Income Statement Preparation

      Watson Corporation has several subsidiaries and the accounts below reflect their combined amounts before income taxes and excluding the amounts noted. Watson Corporation's capital structure consists of 20,000 shares of common stock. At December 31, 2018, an analysis of the accounts and discussions with company officials revealed the following information:   

     Excluded from the above numbers are the operations of the Art Department which the company decided to discontinue on November 1st. The information on the 2018 operations of the Art Department are presented below:

The net realizable value of the remaining Art Department assets is $15,000 less than their net book value.

A 30% tax rate applies to all items.

      Prepare a multiple step income statement

Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that date, Abernethy has the following trial balance: Debit Credit Accounts payable $ 50,000 Accounts receivable $ 40,000 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 120,000 Cash and short-term investments 60,000 Common stock 250,000 Equipment (net) (5-year remaining life) 200,000 Inventory 90,000 Land 80,000 Long-term liabilities (mature 12/31/20) 150,000 Retained earnings, 1/1/17 100,000 Supplies 10,000 Totals $ 600,000 $ 600,000 During 2017, Abernethy reported net income of $80,000 while declaring and paying dividends of $10,000. During 2018, Abernethy reported net income of $110,000 while declaring and paying dividends of $30,000. Assume that Chapman Company acquired Abernethy’s common stock by paying $520,000 in cash. All of Abernethy’s accounts are estimated to have a fair value approximately equal to present book values. Chapman uses the partial equity method to account for its investment. Prepare the consolidation worksheet entries for December 31, 2017, and December 31, 2018.

Statement of Realization and Liquidation

At January 1, 2020, the records of Sharon Thomson, trustee in bankruptcy for Davis Corporation, showed the following:

During January, Thomson sold equipment having a book value of 35,000 for 10,000, and sold the patents for 30,000. Thomson was paid 5,000 as a trustee's fee, and 50,000 was distributed proportionately to the creditors.

Required:

Prepare a statement of realization and liquidation for January and a balance sheet and statement of estate deficit as of January 30, 2020.

Select one area of risk related to auditing operating systems and networks: Describe the threats associated with the risk area. What are the associated controls to address and reduce the likelihood of these threats? What are the audit objectives related to these controls? List the appropriate audit procedures to test these controls?

Explore what impact the different auditor’s opinion will have on the audited organization, its employees and its stakeholders. Do you feel it is absolutely necessary to audit an organization every year if they have continuously been issued a clean audit opinion? Why or why not?

Anja is an advisor. She uses her own car to travel to various locations to meet clients. She acquired a car on 1 March 2020 for $57,000. The acquisition cost was funded entirely by a loan at an interest rate of 10%. She has determined that the depreciation deduction on the car would be $5,700 for the year. In addition, Anja incurred the following expenses during the year:

• Registration and insurance = $5,000;
• Repairs and maintenance = $300; and
• Oil and fuel costs = $4,100.

For the period 1 March 2020 to 30 June 2020, Anja estimates that the car travelled a total of 12,000 kilometres; 8,000 of which were for business purposes. You may assume that Anja has maintained all necessary records and a logbook. Assume that depreciation has been adjusted for partial year use and the impact of the car limit.

i. Calculate Anja's deduction for car expenses under "cents per kilometre" method 1.5 marks
ii. Calculate Anja's deduction for car expenses under log book method 1.5 marks
iii. Which method is preferable for Anja and why? 2 marks

I am trying to create a classified balance sheet and I am unsure what is involved when reporting the current assets, liabilities and owners equity?

Match each description with the appropriate term.

Equipment Corporation incorporated was established on October 20, 1974. to comply with accounting requirements, the company uses an accrual method of accounting. Its accumulated earnings and profits as of December 31, 2016, were $1,200. It made cash distributions during its 2016 calendar tax year of $140,089. This consisted of $85,089 to preferred shareholders and $55,000 to common shareholders. The entire distribution to preferred shareholders is a taxable dividend. The $27,500 distribution on March 15, 2016, to common shareholders is a taxable dividend to extent of $27,318 (99.33%), and the $27,500 distribution on September 15, 2016, to common shareholders is a taxable dividend to the extent of $26,118 (94.97%).

The following profit and loss account appeared in the books of the Equipment Corporation for calendar year 2016. It is required to file Form 1120 and completes Form 1120-F (M-1 and M-2).

1. Please prepare Schedule M-1 for the Equipment Corporation using the financial information and the Form 1120 line items provided above.

2. Please prepare Schedule M-2 for the Equipment Corporation using the retained earning information provided. To accurately calculate and support the ending balance, please complete a Retained Earnings Reconciliation Table.

Flannigan Company manufactures and sells a single product that sells for $500 per unit; variable costs are $270. Annual fixed costs are $943,000. Current sales volume is $4,250,000. Compute the contribution margin per unit.

The Sarbanes Oxley Act is sometimes described as the "full-employment act for accountancy." Why do you think it is often characterized that way?

Match each description with the appropriate term.

1. Relevant Range and Fixed and Variable Costs

   Child Play Inc. manufactures electronic toys within a relevant range of 20,000 to 150,000 toys per year. Within this range, the following partially completed manufacturing cost schedule has been prepared:

   Complete the cost schedule. When computing the cost per unit, round to two decimal places.

   Toys produced	40,000		80,000		120,000
   Total costs:
   Total variable costs	$720,000		d. $		j. $
   Total fixed costs	600,000		e.		k.
   Total costs	$1,320,000		f. $		l. $
   Cost per Unit
   Variable cost per unit	a. $		g. $		m. $
   Fixed cost per unit	b.		h.		n.
   Total cost per unit	c. $		i. $		o. $