Jonas Worth is the engagement partner for the financial report audit of Caufield Ltd for the year ended 31 December, 20X7. The following material events or transactions have come to Wood's attention before he is scheduled to issue his report on 28 February, 20X8.

a) On 3 January, 20X8, Caufield Ltd received a shipment of raw materials from korea. The materials had been ordered in October 20X7, and shipped FOB shipping point in November 20X7

b) On 15 January, 20X8, the company settled and paid a personal injury claim of a former employee as the result of an accident that occurred in March 20X0. The company had not previously recorded a liability for the claim

c) On 25 January, 20X8, the company agreed to purchase for cash the outstanding shares of La Trobe Electrical Ltd. The acquisition is likely to double the sales volume of Caufield Ltd

d) On 1 February, 20X8, a plant owned by Caufield Ltd was damaged by a flood, resulting in an uninsured loss of inventory (50 -80 words)

Required:

For each of the above events or transactions, discuss audit procedures that should have brought the item to the auditor's attention, and indicate the treatment required in the financial report. Give reasons for your decision.

The Pyramid Company has used the LIFO method of accounting for inventory during its first two years of operation, 2019 and 2020. At the beginning of 2021, Pyramid decided to change to the average cost method for both tax and financial reporting purposes. The following table presents information concerning the change for 2019–2021. The income tax rate for all years is 25%.

Pyramid issued 50,000 $1 par, common shares for $230,000 when the business began, and there have been no changes in paid-in capital since then. Dividends were not paid the first year, but $10,000 cash dividends were paid in both 2020 and 2021.

Required:
1. Prepare the journal entry at January 1, 2021, to record the change in accounting principle.
2. Prepare the 2021–2020 comparative income statements beginning with income before income taxes.
3. Prepare the 2021–2020 comparative statements of shareholders’ equity. [Hint: The 2019 statements reported retained earnings of $45,000. This is $60,000 − ($60,000 × 25%).]

• Record the change in accounting principle.
• Prepare the 2021–2020 comparative income statements beginning with income before income taxes. (Round EPS answers to 2 decimal places.)
• Prepare the 2021–2020 comparative statements of shareholders’ equity. [Hint: The 2019 statements reported retained earnings of $45,000. This is $60,000 − ($60,000 × 25%).] (Deductions should be indicated by a minus sign.)

The Unadjusted pre-closing 12/31/2020 account balances for the Mahoney Company are listed below:

During your audit, you discover the following four items that have yet to be recorded:

1) No depreciation on the building has been recorded for 2020. Depreciation on the building is based on Double-Declining Balance. It was purchased on 1/1/18 and has an estimated useful life of 40 years. The estimated salvage value is $1,000,000.

2) Mahoney exhanged a machine for a similar machine on 12/31/2020. The origianl machine cost $3,429,000 and has a book value of $2,134,000. The new machine had a fair value of $1,823,000; Mahoney also received $511,000 in cash. The exchange lacked commercial substance.

3) Mahoney uses the Income Statement approach to record Bad Debts. Bad Debts in 2020 are estimate to be 4% of Sales.

4) Ending Inventory is to be estimated using the Gross Profit Method. The historic Gross Profit percentage is 20%.

Required

A) Record journal entries for items #1-3 above; show supporting computations. In addition, compute ending inventory per #4 above; show supporting computations. Assume adjusting/closing entries to adjust inventory, closing Purchases, and Record Cost of Goods Sold were properly made.

B) Draft the 2020 Condensed Income Statement and the 12/31/2020 Balance Sheet. Assume no Taxes. Do not include Earnings Per Share.

The Unadjusted pre-closing 12/31/2020 account balances for the Mahoney Company are listed below:

During your audit, you discover the following four items that have yet to be recorded:

1) No depreciation on the building has been recorded for 2020. Depreciation on the building is based on Double-Declining Balance. It was purchased on 1/1/18 and has an estimated useful life of 40 years. The estimated salvage value is $1,000.

2) Mahoney exhanged a machine for a similar machine on 12/31/2020. The origianl machine cost $3,429 and has a book value of $2,134. The new machine had a fair value of $1,823; Mahoney also received $511 in cash. The exchange lacked commercial substance.

3) Mahoney uses the Income Statement approach to record Bad Debts. Bad Debts in 2020 are estimate to be 4% of Sales.

4) Ending Inventory is to be estimated using the Gross Profit Method. The historic Gross Profit percentage is 20%.

Required

A) Record journal entries for items #1-3 above; show supporting computations. In addition, compute ending inventory per #4 above; show supporting computations. Assume adjusting/closing entries to adjust inventory, closing Purchases, and Record Cost of Goods Sold were properly made.

B) Draft the 2020 Condensed Income Statement and the 12/31/2020 Balance Sheet. Assume no Taxes. Do not include Earnings Per Share.

Presented below is selected information for Oriole Company.

Answer the questions asked about each of the factual situations. (Do not leave any answer field blank. Enter 0 for amounts.)

1. Oriole purchased a patent from Vania Co. for $1,140,000 on January 1, 2018. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2028. During 2020, Oriole determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2020?

2. Oriole bought a franchise from Alexander Co. on January 1, 2019, for $320,000. The carrying amount of the franchise on Alexander’s books on January 1, 2019, was $320,000. The franchise agreement had an estimated useful life of 30 years. Because Oriole must enter a competitive bidding at the end of 2021, it is unlikely that the franchise will be retained beyond 2028. What amount should be amortized for the year ended December 31, 2020?

3. On January 1, 2020, Oriole incurred organization costs of $260,000. What amount of organization expense should be reported in 2020?

4. Oriole purchased the license for distribution of a popular consumer product on January 1, 2020, for $144,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Oriole can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2020?

what role does a CEO play in an organization's cultures? what role do other leaders/managers play?

What would a CEO try to do if his/her performance evaluation is based on net operating income? Why?

EXERCISE 4‐2 Workpaper Eliminating Entries, Cost Method LO 5 Park Company purchased 90% of the stock of Salt Company on January 1, 2019, for $465,000, an amount equal to $15,000 in excess of the book value of equity acquired. This excess payment relates to an undervaluation of Salt Company's land. On the date of purchase, Salt Company's retained earnings balance was $50,000. The remainder of the stockholders' equity consists of no‐par common stock. During 2023, Salt Company declared dividends in the amount of $10,000, and reported net income of $40,000. The retained earnings balance of Salt Company on December 31, 2022, was $160,000. Park Company uses the cost method to record its investment. Required: Prepare in general journal form the workpaper entries that would be made in the preparation of a consolidated statements workpaper on December 31, 2023.