Exercise 15-7

Crawford Corporation incurred the following transactions.

Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

As auditors (or in any field) we should remain informed about current trends and issues relating to our practice. Share an existing event or trend that connects to the concepts we've covered in this lesson. For example, it may refer to management's assertions, material misstatement, reasonable assurance, or other topics relevant to the content. Provide a summary, as well as an analysis of the situation and an explanation of how it relates to our studies. In your response, please include a link to an article or video about the event or trend to learn more.

Scenario

Wanda comes to you because she is discouraged and needs to talk. Her parents have heard she is thinking of expanding her business and even possibly taking out a second mortgage on her home to fund the expansion. They have never been overly supportive of her business, but as long as it seemed like a “hobby,” they didn’t have much to say. Recently Wanda’s mother called and expressed strong reservations about Wanda taking such a large step. This made a big impression on Wanda. She tells you that she doesn’t want her business to cause a rift in the family. Perhaps she should take her parents’ advice and just forget expanding the business. Moreover, she doesn’t understand why her parents aren’t as excited about the prospects for the business as she is.

For Discussion

1. Using what you know about entrepreneurs, why would Wanda’s parents not see things the way that she does? What positive characteristics of entrepreneurs is Wanda exhibiting?
2. Do you know an entrepreneur personally? If so, what characteristics do you see in entrepreneurs that you have to presume Wanda shares? If you don’t know an entrepreneur, then look to the world of business and use one about whom you can do a little research. Some examples of famous entrepreneurs are Sir Richard Branson (Virgin Wireless, Virgin Galactic), Elon Musk (Tesla), Oprah Winfrey (The “O” Brands). What characteristics do you think these famous entrepreneurs probably share with Wanda?

ACCOUNTING The assumption of financial accounting that individual companies must be separate and distinct from their owners and other entities best describes: the economic entity assumption. the going concern assumption. the fiscal period assumption. the stable dollar assumption.

partial credit, P3-48 (similar to) Marston Corporation manufactures housewares products that are sold through a network of external sales agents. The agents are paid a commission of 19​% of revenues. Marston is considering replacing the sales agents with its own​ salespeople, who would be paid a commission of 10​% of revenues and total salaries of $ 2 comma 520 comma 000. The income statement for the year ending December​ 31, 2017​, under the two scenarios is shown here. Marston Corporation Income Statement For the Year Ended December 31, 2017 Using Sales Agents Using Own Sales Force Revenues $28,000,000 $28,000,000 Cost of goods sold Variable $13,160,000 $13,160,000 Fixed 3,170,000 16,330,000 3,170,000 16,330,000 Gross Margin 11,670,000 11,670,000 Marketing costs Commissions $5,320,000 $2,800,000 Fixed costs 2,644,000 7,964,000 5,164,000 7,964,000 Operating income $3,706,000 $3,706,000 Calculate Marston​'s 2017 contribution margin​ percentage, breakeven​ revenues, and degree of operating leverage under the two scenarios. 2. Describe the advantages and disadvantages of each type of sales alternative. 3. In 2018​, Marston uses its own​ salespeople, who demand a 15​% commission. If all other cost behavior patterns are​ unchanged, how much revenue must the salespeople generate in order to earn the same operating income as in 2017​?

Explain how straight- line depreciation is computed.

Question 1

Inherent risks can be classified according to their nature, such as “unusual pressure on management” or “account likely to require adjustments”; and also their level as either a “financial report level inherent risk” or an “assertion level inherent risk”.

Required: Below are listed six situations that can give rise to inherent risks. Classify each situation by its nature and level.

Note: In answering this question please write the letter that denotes the situation followed by its nature and level. For example, if you believe that the situation A is an example of “Nature of the Entity”, write: A: Nature of the entity; FR level

SITUATIONS
A. Senior management of your client, Black Pty Ltd, can earn substantial bonuses if they meet certain revenue targets.

B. This the fourth year that you are auditing Brown Pty Ltd. In the past two years you have had to ask Brown to adjust its provision for warranty.

C. You are auditing Blue Pty Ltd (Blue). During the year, Blue’s CFO entered into a number of hedging contracts in an attempt to smooth fluctuations in the costs of imported inventory.

D. Your client, Red Pty Ltd, a leading home builder, hired a new Credit Controller during the year. While this person is highly credentialed, she has not worked in the building industry before.

E. Your client, Green Pty Ltd (Green) sells mobile telephones. Recently, Green’s CFO undertook a comprehensive review of inventory.

Which method will give you a higher amount of depreciation expense in the later years of an asset's life, straight-line or declining balance? Explain

The Corporations Act 2001 (Cth) provides defences for director’s conduct that may otherwise breach sections of the Act. Identify these defences for directors and explain how these defences can be applied in relation to that particular breach.                                                   

Pretend you are an auditor (I know, I know, this is an amazing dream). Imagine that you are performing the 12/31/18 financial statement audit of Curly's Coffee and Vinyl Shop. During the substantive procedures, you discovered the situations listed below. If it is a 2018 error, then you will need to communicate these to the client and request that they be fixed within the 2018 financial records. In that case, write the adjusting journal entry that the client should book to correct. Include date, accounts debited and credited and amounts.

If no adjusting entry is needed, then write: “no adjusting entry necessary” and provide a brief explanation.

1. You tested their repairs and maintenance expense account and found an error. They purchased a fancy new espresso machine on 01/01/2018 (check #74 for $4,000). They mistakenly expensed it (as repairs and maintenance expense) instead of capitalizing. Write the journal entries needed to correct error and properly reflect all 2018 accounting entries that should have been booked related this capitalized asset, which has an expected 5-year useful life and no estimated salvage value.

On January 1, 2021, Red Flash Photography had the following balances: Cash, $23,000; Supplies, $9,100; Land, $71,000; Deferred Revenue, $6,100; Common Stock $61,000; and Retained Earnings, $36,000. During 2021, the company had the following transactions: 1. February 15 Issue additional shares of common stock, $31,000. 2. May 20 Provide services to customers for cash, $46,000, and on account, $41,000. 3. August 31 Pay salaries to employees for work in 2021, $34,000. 4. October 1 Paid for one year's rent in advance, $23,000. 5. November 17 Purchase supplies on account, $33,000. 6. December 30 Pay dividends, $3,100. The following information is available on December 31, 2021: Employees are owed an additional $5,100 in salaries. Three months of the rental space has expired. Supplies of $6,100 remain on hand. All of the services associated with the beginning deferred revenue have been performed.

I just need the closing entries for the revenue accounts, the expense accounts and the dividends accounts

As an employee, write an internal memo to your manager addressing the following: Suggest several ways (other than raising prices) a medical practice can maximize the
contribution margin per unit of this limiting resource. identify the factor that you believe is most likelyto limit potential output capacity

Research should be memo and  should include the following five sections:

(1) Facts, (2) Issue, (3) Authorities, (4) Conclusion, and (5) Analysis.

Scenario. Mary and John were married during the years at issue (i.e., years 2014, 2015, and 2016). They separated in 2016 and divorced in 2017 after nearly 20 years of marriage. At the time Mary filed her petition, she resided in Maryland. She holds a high school diploma and attended the University of Delaware for six months, taking noncredit courses in the data processing. While married, Mary and John owned the marital home, two rental properties and a farm. As having a large blended family, they owned a large van in addition to two pickup trucks and an Oldsmobile Cutlass, which John described as a "classic car". They took family vacations each year, including trips to Bermuda and Mexico. They enjoyed camping, and throughout the years they purchased several campers, which they used on family camping trips every few months. John owned VIP Builders, which was the primary source of the family's income. Established in the early 1990s, VIP Builders is a home improvement company focusing on residential remodeling. A carpenter by trade, John operated the business, but he did not have the bookkeeping background to maintain the company's records. He hired Mary to be the company's bookkeeper and office manager. Their relationship blossomed, and they eventually wed. Mary was VIP Builders' bookkeeper/office manager for approximately 20 years, including the years at issue. She developed and maintained the accounting program used by the business. Her duties included: (1) managing the company's financial records, bank accounts, and American Express credit card account; (2) managing the company's "end of the month check run", which reconciled all charge accounts that VIP Builders had from its vendors, roofing suppliers, lumber yards, plumbing supply houses, and other subcontractors; (3) reconciling the company's bank and credit card statements; (4) managing the accounts payable and accounts receivable; (5) tracking inventory; and (6) managing the company's payroll. To these ends, Mary had the authority to write and sign checks on behalf of VIP Builders, deposit money into the company's accounts, and prepare checks and receipts for the business. Mary was familiar with VIP Builders' clients and knew, or at least could have learned, the amounts they paid the company. Before becoming VIP Builders' bookkeeper, she had other experience in accounting. When Mary managed VIP Builders' finances, her duties included the end-of-year accounting for the company. She reviewed the company's books and provided information and documents to the company's certified public accountant (C.P.A.), Joe Taigi, who prepared Mary and John's joint tax returns. Mary also met and interacted with Mr. Taigi during the years involved. She admitted to "booking things wrong" for VIP Builders and was advised that she had done so by Mr. Taigi. 2 For 2014 Mary and John's joint returns underreported income attributable to VIP Builders; for 2015 the returns underreported income and overstated expenses attributable to VIP Builders. The IRS made no adjustments with respect to VIP Builders for 2016. In addition to working for VIP Builders, Mary operated a horse care and boarding business on the farm that she and John owned. She exclusively controlled the business, and under her stewardship, the business' income for each of the years involved was underreported. All adjustments made by the IRS for 2016 were due to underreported income with respect to the horse care and boarding business. Mary wrote checks drawn on VIP Builders' bank account to herself, and she used the VIP Builders' American Express credit card to pay horse care and boarding business and household expenses. Mary was given the joint income tax returns for 2014, 2015, and 2016 before they were filed, but she did not review them before signing them. Mary was not a victim of spousal abuse or domestic violence during the years involved. The IRS tries to collect the joint tax liabilities of years 2014-2016 from Mary. Instruction: Provide your advice to Mary who is appealing the case.