Which of the following statements is correct?

Select one:

a. An engagement designed to express limited assurance relating to subject matter or an assertion is called an examination.

b. An attest engagement in which the CPAs agree to perform procedures for a specified party and issue a report that is restricted to use by that party is called an agreed-upon procedures engagement.

c. Professional services that can be performed without considering ethics, integrity or independence are called nonassurance services.

d. Professional services that enhance the quality of information, or its context, for decision makers are called nonattest services.

Audits lend credibility to information by reducing ____________, or the risk that the information used to assess business risk is not accurate (or materially misstated)

Select one:

a. information risk

b. operational risk

c. audit risk

d. business risk

Which of the following statements is correct?

Select one:

a. Errors are intentional misstatements or omissions of amounts or disclosures in the financial statements.

b. Professional skepticism refers to an attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatements, and a critical assessment of audit evidence

c. Audits provide absolute assurance of detecting material misstatements and reasonable assurance of detecting immaterial misstatements.

d. When performing an audit, auditors should not trust any documentation provided by the client's management, even if the entity shows strong internal controls.

Factory Overhead Cost Variance Report

Tannin Products Inc. prepared the following factory overhead cost budget for the Trim Department for July of the current year, during which it expected to use 12,000 hours for production:

Tannin has available 16,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 11,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows:

Construct a factory overhead cost variance report for the Trim Department for July. Enter all amounts as positive numbers. If an amount box does not require an entry, leave it blank. Round your interim computations to the nearest cent, if required.

**THIS IS ALL THE AVAILABLE INFORMATION I HAVE. I DON'T HAVE ANY OTHER INFORMATION**

Sales revenue$745,000Cost of goods sold450,000Selling expenses58,000Administrative expenses72,000Loss on sale of equipment5,000Income tax expense64,000Shares of common stockOutstanding at January 115,000sharesAdditional issued at May 17,000sharesAdditional issued at November 12,000shares

Find earnings per share of common stock

The following situations should be considered independently. (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.)

1. John Jamison wants to accumulate $80,170 for a down payment on a small business. He will invest $34,000 today in a bank account paying 10% interest compounded annually. Approximately how long will it take John to reach his goal?
2. The Jasmine Tea Company purchased merchandise from a supplier for $48,016. Payment was a noninterest-bearing note requiring Jasmine to make seven annual payments of $8,000 beginning one year from the date of purchase. What is the interest rate implicit in this agreement?
3. Sam Robinson borrowed $22,000 from a friend and promised to pay the loan in 12 equal annual installments beginning one year from the date of the loan. Sam’s friend would like to be reimbursed for the time value of money at an 11% annual rate. What is the annual payment Sam must make to pay back his friend?

During the first half of the semester we’ve often discussed the importance and cited examples of “stealth tax” provisions in our US federal tax law. Briefly explain what is meant by a “stealth tax” provision, how it impacts an individual’s US federal income tax liability and cite one (1) example of stealth income tax provisions currently in our US federal tax law.

Required information

E7-6 through E7-10.

[The following information applies to the questions displayed below.]

Morning Sky, Inc. (MSI), manufactures and sells computer games. The company has several product lines based on the age range of the target market. MSI sells both individual games as well as packaged sets. All games are in CD format, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI has developed and manufactured all the CDs itself as well as the accessories and packaging for all of its products.

The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability.

E7-6 (Algo) Analyzing Special-Order Decision [LO 7-2, 7-3]

MSI has been approached by a fourth-grade teacher from Portland about the possibility of creating a specially designed game that would be customized for her classroom and environment. The teacher would like an educational game to correspond to her classroom coverage of the history of the Pacific Northwest, and the state of Oregon in particular. MSI has not sold its products directly to teachers or school systems in the past, but its Marketing Department identified that possibility during a recent meeting.

The teacher has offered to buy 2,300 copies of the CD at a price of $5.00 each. MSI could easily modify one of its existing educational programs about U.S. history to accommodate the request. The modifications would cost approximately $480. A summary of the information related to production of MSI’s current history program follows:

Required:
1. Compute the incremental profit (or loss) from accepting the special order.

2. Should MSI accept the special order?

3. Suppose that the special order had been to purchase 2,300 copies of the program for $1.50 each. Compute the incremental profit (or loss) from accepting the special order under this scenario.

4. Suppose that MSI is operating at full capacity. To accept the special order, it would have to reduce production of the history program. Compute the special order price at which MSI would be indifferent between accepting or rejecting the special order.

Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently. (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.)

1. On June 30, 2018, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay Genovese $27,000 on the purchase date and the balance in eight annual installments of $4,000 on each June 30 beginning June 30, 2019. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment?
2. Johnstone needs to accumulate sufficient funds to pay a $570,000 debt that comes due on December 31, 2023. The company will accumulate the funds by making five equal annual deposits to an account paying 7% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 31, 2018.
3. On January 1, 2018, Johnstone leased an office building. Terms of the lease require Johnstone to make 20 annual lease payments of $137,000 beginning on January 1, 2018. A 10% interest rate is implicit in the lease agreement. At what amount should Johnstone record the lease liability on January 1, 2018, before any lease payments are made?

One topic covered in this chapter is: "methods of paying wages and salaries." Using the knowledge you gained in this chapter, examine the following real life situation and answer both questions (remembering the requirements above): You are a payroll accountant in a small accounting firm. One of your clients, a small business owner, has told you that he wants to pay some employees in cash instead of check, direct deposit, or pay cards. His reason for wanting to pay some employees in cash is that some of his employees do not have a checking account. While this practice is technically not illegal, what advice would you give the small business owner? What is your reason behind offering this advice?

Novak Inc. charges an initial franchise fee of $66,000. Upon the signing of the agreement (which covers 3 years), a payment of $26,400 is due. Thereafter, 3 annual payments of $13,200 are required. The credit rating of the franchisee is such that it would have to pay interest at 9% to borrow money. The franchise agreement is signed on May 1, 2020, and the franchise commences operation on July 1, 2020.

Click here to view factor table.
Prepare the journal entries in 2020 for the franchisor under the following assumptions.

Capital Budgeting Risk Analysis Project Instruction Create the pro forma income statement and estimate the cash flows for the following project. Decide whether to accept this project based on analysis of the NPV, Profitability Index, and IRR. Project Assumptions (Base Case) Equipment Life 6 Years Initial Equipment Cost $2,500,000 in year 0 Depreciation Straight Line Method Initial Revenue $1,000,000 in year 1 Revenue growth rate year 2 10% Revenue growth rate year 3 15% Revenue growth rate year 4 10% Revenue growth rate year 5 5% Variable Costs 60% of this year's revenue Fixed Costs $75,000 in year 1 Fixed Costs Inflation Rate 3% per year Long-term growth rate 2% per year Net Working Capital 4% of next year's revenue Tax Rate 35% Discount Rate 18% Model Structure Since this project does not have an end date we need to decide how many years of detailed analysis we will conduct. For this assignment, we will estimate detailed cash flows for 5 years and estimate the terminal value at the end of year 5. The Income Statement is the building block for cash flow estimation. Your income statement should contain the following items. You may include additional items if you find them useful in your model. Revenue Variable Cost Gross Profit Cash Fixed Cost Depreciation EBIT (Earnings Before Interest and Tax) Tax Net Income Cash Flows: • Operating Cash Flow = EBIT + Depreciation – Taxes • Other cash flow items o initial investment o change in Net Working Capital o Terminal value   Analyses 1. Scenario Analysis: prepare a scenario summary report. Use the values in the original assumption as the base case and add the following two cases. Case 1 (worst case) Variable Costs 65% of this year's revenue Fixed Costs $80,000 in year 1 Fixed Costs Inflation Rate 5% per year Long-term growth rate 1% per year Case 2 (best case) Variable Costs 55% of this year's revenue Fixed Costs $70,000 in year 1 Fixed Costs Inflation Rate 3% per year Long-term growth rate 3% per year 2. Sensitivity Analysis: prepare a one-way data table. Make sure to use the base case values. Allow the long-term growth rate to vary from -3.0% to +3.0% in increments of 0.5%. Show the impact on NPV and IRR. 3. Breakeven Analysis: identify the initial revenue level that will result in $0 NPV. Things to turn in: 1. A one-page memo explaining the results of your analysis and your recommendation. The memo should include important results of your analysis such as a summary table or graph. The memo is limited to one page so be very selective on what information to include. 2. An Excel spreadsheet showing the following: • Entire model for the base case • Scenario Analysis (Scenario Summary Report) • Sensitivity Analysis (Data Table) • Breakeven Analysis (Goal Seek result) Check Figures (Base case): Model Year 0 1 5 6 Pro Forma Incremental Income Statement Revenue 1,000,000 1,461,075 1,490,297 Net Income (59,583) 54,178 Pro Forma Incremental Balance Sheet Net Working Capital 40,000 44,000 59,612 Pro Forma Incremental Cash Flows Total Net AT CF (2,540,000) 353,083 3,463,856

SUBJECT : Accounting and Finance

Question 1 Financial accounting and management accounting have different uses to the stakeholders. Differentiate the broad types of accounting information between both disciplines.

Question 2 The global COVID-19 pandemic have resulted in many companies contemplating to shut down or close permanently their operations. Discuss the decisions that must be considered by management before taking such a move.

Hermosa, Inc., produces one model of mountain bike. Partial information for the company follows:

     
Required:
1. Complete the table. (Round your "Cost per Unit" answers to 2 decimal places.)


  
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 $660. (Round your percentage answers to 2 decimal places. (i.e. .1234 should be entered as 12.34%.))



4. Calculate Hermosa’s break-even point in units and sales revenue. (Round your answers to the nearest whole number.)

Income Tax Credits (LO. 6)

Brendan and Theresa are married and have three children in college. Their twin daughters, Christine and Katlyn, are freshmen and attend the same university. Their son, Kevin, is a graduate student. In 2020, Brendan and Theresa pay $12,100 in tuition and fees ($6,050 each) and $2,920 in textbooks ($1,430 and $1,490, respectively) for their daughters and $4,230 in tuition and fees for Kevin and $350 in textbooks. The twins' room and board is $2,590, while Kevin's room and board is $1,310. Brendan and Theresa have an adjusted gross income of $72,100.

a. Brendan and Theresa can claim ______ as a tax credit for the higher education expenses.

Round intermediate computations and final answer to the nearest dollar.

b. Assume that their adjusted gross income is $124,400, then they can claim _______ as a tax credit for the higher education expenses.

c. Assume the same facts as in part a, except that Kevin is a freshman and the twins are graduate students. Brendan and Theresa can claim ________ as a tax credit for the higher education expenses.

Net income $2,350,000, Preferred stock: 52,000 shares outstanding, $100 par, 9% cumulative, not convertible 5,200,000

Common stock: Shares outstanding 1/1 686,400  

Issued for cash, 5/1 270,000   

Acquired treasury stock for cash, 8/1 148,800   

2-for-1 stock split, 10/1

Compute earnings per share: