Major "Big 6" Certified Public Accounting firms have three sources of revenue or three divisions: Audit, tax, and Management Consulting. But the real power resides in the Audit Department because the Audit Partners earn between $100,000-750,000 per year. An annual audit of a large U.S. corporation can cost over $500,000 each year. The Securities and Exchange Commission (SEC) of the federal government requires that all corporations selling stock on the New York Stock Exchange be audited annually by an independent national CPA firm. The Audit Partner in-charge of the engagement directs the staff auditors to keep audit workpapers for evidence in case of a law suit. These workpapers show that the corporation is or is not maintaining generally accepted accounting principles (GAAP). During an audit in Hollywood, California a staff auditor was completing an audit of a home health care corporation. During the investigation it was noticed that some of the accounting records were missing. It was common knowledge that the prior corporate controller had embezzled hundreds of thousands of dollars from the corporation and had fled the United States. The staff auditor commented in the workpapers that the missing files could be due to the embezzlement. Upon reviewing the workpapers, the Audit Manager rebuked the staff auditor for mentioning the embezzlement in the workpapers. Questions:

1 What are the issues involved here? Explain in your own words ?

2 Should the audit workpapers be re-done? Explain in your own words?

3 What would you do? Explain in your own words?

4 What are the short and long term consequences of not reporting the embezzlement in the workpapers? Explain in your own words ?

5 What are the legal ramifications of this case? Explain in your own words?

6 Who is affected by the note in the papers: stockholders, employees, auditors, the community in general? Explain in your own words

Nonprofit, or not-for-profit, firms:

Select one:

a. ​minimize cost rather than maximize profit.

b. ​maximize revenue instead of profit.

c. ​pursue profit as their main goal despite their name.

d. ​have no incentive to produce efficiently.

e. ​often pursue goals other than profit maximization.

17-3 17-01

Vertical Analysis of Income Statement

Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:

a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.

b. The vertical analysis indicates that the cost of goods sold as a percent of sales (INCREASED/DECREASED)

by 5 percentage points, while selling expenses (INCREASED/DECREASED)

by 2 percentage points, and administrative expenses INCREASED/DECREASED

by 1 percentage points. Thus, net income as a percent of sales (INCREASED/DECREASED)

by 2 percentage points. (INCREASED/DECREASED)

Royal Lawncare Company produces and sells two packaged products—Weedban and Greengrow. Revenue and cost information relating to the products follow:

Common fixed expenses in the company total $96,000 annually. Last year the company produced and sold 35,500 units of Weedban and 21,500 units of Greengrow.

Required:

Prepare a contribution format income statement segmented by product lines.

Question 1 : Company has 4 revenue options.
Option A: initial cost of $300,000, annual savings of $65,000, salvage of $150,000, useful life of 6 years
Option B: initial cost of $495,000, annual savings of $80,000, an additional one-time saving of $150,000 in year 3, salvage of $250,000, useful life of 4 years
Option C: initial cost of $350,000, annual savings of $100,000, salvage of $200,000, useful life of 3 years
Option D: initial cost of $400,000, annual savings of $100,000, salvage of $300,000, useful life of 2 years
a) If the options are independent and MARR is 15%, which should be selected? Justify answer using ROR.
b) If the options are mutually exclusive and MARR is 15%, which should be selected? Just answer using ROR.
c) If MARR is 20%, which should be selected if they are independent options?
d) If MARR is 20%, which should be selected if they are mutually exclusive?

1. We see government's debt. Every month the government is collecting record revenue amounts yet still runs a deficit. Those deficits have added up to large amounts of debt? Is the government's debt an economic problem? Why or why not?  
2. Look up the most current unemployment (U3) report? What is significant about that report? What is the current labor force participation rate and why is that an important consideration when evaluating employment? How does U3 differ from U6 #'s?
3. What are the two options for calculating GDP? What are the key differences and why are they important? Why are CPI & the GDP deflator important considers for evaluating the GDP? What impact will the countries government debt have on the economy?
4. What is the significance of considering LRAS & SAS in the Macro S & D model?
5. What do the above economic factors indicate about the current state of our economy?

Find and graph the Post Tax Consumer Surplus,Producer Surplus,Tax Revenue, Dead Weight Loss, and the economic incidence of the Tax

Demand is P=18-2Q

Supply is P=Q

Tax is $6 per unit

Unit sold: Standard Carrier: 132,000 Deluxe Carrier: 88,000 Total: 220,000

Revenue at $25 and $61 per unit $3,300,000 $5,368,000 $8,687,000

Variable costs at $15 and $31 per unit 1,980,000 2,728,000 4,708,000

Contribution margins at $10 and $30 per unit $1,320,000 $2,640,000 $3,960,000

Fixes Costs $2,205,000

Operating Income $1,755,000

The Ready company retails two​ products: a standard and a deluxe version of a luggage carrier. The budgeted income statement for next period is as​ follows:  

Requirement 1. Compute the breakeven point in​ units, assuming that the company achieves its planned sales mix. Begin by determining the sales mix. For every 2 deluxe units sold: ? stand units are sold.

This is the formula used to calculate the breakeven point when there is more than one product sold. Enter the amounts in the formula to calculate the breakeven point.

Fixes cost / Contribution margin per bundle = Breakeven point in bundles

$ ? / $ ? = $ ?

The breakeven point is: ? standard unit and : ? deluxe units.

Requirement 2. Compute the breakeven point in units​ (a) if only standard carriers are sold and​ (b) if only deluxe carriers are sold.

(a) If only standard carriers are sold, the breakeven point is : ? units

(b) If only deluxe carriers are sold, the breakeven point is: ? units

Requirement 3. Suppose 220,000 units are sold but only 22,000 of them are deluxe. Compute the operating income. Compute the breakeven point in units. Compare your answer with the answer to requirement 1. What is the major lesson of this​ problem?

Compute the operating income if

220,000 units are sold but only 22,000 of them are deluxe.

Before calculating the breakeven points, determine the new sales mix.

For every 1 deluxe carrier sold: ? standard carriers are sold,
Compute the breakeven point in​ units, assuming the new sales mix. ​(Round your answers up to the next whole​ number.)

Compare your answer with the answer to requirement 1.

.

Problem 6-2A Calculate ending inventory, cost of goods sold, sales revenue, and gross profit for four inventory methods (LO6-3, 6-4,6-5) [The following information applies to the questions displayed below.] Greg’s Bicycle Shop has the following transactions related to its top-selling Mongoose mountain bike for the month of March. Greg's Bicycle Shop uses a periodic inventory system.

For the specific identification method, the March 5 sale consists of bikes from beginning inventory, the March 17 sale consists of bikes from the March 9 purchase, and the March 27 sale consists of four bikes from beginning inventory and eight bikes from the March 22 purchase.

1. Calculate ending inventory and cost of goods sold at March 31, using the specific identification method.

2. Using FIFO, calculate ending inventory and cost of goods sold at March 31.

3. Using LIFO, calculate ending inventory and cost of goods sold at March 31.

4. Using weighted-average cost, calculate ending inventory and cost of goods sold at March 31. (Round your intermediate and final answers to 2 decimal places.)

5. Calculate sales revenue and gross profit under each of the four methods. (Round weighted-average cost amounts to 2 decimal places.)