. TI check figure $127,500.

The Bradford Company issued 12% bonds, dated January 1, with a face amount of $96 million on January 1, 2018. The bonds mature on December 31, 2027 (10 years). For bonds of similar risk and maturity, the market yield is 14%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds at January 1, 2018. 2. to 4. Prepare the journal entry to record their issuance by The Bradford Company on January 1, 2018, interest on June 30, 2018 and interest on December 31, 2018 (at the effective rate).

Analytical procedures are required on every audit.

1. Should the procedure be performed before or after the calculation of the expected result?
2. If the result of an analytical procedure differs significantly from the expectation, is that conclusive evidence that there is an error in the books?
3. If the result of an analytical procedure differing significantly from the expectation does not necessarily mean the books are in error, what does it mean?

Smart Company prepared its annual financial statements dated December 31, 2020. The company applies the FIFO inventory costing method; however, the company neglected to apply the LC&NRV valuation to the ending inventory. The preliminary 2020 statement of earnings follows:

Assume that you have been asked to restate the 2020 financial statements to incorporate the LC&NRV inventory valuation rule. You have developed the following data relating to the ending inventory at December 31, 2020:

1. Restate the statement of earnings to reflect the valuation of the ending inventory on December 31, 2020, at the LC&NRV. Apply the LC&NRV rule on an item-by-item basis.(FINISHED BELOW ANSWER QUESTION 2)

2. Compare and explain the LC&NRV effect on each amount that was changed in part 1. (Negative answers should be indicated by a minus sign.)

One of the differences between Managerial Accounting and Financial Accounting is reporting flexibility. Financial reporting is restricted by Generally Accepted Accounting Principles whereas reporting in Managerial Accounting has fewer rules.

Why is it permissible to violate Generally Accepted Accounting Principles when preparing reports used strictly by company management? Should external users always have the same information as internal users?

On April 1, 2017, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company’s first month.

The company's chart of accounts follows:

Use the following information:

1. Two-thirds (or $128) of one month’s insurance coverage has expired.
2. At the end of the month, $700 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $500.
4. Employees earned $600 of unpaid and unrecorded salaries as of month-end.
5. The company earned $1,750 of commissions that are not yet billed at month-end.

Required:
1. & 2. Prepare journal entries to record the transactions for April and post them to the ledger accounts in Requirement 6b. The company records prepaid and unearned items in balance sheet accounts.
3. Using account balances from Requirement 6b, prepare an unadjusted trial balance as of April 30.
4. Journalize and post the adjusting entries for the month and prepare the adjusted trial balance.
5a. Prepare the income statement for the month of April 30, 2017.
5b. Prepare the statement of retained earnings for the month of April 30, 2017.
5c. Prepare the balance sheet at April 30, 2017.
6a. Prepare journal entries to close the temporary accounts and then post to Requirement 6b.
6b. Post the journal entries to the ledger.
7. Prepare a post-closing trial balance.

Average Rate of Return Method, Net Present Value Method, and Analysis

The capital investment committee of Ellis Transport and Storage Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows:

Each project requires an investment of $400,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis.

Required:

1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.

1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value.

2. The warehouse has a   net present value as tracking technology cash flows occur   in time. Thus, if only one of the two projects can be accepted, the   would be the more attractive.

Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (13,200 units × $30 per unit) $ 396,000 Variable expenses 237,600 Contribution margin 158,400 Fixed expenses 176,400 Net operating loss $ (18,000 ) Required: 1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,100 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $82,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income? 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $30,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by 0.50 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,000? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $59,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. b. Assume that the company expects to sell 21,000 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 21,000)?

1. Explain some of the differences between Dow Jones Industrial Average (DJIA) and the NASDAQ index?
2. With respect to bank capitalization, what are the “Basel I” rules? Describe the weightings given to different types of debt.

If you were an auditor, how would you review a company’s accounting related records to identify potential liabilities which were not reported on the company’s balance sheet?

Cost Assignment and JIT

Bunker Company produces two types of glucose monitors (basic and advanced). Both pass through two producing departments: Fabrication and Assembly. Bunker also has an Inspection Department that is responsible for testing monitors to ensure that they perform within prespecified tolerance ranges (a sampling procedure is used). Budgeted data for the three departments are as follows:

In the Fabrication Department, the basic model requires 1 hour(s) of direct labor and the advanced model requires 2 hour(s). In the Assembly Department, the basic model requires 1.2 hour(s) of direct labor and the advanced model requires 2.25 hours. There are 60,000 basic units produced and 32,000 advanced units.

Immediately after preparing the budgeted data, a consultant suggests that two manufacturing cells be created: one for the manufacture of the basic model and the other for the manufacture of the advanced model. Raw materials would be delivered to each cell, and goods would be shipped immediately to customers upon completion. Workers within each cell would also be trained to perform monitor testing. The total direct overhead costs estimated for each cell would be $304,000 for the basic cell and $960,000 for the advanced cell.

Required:

1. Allocate the inspection costs to each department.

Compute the overhead cost per unit for each monitor. Overhead rates use direct labor hours. Round your intermediate calculations and final answers to the nearest cent.

2. Compute the overhead cost per unit if manufacturing cells are created. If required, round your intermediate calculations and final answers to the nearest cent.

Which unit overhead cost do you think is more accurate—the one computed with a departmental structure, or the one computed using a cell structure?

Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March. Date Activities Units Acquired at Cost Units Sold at Retail Mar. 1 Beginning inventory 140 units @ $75 per unit Mar. 5 Purchase 440 units @ $80 per unit Mar. 9 Sales 460 units @ $110 per unit Mar. 18 Purchase 200 units @ $85 per unit Mar. 25 Purchase 280 units @ $87 per unit Mar. 29 Sales 240 units @ $120 per unit Totals 1,060 units 700 units For specific identification, the March 9 sale consisted of 90 units from beginning inventory and 370 units from the March 5 purchase; the March 29 sale consisted of 80 units from the March 18 purchase and 160 units from the March 25 purchase. 3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification.