Discuss property the importance of earnings management, and the role that ethics plays in its reporting. What policies and internal procedures would you consider being the minimum necessary to instill confidence in earnings reports? How and why would you supplement those?

Matthias Corp. had the following foreign currency transactions during 2017: Purchased merchandise from a foreign supplier on January 20 for the U.S. dollar equivalent of $59,300 and paid the invoice on April 20 at the U.S. dollar equivalent of $51,200. On September 1, borrowed the U.S. dollar equivalent of $308,000 evidenced by a note that is payable in the lender's local currency in one year. On December 31, the U.S. dollar equivalent of the principal amount was $321,000. In Matthias's 2017 income statement, what amount should be included as a net foreign exchange gain or loss?

Which of the following is not one of the considerations given to capital budgeting proposals?

Select one:

A. Whether there is an immediate need to replace or repair critical assets

B. Whether the proposal is in compliance with capital budgeting policies

C. Whether the proposal would meet the established minimum return on capital

D. Whether the proposal is congruent with the firm's long-term goals

E. All of the above are considerations given to capital budgeting proposals

Which of the following affect the weighted average cost of capital?

Select one:

A. Interest on bank loans

B. Dividends expected by investors

C. Expected increases in the value of stock in the company

D. Bond interest payments

E. All of the above

The present value of an ordinary annuity is:

Select one:

A. The amount that would be paid today in order to receive a series of unequal payments in the future

B. The amount that would be paid today in order to receive a series of equal payments in the future

C. The amount that would be paid in the future in order to receive a series of unequal payments leading up to that point

D. The amount that would be paid in the future in order to receive a series of equal payments leading up to that point

E. None of the above

The present value of a single sum is:

Select one:

A. The amount that would be paid today to receive a single amount at a specified date in the future

B. The amount that would be paid today to receive a single amount at an unspecified date in the future

C. The amount that would be paid at a specified date in the future to receive a single amount today

D. The amount that would be paid at an unspecified date in the future to receive a single amount today

E. None of the above

Bergamo Bay's computer system generated the following trial balance on December 31, 2019. The company’s manager knows something is wrong with the trial balance because it does not show any balance for Work in Process Inventory but does show a balance for the Factory Overhead account. In addition, the accrued factory payroll (Factory Wages Payable) has not been recorded.

After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date.

Jobs 402 and 404 are the only units in process at year-end. The predetermined overhead rate is 100% of direct labor cost.

3. Prepare a revised trial balance.

Problem 5-29 Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [LO5-4, LO5-5, LO5-7, LO5-8]

Morton Company’s contribution format income statement for last month is given below:

The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.

Required:

1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $8.70 per unit. However, fixed expenses would increase to a total of $767,340 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased.

2. Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage.

3. Refer again to the data in (1). As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that enough funds are available to make the purchase.)

4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company’s marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in selling price; the company’s new monthly fixed expenses would be $359,513; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy.

1. Why is documentation, conclusion, and accumulation of audit evidence important for auditors to maintain?
2. Why are representation letters important confirmation for external auditors to use in their final evaluation of the audit?

You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked you to perform a comprehensive analysis of the company’s financial statements, including comparing Lydex’s performance to its major competitors. The company’s financial statements for the last two years are as follows:

To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:

Required:

1. Present the balance sheet in common-size format.

2. Present the income statement in common-size format down through net income.

Required 1

Required 2

Problem 20-17 Integrating problem; error; depreciation; deferred taxes [LO20-6]

George Young Industries (GYI) acquired industrial robots at the beginning of 2015 and added them to the company’s assembly process. During 2018, management became aware that the $2.2 million cost of the machinery was inadvertently recorded as repair expense on GYI’s books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property. Cost deducted over 7 years by the modified accelerated recovery system as follows:

The tax rate is 40% for all years involved.

Required:
1. & 3. Prepare any journal entry necessary as a direct result of the error described and the adjusting entry for 2018 depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  

Berger’s Lawn Maintenance Inc. is considering accepting 20-year property maintenance contract from the City of Kingston. The contract would require Berger’s to acquire new landscaping equipment, including a new trencher and excavator machine, amounting to a total purchase cost of $500,000 plus installation costs of $50,000. Other data relating to the contract are as follows: Annual incremental revenues from the contract $200,000 Annual maintenance cost for the new equipment $80,000 Additional maintenance costs at the end of year 10 $300,000 Salvage value of the equipment at termination of the contract $20,000 If the contract was accepted, several old, fully depreciated pieces of equipment would be sold at a total price of $30,000 upon signing the contract. These funds would be used to help purchase the new equipment. For tax purposes, the company computes CCA deductions using the maximum rate of 20%. The company requires an 11% after-tax return on all equipment purchases. The tax rate is 30%.

Required: Compute the net present value of this investment opportunity. Round all dollar amounts to the nearest whole dollar. Would you recommend that the contract be accepted?

1. A charter flight charges a fare of $200per person plus an additional $4 per person for each unsold seat on a plane that holds a maximum of 100 passengers. Let x represent the number of unsold seats.

a)Express the number of passengers on the flight as a function of x. Call this functionQ(x).

b)Express the price per ticket on the flight as a function of x. Call this functionP(x)

c)Express the total revenue received for the flight as a function of x. Call this functionR(x)

d)Find the number of unsold seats that will produce the maximum revenue as well as what the maximum revenue is (rounded to the nearest cent). Explain how you found your answer using complete sentence

Bonita Cole Inc. acquired the following assets in January of 2015. Equipment, estimated service life, 5 years; salvage value, $16,000 $559,000 Building, estimated service life, 30 years; no salvage value $675,000 The equipment has been depreciated using the sum-of-the-years’-digits method for the first 3 years for financial reporting purposes. In 2018, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the building from 30 years to 40 years, with no change in the estimated salvage value. The building is depreciated on the straight-line method. (a) Prepare the general journal entry to record depreciation expense for the equipment in 2018. (b) Prepare the journal entry to record depreciation expense for the building in 2018. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit (a) (b)

discuss what a disclaimer is, when is it is issued, and how it would affect the format of a standard three paragraph audit report.

E8-10 (Algo) Computing Depreciation under Alternative Methods LO8-3

Strong Metals Inc. purchased a new stamping machine at the beginning of the year at a cost of $1,900,000. The estimated residual value was $100,000. Assume that the estimated useful life was five years and the estimated productive life of the machine was 300,000 units. Actual annual production was as follows:

Required:

1. Complete a separate depreciation schedule for each of the alternative methods.

a. Straight-line.

b. Units-of-production.

c. Double-declining-balance.

This is the chart to use for each question. Boxes with a dash in it do not have to be filled.