Consider each of the following independent and material situations. In each case:
• the financial report date is 31 December 2019;
• the field work was completed on 12 February 2020;
• the directors declaration and the audit report were signed on 19 February 2020; and
• the completed financial report accompanied by the signed audit report were mailed to shareholders on 18 March 2020
A. You are an auditor pf PP Limited (PP), a company specialising in industrial property development. On 10 February 2020, you become aware that a major overseas investor has informed the management of PP of their intention to withdraw their investment in a proposed major development. On the basis of its discussions with the investor and previously pledged funds from them, PP has incurred substantial costs in feasibility studies, structural engineering reports and architectural plans. A significant portion of these costs has been capitalised. The management is dependent on finding a new investor to be able to meet these expenses and to continue with the project.
B. You are the auditor of XY Limited (XY), a manufacturing client. XY has plans to upgrade its manufacturing process and plans to finance this by a sale of property which is superfluous to its needs, situated next to its head office. The property has been subdivided for the purposes of the sale and placed on the market in December 2019. On 25 January 2020, the state government approved a plan for the construction of an express freeway. The plan will result in the appropriation of a portion of the property owned by XY and subdivided for the purpose of sale. Construction of the freeway will begin in late 2020. No estimate of the compensation payment is available.
C. You are an auditor of Q limited (Q), a major public company involved in the property development industry. Prior to signing your audit report you sought a letter of comfort from Q’s bankers that the bank would continue to support Q by providing finance over the coming year. The bank agrees that it would continue to provide finance. It was your view that without such support Q had severe cash flow problems and the financial report would need to be modified with respect to a going concern assumption. On 15 March 2020, the company’s bankers wrote to you advising that the company had breached its loan covenant with the bank in February 2020 and that the loan facility was now due and payable and would not be renewed.
D. You are the auditor of Turbo Limited (Turbo), a professional services client. On 15 January 2020, Turbo settled and paid a personal injury claim to a former employee as the result of an accident that occurred in September 2017. The company had not previously recorded a liability for the claim. E. You are the auditor of Charge Limited (Charge), an automobile parts manufacturer. On 2 February 2020, Charge agreed to purchase for cash the outstanding shares of Electronic Fuel Injection Limited. The acquisition is likely to double the sales volume of Charge.
Required: For each of the events A to E:
2. Determine whether additional audit evidence needs to be obtained. If so, describe the nature of the audit evidence to be obtained and the audit procedures used to obtain it.
In: Accounting
Consider each of the following independent and material situations. In each case:
• the financial report date is 31 December 2019;
• the field work was completed on 12 February 2020;
• the directors declaration and the audit report were signed on 19 February 2020; and
• the completed financial report accompanied by the signed audit report were mailed to shareholders on 18 March 2020
A. You are an auditor pf PP Limited (PP), a company specialising in industrial property development. On 10 February 2020, you become aware that a major overseas investor has informed the management of PP of their intention to withdraw their investment in a proposed major development. On the basis of its discussions with the investor and previously pledged funds from them, PP has incurred substantial costs in feasibility studies, structural engineering reports and architectural plans. A significant portion of these costs has been capitalised. The management is dependent on finding a new investor to be able to meet these expenses and to continue with the project.
B. You are the auditor of XY Limited (XY), a manufacturing client. XY has plans to upgrade its manufacturing process and plans to finance this by a sale of property which is superfluous to its needs, situated next to its head office. The property has been subdivided for the purposes of the sale and placed on the market in December 2019. On 25 January 2020, the state government approved a plan for the construction of an express freeway. The plan will result in the appropriation of a portion of the property owned by XY and subdivided for the purpose of sale. Construction of the freeway will begin in late 2020. No estimate of the compensation payment is available.
C. You are an auditor of Q limited (Q), a major public company involved in the property development industry. Prior to signing your audit report you sought a letter of comfort from Q’s bankers that the bank would continue to support Q by providing finance over the coming year. The bank agrees that it would continue to provide finance. It was your view that without such support Q had severe cash flow problems and the financial report would need to be modified with respect to a going concern assumption. On 15 March 2020, the company’s bankers wrote to you advising that the company had breached its loan covenant with the bank in February 2020 and that the loan facility was now due and payable and would not be renewed.
D. You are the auditor of Turbo Limited (Turbo), a professional services client. On 15 January 2020, Turbo settled and paid a personal injury claim to a former employee as the result of an accident that occurred in September 2017. The company had not previously recorded a liability for the claim. E. You are the auditor of Charge Limited (Charge), an automobile parts manufacturer. On 2 February 2020, Charge agreed to purchase for cash the outstanding shares of Electronic Fuel Injection Limited. The acquisition is likely to double the sales volume of Charge.
Required: For each of the events A to E:
3. If no action is taken by management, determine the most appropriate audit report to be issued.
In: Accounting
Context
In this week's discussion, you are going to be the CEO of a company. In anticipation of the upcoming quarterly disclosure of profits, you prepare your board of directors for the challenge that U.S. tariffs on Chinese imports are having on profits.
Conceptually, you will be asked to address elasticity as a measurement of the magnitude of a change. Additionally, you will be asked to examine how price elasticity of demand plays a role in consumer demand and how profits are affected by a tariff.
Instructions
For this discussion, please make yourself CEO of only one of these hypothetical companies.
In your discussion post, address the following prompts within the context of your chosen hypothetical company of which you are the CEO:
Note: In your discussion posts for this course, do not rely on Wikipedia, Investopedia, or any similar website as a reference or supporting source.
In: Economics
What function does U.S. Cyber Command perform and how is CYBERCOM working to protect the 2020 elections. Find an article or podcast that details this action.
In: Computer Science
Assume that the GPA of MBA students at Boston University is normally distributed with µ = 3.3 and σ = .2. If we sample 16 of the MBA students what is the probability that the average GPA will exceed 3.36?
In: Statistics and Probability
On October 20, 2020, Kevin Mason, President of Tropicane Juice is reviewing the financial statements of Sunnydee, a potential acquisition candidate for the company. Tropicane is an American company, which produces and distributes juice throughout North America. It is in juice production and is interested in getting into the Canadian market. Sunnydee is a Canadian company that produces similar juice products and sells these across Canada. Tropicane is a public company and Sunnydee is a private company. Sunnydee is owned by the local area farmers and was originally started as a co-operative. Of the 1,000,000 shares outstanding, 600,000 are owned by the founder of the company, Mr. S. The rest are owned by various employees. Sunnydee has a perpetual debt with a par value of $5 million and coupon rate of 6 percent. However, interest rates have decreased and now the debt has a 4 percent yield-to-maturity. Annual before-tax before-interest operating cash flows for the year just ended were $3 million. The corporate tax rate was 20 percent. Assume perpetual operating cashflows for Sunnydee’s future cashflows. Tropicane has return on equity of 12.24%, debt-to-equity ratio of 40%, and yield to maturity of 3% on its outstanding debt.
a) What do you think is the maximum acquisition price that Mr. Mason is willing to pay for acquiring Sunnydee?
b) Compute weighted average cost of capital for Sunnydee.
In: Finance
A delivery truck was acquired on January 1, 2020, at a cost of
$40,600. The truck was originally estimated to have a salvage value
of $16,800 and an estimated life of 5 years. Depreciation has been
recorded through December 31, 2021, using the straight-line method.
On January 1, 2022, the truck’s engine was rebuilt at a cost of
$5,000 the estimated salvage value was revised to $15,600 and the
useful life was revised to a total of 6 years.
Prepare the journal entry to record depreciation expense for 2022.
(Credit account titles are automatically indented when
the amount is entered. Do not indent
manually.)
| Depreciation expense for 2022 | $enter the Depreciation expense for 2017 in dollars |
Adjusting journal entry at 12/31/22:
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Dec. 31 |
|||
In: Accounting
In 2008, the Board of Directors and shareholders of Anheuser Busch agreed to be acquired by a Belgian Brewer (InBev). Prior to the merger, InBev made many pledges to AB regarding how the company would operate after the merger, how its employees would be treated, and so on. With some stipulations, the U.S. Government agreed to allow the merger.
Since the merger, InBev has laid off a significant number of Anheuser Busch employees, most of whom worked at the St. Louis headquarters. Where the merger created duplication of job duties, those being terminated have to-date been from AB, not InBev. There is a great deal of speculation and trepidation around the St. Louis area about the long-term fate of the remaining employees, as well as worry about how the new company will view the many and varied civic contributions the company has made to St. Louis and the many other U.S. areas in which it has operations.
View 1 - AB acted as a well-managed business that takes the actions necessary to remain competitive in a very competitive market. If AB had not approved the merger, its profits and stock price would have fallen, and investment capital would have fled the company. As difficult as the decision was, AB operates in a very competitive environment and owes its stockholders the best return it can provide.
View 2 - The decision to sell the company was both short-sighted and, ultimately, a bad business decision. Any short term benefits AB stockholders reaped from the merger will be more than offset by U.S. job losses, lower tax revenues for States and the U.S. Government, and damage to the U.S. communities in which the company operates. Employees whose employers are loyal to them during difficult times repay that loyalty to the company through hard work. Employees who view themselves as economic pawns to be added or discarded as needed will feel only a marginal commitment to the new AB and their work performance will reflect the negative opinion they hold of their employer.
Let's hear your thoughts. Don't just tell us what you think personally, but bring Managerial Economic theory to bear on this issue.
In: Economics
On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
Additional information: Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2018 and 2019, and by $500,000 in 2020. It is now December 31, 2020, the accounting year-end.
Here is Starfruit Company’s trial balance at December 31, 2020:
Dr (Cr)
Current assets $28,200,000
Plant & equipment, net 188,000,000
Intangibles 2,000,000
Liabilities (180,000,000)
Capital stock (1,000,000)
Retained earnings, January 1 (29,500,000)
Acumulated other comprehensive income, January 1 (500,000)
Dividends 400,000
Sales revenue (24,000,000)
Cost of goods sold 10,000,000
Operating expenses 6,500,000
Other comprehensive income (100,000)
$ 0
Question: On the 2020 consolidation working paper, eliminating entry (R) reduces the Investment in Starfruit by
$ 3,600,000
$64,800,000
$68,200,000
$81,000,000
In: Accounting
A random sample of 75 students revealed 0.25 had acquired an internship for summer 2020 before February 2020. If an associated confidence interval started at 0.152 and ended at 0.348, what was the level of confidence?
Group of answer choices
a) 90
b)80
c)99
d)95
For a t distribution with n = 19, find the probability for the following region:
To the left of +2.5524
a)0.51
b)0.49
c)0.99
d)0.91
In: Statistics and Probability