The following is a partial audit program for the audit of cash receipts:
Review the cash receipts journal for large and unusual transactions.
Trace entries from the prelisting of cash receipts to the cash receipts journal to determine if each is recorded.
Compare customer name, date, and amount on the prelisting with the data on the cash receipts journal.
Examine the related remittance advice for entries selected from the prelisting to determine if cash discounts were approved.
Trace entries from the prelisting to the deposit slip to determine if each has been deposited.
Required:
Identify which audit procedures could be tested using attribute sampling.
What is the appropriate sampling unit for the tests in part (a)?
List the attributes for testing in part (a).
In: Accounting
Matthew frequently purchased a food truck from a local supplier. He is considering travelling to Harrisburg for a local festival to sell his tacos. Before Matthew purchases a permit to sell food at the festival, he wants to calculate how much volume he would need to sell for the trip to be profitable. Matthew met with his accountant to determine his food costs and what his tax liability would be, which in fact is a modest 20% tax on profits. After reviewing the below information, calculate (A) What number of tacos Matthew must sell to break even. (B) What number of tacos Matthew must sell to make a profit before tax of $650. and (C) What number of tacos must Matthew sell to make an after tax profit of $400?
| Selling Price Per Taco | $7.50 | ||
| Variable Cost Per Taco | 2.25 | ||
| Total Fixed Costs | $ 11,300 | ||
In: Accounting
World Gourmet Coffee Company (WGCC) is a distributor and
processor of different blends of coffee. The company buys coffee
beans from around the world and roasts, blends, and packages them
for resale. WGCC currently has 15 different coffees that it offers
to gourmet shops in one-pound bags. The major cost is raw
materials; however, there is a substantial amount of manufacturing
overhead in the predominantly automated roasting and packing
process. The company uses relatively little direct labor. Some of
the coffees are very popular and sell in large volumes, while a few
of the newer blends have very low volumes. WGCC prices its coffee
at full product cost, including allocated overhead, plus a markup
of 20 percent. If prices for certain coffees are significantly
higher than market, adjustments are made. The company competes
primarily on the quality of its products, but customers are
price-conscious as well. Data for the 20x1 budget include
manufacturing overhead of $12,532,320, which has been allocated on
the basis of each product’s direct-labor cost. The budgeted
direct-labor cost for 20x1 totals $1,253,232. Based on the sales
budget and raw-material budget, purchases and use of raw materials
(mostly coffee beans) will total $5,900,000. The expected prime
costs for one-pound bags of two of the company’s products are as
follows: Kona Malaysian Direct material $ 3.00 $ 4.00 Direct labor
0.50 0.50 WGCC’s controller believes the traditional
product-costing system may be providing misleading cost
information. She has developed an analysis of the 20x1 budgeted
manufacturing-overhead costs shown in the following chart. Activity
Cost Driver Budgeted Activity Budgeted Cost Purchasing Purchase
orders 2,341 $ 2,387,820 Material handling Setups 3,640 2,966,600
Quality control Batches 1,460 598,600 Roasting Roasting hours
193,200 4,057,200 Blending Blending hours 67,600 1,419,600
Packaging Packaging hours 52,500 1,102,500 Total
manufacturing-overhead cost $ 12,532,320 Data regarding the 20x1
production of Kona and Malaysian coffee are shown in the following
table. There will be no raw-material inventory for either of these
coffees at the beginning of the year. Kona Malaysian Budgeted sales
2,200 lb. 101,000 lb. Batch size 550 lb. 20,200 lb. Setups 3 per
batch 3 per batch Purchase order size 550 lb. 50,500 lb. Roasting
time 1 hr. per 100 lb. 1 hr. per 100 lb. Blending time 0.5 hr. per
100 lb. 0.5 hr. per 100 lb. Packaging time 0.1 hr. per 100 lb. 0.1
hr. per 100 lb.
Required: 1. Using WGCC’s current product-costing system:
a. Determine the company’s predetermined overhead rate using direct-labor cost as the single cost driver.
b. Determine the full product costs and selling prices of one pound of Kona coffee and one pound of Malaysian coffee.
2. Develop a new product cost, using an activity-based costing approach, for one pound of Kona coffee and one pound of Malaysian coffee.
In: Accounting
Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,507 per unit and then sells them to retail customers for an average price of $2,900 each. The company’s selling and administrative costs for a typical month are presented below:
| Costs | Cost Formula | |
| Selling: | ||
| Advertising | $ | 944 per month |
| Sales salaries and commissions | $ | 4,811 per month, plus 4% of sales |
| Delivery of pianos to customers | $ | 59 per piano sold |
| Utilities | $ | 668 per month |
| Depreciation of sales facilities | $ | 4,947 per month |
| Administrative: | ||
| Executive salaries | $ | 13,560 per month |
| Insurance | $ | 710 per month |
| Clerical | $ | 2,549 per month, plus $37 per piano sold |
| Depreciation of office equipment | $ | 937 per month |
During August, Marwick’s Pianos, Inc., sold and delivered 60 pianos.
Required:
1. Prepare a traditional format income statement for
August.
2. Prepare a contribution format income statement for August. Show
costs and revenues on both a total and a per unit basis down
through contribution margin.
In: Accounting
What are the key management information requirements? 120–150 words
Please do not copy and paste from another source. Thanks
In: Accounting
Derek plans to retire on his 65th birthday. However, he plans to work part-time until he turns 75.00. During these years of part-time work, he will neither make deposits to nor take withdrawals from his retirement account. Exactly one year after the day he turns 75.0 when he fully retires, he will begin to make annual withdrawals of $135,088.00 from his retirement account until he turns 86.00. He he will make contributions to his retirement account from his 26th birthday to his 65th birthday. To reach his goal, what must the contributions be? Assume a 10.00% interest rate.
In: Accounting
You are on the audit team of Apollo Shoes, Inc. for the year
ending December 31, 2015 and your manager has asked you to prepare
a draft of the engagement letter
Some things to note:
All pre-engagement activities have been completed
They are a public entity
Mr. Larry Lancaster is the president and chairman of Apollo Shoes Board of directors
Instructions: Prepare the draft engagement letter
In: Accounting
Lewis Securities Inc. has decided to acquire a new market data and quotation system for its Richmond home office. The system receives current market prices and other information from several online data services and then either displays the information on a screen or stores it for later retrieval by the firm’s brokers. The system also permits customers to call up current quotes on terminals in the lobby.
The equipment costs $1,000,000 and, if it were purchased, Lewis could obtain a term loan for the full purchase price at a 10% interest rate. Although the equipment has a 6-year useful life, it is classified as a special-purpose computer and therefore falls into the MACRS 3-year class. If the system were purchased, a 4-year maintenance contract could be obtained at a cost of $20,000 per year, payable at the beginning of each year. The equipment would be sold after 4 years, and the best estimate of its residual value is $200,000. However, because real-time display system technology is changing rapidly, the actual residual value is uncertain.
As an alternative to the borrow-and-buy plan, the equipment manufacturer informed Lewis that Consolidated Leasing would be willing to write a 4-year guideline lease on the equipment, including maintenance, for payments of $260,000 at the beginning of each year. Lewis’s marginal federal-plus-state tax rate is 40%. You have been asked to analyze the lease-versus-purchase decision and, in the process, to answer the following questions:
What is the net advantage to leasing (NAL)? Does your analysis indicate that Lewis should buy or lease the equipment? Explain.
Now assume that the equipment’s residual value could be as low as $0 or as high as $400,000, but $200,000 is the expected value. Because the residual value is riskier than the other relevant cash flows, this differential risk should be incorporated into the analysis. Describe how this could be accomplished. (No calculations are necessary, but explain how you would modify the analysis if calculations were required.) What effect would the residual value’s increased uncertainty have on Lewis’ lease-versus-purchase decision?
The lessee compares the present value of owning the equipment with the present value of leasing it. Now put yourself in the lessor’s shoes. In a few sentences, how should you analyze the decision to write or not to write the lease?
In: Accounting
Periodic Inventory by Three Methods
The units of an item available for sale during the year were as follows:
| Jan. 1 | Inventory | 1,080 units @ $124 |
| Feb. 17 | Purchase | 1,440 units @ $125 |
| July 21 | Purchase | 1,655 units @ $126 |
| Nov. 23 | Purchase | 1,145 units @ $126 |
There are 1,220 units of the item in the physical inventory at December 31. The periodic inventory system is used.
a. Determine the inventory cost by the
first-in, first-out method.
$fill in the blank 1
b. Determine the inventory cost by the last-in,
first-out method.
$fill in the blank 2
c. Determine the inventory cost by the weighted
average cost method. Do not round intermediate calculation
and round final answer to the nearest whole dollar.
$fill in the blank 3
In: Accounting
Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records: All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 30 percent are collected in the following month. Uncollectibles amounting to 10 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1. Sixty percent of the merchandise purchases are paid for in the month of purchase; the remaining 40 percent are paid for in the month after acquisition. The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $90,000; accounts receivable, $210,000; and accounts payable, $75,000. Mary and Kay, Inc. maintains a $90,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 10 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time. Additional data: January February March Sales revenue $ 540,000 $ 630,000 $ 645,000 Merchandise purchases 360,000 390,000 510,000 Cash operating costs 102,000 81,000 144,000 Proceeds from sale of equipment — — 24,000 Required: Prepare a schedule that discloses the firm’s total cash collections for January through March. Prepare a schedule that discloses the firm’s total cash disbursements for January through March. Prepare a schedule that summarizes the firm’s financing cash flows for January through March.
In: Accounting
The following information is available for the preparation of
the government-wide financial statements for the City of Southern
Springs as of April 30, 2020:
| Cash and cash equivalents, governmental activities | $ | 490,000 | |
| Cash and cash equivalents, business-type activities | 1,031,000 | ||
| Receivables, governmental activities | 582,000 | ||
| Receivables, business-type activities | 1,718,000 | ||
| Inventories, business-type activities | 674,000 | ||
| Capital assets, net, governmental activities | 17,496,000 | ||
| Capital assets, net, business-type activities | 9,201,000 | ||
| Accounts payable, governmental activities | 840,000 | ||
| Accounts payable, business-type activities | 724,000 | ||
| General obligation bonds, governmental activities | 10,102,000 | ||
| Revenue bonds, business-type activities | 4,156,000 | ||
| Long-term liability for compensated absences, governmental activities | 466,000 | ||
From the preceding information, prepare a Statement of Net Position
for the City of Southern Springs as of April 30, 2020. Assume that
outstanding bonds were issued to acquire capital assets and
restricted assets total $716,000 for governmental activities and
$255,000 for business-type activities. (Negative amounts
should be indicated by a minus sign)
In: Accounting
Financial Statement Analysis
Due Date: Monday, March 18, 2019 by 5:00pm.
Submission:
Upload your submission file to D2L under Assignments. Include your
first and last name in the title of the files you upload. Each
individual will submit one (1) Excel workbook and one (1) Word
document. There should be only one (1) worksheet in the
workbook.
Donna James, a 2009 graduate of the University of Florida with 4 years of banking experience, was recently brought in as an assistant to the chairperson of the board of Keystone Foods, a small food producer that operates in southeastern Pennsylvania and whose specialty is high-quality pecan and other nut products sold in the snack food market. Keystone’s president, Jimmy Watkins, decided in 2017 to undertake a major expansion and to “go national” in competition with Frito-Lay, Eagle, and other major snack food companies. Watkins believed that Keystone’s products were of higher quality than the competition’s; that this quality differential would enable it to charge a premium price; and that the end results would be greatly increased sales, profits, and stock price.
The company doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Keystone’s results were not satisfactory, to put it mildly. Thus far, sales have not been up to the forecasted level, costs have been higher than were projected, and a large loss occurred in 2018 rather than the expected profit.
Its board of directors, which consisted of the president, vice president, and major stockholders (all of whom were local business people), was most upset when directors learned how the expansion was going. Unhappy suppliers were being paid late; and the bank was complaining about the deteriorating situation, threatening to cut off credit. As a result, Watkins was informed that changes would have to be made - and quickly; otherwise, he would be fired. Also, at the board’s insistence, Donna James was brought in and given the job of assistant to Frederico Ortez, a retired banker who was Keystone’s chairperson and largest stockholder. Ortez agreed to give up a few of his golfing days and help nurse the company back to health, with James’ help.
James began by gathering the financial statements and other data given (see supplemental spreadsheet schedules). She also projected financial statement data for 2019 (see supplemental spreadsheet schedules), assuming that some new financing is arranged to get the company “over the hump.”
James examined monthly data for 2018 (not provided in the case), and she detected an improving pattern during the year. Monthly sales were rising, costs were falling, and large losses in the early months had turned to a small profit by December. Thus, the annual data look somewhat worse than final monthly data. Also, she noticed that it appears to be taking longer for the advertising program to get the message out, for the new sales offices to generate sales, and for the new manufacturing facilities to operate efficiently. In other words, the lags between spending money and deriving benefits were longer than Keystone’s managers had anticipated. For these reasons, James and Ortez see hope for the company - provided it can survive in the short run.
Other pertinent facts:
Keystone purchases materials on 30-day terms, meaning that it is supposed to pay for purchases within 30 days of receipt.
Keystone spends money for labor, materials, and fixed (long-term) assets (i.e., depreciation) to make products - and spends still more money to sell those products. Then, the firm makes sales that result in receivables, which eventually results in cash inflows.
Keystone’s sales manager changed the company’s sales terms to 60-day credit terms rather than 30-day terms which were historically offered. Keystone’s competitors reacted by offering similar terms.
James must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions should be taken. Your assignment is to help her answer the following questions. Using spreadsheet software (i.e., Microsoft Excel or Google Sheets) and word processing software (i.e., Microsoft Word or Google Docs), respond to the following items, providing clear explanations, not simply “yes” or “no” answers. In all cases requiring computation, determine your responses using appropriate formulas. DO NOT simply key in an answer without computation.
Identify specific ratios that should be used to assess the financial health of Keystone. Justify your inclusion of each selected ratio. Be sure to also classify these ratios based on what aspect of the firm’s characteristics they reflect (e.g., liquidity).
For each given year, conduct calculations for the ratios you identified in #1. Show the appropriate formula for each ratio, the value(s) used in the numerator and denominator, and the final calculated result.
Discuss/interpret each ratio in the context of the company’s overall financial health. Which ratios are positive and/or show improvement? Which ratios continue to highlight areas for further investigation or problems? Discuss any trends in the ratios that you observed over the time period presented.
Based on your analysis, what three (or more) specific actionable items could Keystone do to improve its financial health? Be specific in your response and discuss the implication of your recommendation; for example, if you suggest that the company should pursue raising capital through a bond issue, you should discuss the merits of this recommendation, note any limitations that the company may encounter, and discuss the expected implication on the firm’s financial results. On the later, a high-level discussion on the financial results will suffice, such as, “if a bond issue is undertaken, the company would be responsible for paying bond interest expense which would negatively affect cash flow.
In: Accounting
On January 1, 2017, Boston Enterprises issues bonds that have a $1,600,000 par value, mature in 20 years, and pay 8% interest semiannually on June 30 and December 31. The bonds are sold at par.
1. How much interest will Boston pay (in cash) to the bondholders every six months?
2. Prepare journal entries to record (a) the issuance of bonds on January 1, 2017; (b) the first interest payment on June 30, 2017; and (c) the second interest payment on December 31, 2017.
3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 98 and (b) 102.
In: Accounting
In: Accounting
Lone Star Sales & Service acquired a new machine that cost
$84,000 in early 2016. The machine is expected to have a five-year
useful life and is estimated to have a salvage value of $14,000 at
the end of its life. (Round your final answers to the nearest
dollar.)
(a.) Using the straight-line depreciation method, calculate the
depreciation expense to be recognized in the second year of the
machine's life and calculate the accumulated depreciation after the
third year of the machine's life.
(b.) Using the double-declining-balance depreciation method,
calculate the depreciation expense for the third year of the
machine's life and the net book value of the machine at this point
in time.
In: Accounting