ABC Ltd is a wholesaler of furniture which has been in operation for ten years. It buys furniture from five major manufacturers and sells them to a range of customers. The company currently has a customer base of over 500 customers most of which are credit customers. The receivables balance comprises customers owing up to $2,000,000 to smaller balances of about $10,000, all with many different due dates for payments and credit limits. The level of receivables is considerably higher than last year and there are concerns about the creditworthiness of some customers.

The company has only recently computerised its operations including its accounting system. Manual invoices, receipts and cheques have been replaced with computer-generated documents. The sub-ledgers are now maintained in the accounting software which have facilitated more timely generation of statements much to the delight of customers. The sales process is initiated by a Purchase Order from the customer which is used to raise a system generated Sales Invoice and Delivery Slip. A copy of the Delivery Slip is given to the Security at the gate for logging and check off to allow passage of goods through the gate; another copy of the Delivery Slip is given for the customer to sign and then returned to the Sales Dept. All information is stored on ABC Ltd’s computer systems. There is no backup of data off site. The client’s staff are helpful although they cannot confirm completeness of documentation for the system.

You are the audit senior in charge assigned for ABC Ltd’s audit and you are in the process of planning the current year’s audit. You are contemplating the changes in the client’s audit environment and the impact that these changes will have on the audit risk and the audit methodology. Your audit assistant is curious why it is necessary to plan the audit from one year to the next. Why not just copy the previous year’s workpapers?

3. (a) Your audit plan notes that you will be testing the system of internal controls for the ‘three Es’. Explain the ‘three Es’ and the impact these will have on the audit if positive and if negative.

(b) State the audit procedure you will be using for the following:

i) To test the control over completeness of sales

ii) To test the accuracy and existence of receivables balances

(c) List the set of management assertions for “Sales” and “Accounts Receivable” which you will be testing.

a. A US corporation has an account payable to an unrelated Irish company in 90 days. The amount of the payable is €500,000. The spot exchange rate for the euro is EUR/USD 1.2131. The company’s combined federal and state income tax rate is 27.3%; the Irish corporate income tax rate is 12.5%. The company expects the exchange rate for the euro to decline to 1.2030 prior to the account’s due date. When should the company make the payment? Explain.

b. If the payee on the account is an affiliated corporation, when should the company make the payment? Explain.

c. What is the payment described in part b called? How can the company justify the amount of the payment if it is challenged by the US Internal Revenue Service or Ireland’s Revenue authority?

Acme 3-D Printing Co. custom produces products for customers by using computerized 3D printing. An employee (clerk) at Acme takes orders from customers, each order contains the specifications for one “print job”: one custom 3D object to be manufactured. When the order is received, the employee immediately collects cash payment – no credit is extended to customers. The order takes about one week to put into production as a print job. The print job is a manufacturing process consisting of the application of different colored plastics which are shaped and milled into a single 3-dimensional object using various machine processes. Acme maintains information about its cash accounts, orders, print jobs, the employees (machinists) who perform each print job, customers, the quantities of different colored plastics used in each print job, and the processes that are performed on each print job. Each print job is manufactured by one employee who performs all the processes that are necessary for that print job. Print jobs manufactured for customers require one or more colored plastics, and one or more processes. Each customer could have many orders and many print jobs throughout the year; each print job requires a new order. All company data is currently contained in the following database:

CASH (ACCOUNT-NO, ACCT-TYPE, CASH-BALANCE)

ORDERS (ORDER-NO, ORDER-DATE, SPECS, ACCOUNT-NO*)

PRINT_JOB (JOB-NO, JOB-DATE, EMPLOYEE-NO, EMPLOYEE-NAME, MFG-TIME, CUSTOMER-NO, CUSTOMER-NAME, CUSTOMER-ADDRESS, PROCESS-NO*, ORDER-NO*)

COLORED_PLASTICS (JOB-NO*, CP-NO, CP-DESCRIPTION, QUANTITY-USED)

PROCESSES (PROCESS-NO, PROCESS-DESCRIPTION)

Definitions of some fields: Any -NO field is the unique identifier of a database entity SPECS is a text field that contains all the print job specifications taken during the order CP stands for “colored plastic” QUANTITY-USED field indicates the quantity of each colored plastic used on each print job. JOB-DATE is the date on which the print job is manufactured MFG-TIME is the amount of manufacturing time the entire print job takes

(1a.) Does this database contain a transitive dependency? If yes, describe ONE transitive dependency by naming the fields and how they create the dependency.

(1b.) Does this database contain a partial dependency? If yes, describe ONE partial dependency by naming the fields and how they create the dependency.

(1c.) Does this database contain a potential repeating group? If yes, describe ONE repeating group by naming a field that would repeat.

Q.1) Emirates Steel Company reported the following accounting values:

Required:

Part 1:

a. Compute contribution margin.

b. Compute contribution margin percentage.

c. Compute gross margin.

d. Compute gross margin percentage.

e. Compute operating income.

Part-2:

Write a note on the above retrieved ratios and give comments whether investment in the shares of M/s Emirates Steel Company is a prudent decision as an investor or not? In both cases, respond why you taken decision of ‘Yes’ or ‘No’ (give reasons)?

Q.2) Pepsi Cola Company wants to estimate the cost for each process. It is a beverage manufacturing unit and only produce different flavors of beverages.

Required:

a. Classify each of the following costs as either direct or indirect with respect to production process.

b. Classify each of the following costs as either fixed or variable with respect to Pepsi Cola Company per day.

There are five revenue recognition? criteria.

1.Identify the contract with the customer.

2.Identify the performance obligations.

3.Determine the transaction price.

4.Allocate the transaction price to performance obligations.

5.Recognize revenue in accordance with performance.

There are some situations.a.
a.An apartment owner receives a deposit of? $1200 equal to one? month's rent.
b.An insurance company receives annual premiums for fire insurance on June 25 for coverage beginning July 1.
c.A city transit authority issues? 200,000 monthly passes at? $80 each for sale at various retailers. Retailers act as consignees for these passes.
d.A city transit authority sells? 50,000 monthly passes at? $80 each to transit riders at its own retail? offices/stores.e.
e.A provincial lottery corporation delivers 10 million? scratch-and-win cards to retailers. The cards retail for? $2 and generate a commission of? $0.20 per card for the retailer. The retailer can return unsold cards to the lottery corporation.

Just  identify which revenue recognition? criterion/criteria is/are NOT met at the point of? sale, preventing the recognition of revenue at that time

1. Heights of all tall buildings in San Francisco 500 feet or higher.

a) Is this a sample or population? _____ 500 525 529 529 538 541 550 564 565 569 570 573 600 600 641 645 695 779 853

b) Mean __________

c) Standard Deviation ___________

d) Variance ____________

e) 5# Summary ______________________________________

f) IQR _____________

g) Upper fence ____________

h) Lower fence ___________

i) Are there any outliers? _________

If so, identify them: ______________________

j) Make a stemplot k) Draw a boxplot showing any outliers

i) Shape? ______________________ (Leaf unit 10)

2. State the Empirical Rule for symmetric and near normal distributions.

Approximately _____% of the data lie within ___ standard deviation of the mean.

Approximately _____% of the data lie within ___ standard deviations of the mean.

Approximately _____% of the data lie within ___ standard deviations of the mean.

3. Class test scores are normally distributed with mean 64 and standard deviation 10.

Find the proportion of scores using the Empirical Rule.

Make a sketch for each problem.

a) X > 74 a) 44 < X < 74

b) X < 44

Peter Krone is the chief financial officer (CFO) of Echo Inc. The firm was founded seven years ago to provide educational services for the rapidly expanding primary and secondary school markets. Although Echo Inc. has done well, the firm's founder believes that an industry shakeout is imminent. To survive, Echo Inc. must grab market share now, and this will require a large infusion of new capital. Because he expects earnings to continue rising sharply and looks for the stock price to follow suit, Mr. Krone does not think it would be wise to issue new common stock at this time. On the other hand, interest rates are currently high by historical standards, the interest payments on a new debt issue would be prohibitive. Thus, he has chosen to finance the needed capital using bonds with warrants. Mr. Krone estimates that Echo Inc. could issue a bond-with-warrants package consisting of a 20-year bond and 27 warrants. Each warrant would have a strike price of $25 and 10 years until expiration. It is estimated that each warrant, when detached and traded separately, would have a value of $5. The coupon on a similar bond but without warrants would be 10%.

1- what coupon rate should be set on the bond with warrants if the total package is to sell for $1,000 ?

2-if Echo inc. issues 100,000 bond with warrant packages how much cash will Echo Inc receive when the warrants are exercised ?

3- how much shares of stock will be outstanding after the warrants are exercised ? ( Echo Inc. currently has 20 million shares outstanding )

Researchers plan to study the weight gain of cows during a 3-month period. They wish to test at alpha = 0.01 if the mean weight gain exceeds 15 kg. Further, it is important for the researchers to detect if the mean weight gain is as large as 27 kg. An earlier study indicated that the standard deviation of the weight gains was around 14 kg. Since weight gains are normally distributed a t-test is to be used.

(a) If the researchers used a sample size of 22 what would be the power of the test in detecting if the mean weight gain is as large a 27 kg? Use R, showing the command you used and the result.

(b) Use Table 21 to determine the sample size required in order to have a power of 0.99 to detect if the mean weight gain is as large a 27 kg.

mong the thirty largest U.S. cities, the mean one-way commute time to work is 25.8 minutes. The longest one-way travel time is in New York City, where the mean time is 38.8 minutes. Assume the distribution of travel times in New York City follows the normal probability distribution and the standard deviation is 7.7 minutes. Use Appendix B.3

. What percent of the New York City commutes are for less than 27 minutes? (Round your intermediate calculations and final answer to 2 decimal places.)

What percent are between 27 and 35 minutes? (Round your intermediate calculations and final answer to 2 decimal places.)

What percent are between 27 and 43 minutes? (Round your intermediate calculations and final answer to 2 decimal places.)