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 (2.5 marks). (50 -80 words)

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 (2.5 marks). (50 -80 words)

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 (50 -80 words)

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.

You are an associate at ABC LLP, a forensic accounting firm. Your company is retained by the Law Firm that is representing a client. The client, the former CFO of the Public Company, is being investigated by the SEC and FBI for running a large accounting fraud scheme and funneling money to his own account after allegedly falsely invoicing sales during 2013 and 2014. The Auditing Firm, which was recently terminated, audited the Public Company and issued opinion letters in connection with the Public Company’s 2013 and 2014 annual reports.

You are just getting up to speed on the case, but the ABC Partner asked for you to help analyze the issue in connection with the Law Firm.

Assume that you received a large data file reflecting invoices and purchase orders identified by date. Assume that the CFO provided to you, through his/her attorney, a large data file concerning the CFO’s own monetary transactions, which are listed by date.

1. Generate a step-by-step guide concerning how you would go about analyzing this information. (In other words, explain how you would transition from raw data to an analysis through forensic accounting techniques).  10 points

2. More specifically, assume that you would analyze this information using Excel: identify the formulas and methods you would use to analyze the data. 10 points

IAS 16. Fixed Assets. We are a graphic arts company, and at the beginning of 2016, we acquired a new printer. The price of this printer was 25,000 euros. The additional expenses of the purchase were as follows:

• Installation and assembly: 3.000 euros.
• Transportation and delivery: 1.150 euros.

All operations have a 21% VAT (not included), and the payment of the amounts is made by bank check.

During January, the assembly and installation of the new printer takes place, which is in perfect working condition from February the 1st.

The useful life expectancy of the printer is estimated at 10 years, and its amortisation will be carried out following the linear method. Additionally, at the end of its useful life, the company will have to face the costs of dismantling and rehabilitation of the place. Estimating said costs in 5,000 euros. Besides, said machinery requires specialised weekly maintenance, amounting to 250 euros per month.

Calculate:

• The initial cost of the acquisition.
• The amortization fees.
• The costs derived from daily maintenance.

IAS 36. Impairment of assets. We are a photo studio, and due to the increase in work and staff, we have had to acquire three new cameras and accessories. The acquisition occurred in January 2018. The prices of the cameras are as follows:

• Camera 1: 1.750 euros
• Camera 2: 3.500 euros
• Camera 3: 1.950 euros
• Accessories: 4.550 euros

Calculate:

• The impairment loss of the asset at the end of 2020, taking into account that the recoverable amount of the acquisitions is:
  • Camera 1: 575 euros
  • Camera 2: 1.500 euros
  • Camera 3: 750 euros
  • Accessories: 2.200 euros

IAS 38. Intangible Assets. On March 1, 2016, we obtained a patent for 7,500 euros.

At the close of the fiscal year, on December 31, 2016, the fair value of the patent was 9,000 euros.

As of December 31, 2017, the fair value of the patent stands at 8,000 euros.

The criterion we use for valuation after the initial recognition of the asset is the revaluation model.

Formulate:

Make the accounting entries corresponding to the acquisition of the asset and at each accounting close.

In 2019, Lila Done Ltd explored two different areas of interest and spent $340,000 for Area X and $260,000 for Area Y. The results of exploration and evaluation (E&E) activities suggested that Areas X and Y may contain mineral reserves, so the company acquired leases over these two areas. The leases cost $300,000 for each area.

In 2020, Lila Done Ltd commenced a drilling program to evaluate Areas X and Y. Two exploratory wells were drilled in Area X and one in Area Y at a cost of $240 ,000 each. The two wells drilled in Area X indicated that the company had discovered economically recoverable reserves. Management was uncertain about the likelihood of finding economically recoverable reserves for the well in Area Y. Therefore, Lila Done Ltd decided to continue E&E activities in Area Y. After incurring costs of $120 ,000 to confirm the technical feasibility and commercial viability of extracting the mineral resources, development of Area X commenced.

In 2021, to evaluate the area of interest further, three more wells were drilled in Area X. Of these, two were dry. Each well costs $250 ,000. The successful wells in Area X were developed for a total cost of $600,000. After further dry wells costing $150 ,000 were drilled in Area Y, management concluded that Area Y did not contain any commercially viable quantities of mineral resources, so it was abandoned. Assume that the company's financial year starts on 1 January and closes on 31 December.

REQUIRED

Determine what amounts would be recognised as an expense (in the profit or loss) versus capitalised as an asset, in relation to each area of interest for each financial year assuming Lila DoneLtd capitalises successful E&E costs on an area of interest basis (i.e., expenses dry holes).

In recent years, Concord Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. Machine Acquired Cost Salvage Value Useful Life (in years) Depreciation Method 1 Jan. 1, 2020 $ 96,600 $ 14,000 8 Straight-line 2 July 1, 2021 88,500 12,000 5 Declining-balance 3 Nov. 1, 2021 92,500 8,500 6 Units-of-activity For the declining-balance method, Concord Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 28,000. Actual hours of use in the first 3 years were 2021, 800; 2022, 4,300; and 2023, 6,300. Compute the amount of accumulated depreciation on each machine at December 31, 2023. For Bus #3, calculate depreciable cost per mile under units-of-activity method. Depreciable cost $enter depreciable cost per mile in dollars 3 per mile Accumulated depreciation MACHINE 1 $enter the amount of accumulated depreciation in dollars MACHINE 2 $enter the amount of accumulated depreciation in dollars MACHINE 3 $enter the amount of accumulated depreciation in dollars (Round answer to 2 decimal places, e.g. 0.50.)

On July 1, 2022, Pina Colada Corp. invested $740,160 in a mine estimated to have 771,000 tons of ore of uniform grade. During the last 6 months of 2022, 104,000 tons of ore were mined. (a1) Calculate depletion cost per unit. (Round answer to 2 decimal places, e.g. 0.50.) Depletion cost per unit $enter depletion cost per unit amount in dollar (Round answer to 2 decimal places, e.g. 0.50.)

The Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2021. At December 31, 2020, inventories were $111,000 (average cost basis) and were $115,000 a year earlier. Cecil-Booker’s accountants determined that the inventories would have totaled $137,000 at December 31, 2020, and $142,000 at December 31, 2019, if determined on a FIFO basis. A tax rate of 25% is in effect for all years.

One hundred thousand common shares were outstanding each year. Income from continuing operations was $310,000 in 2020 and $435,000 in 2021. There were no discontinued operations either year.

Required:
1. Prepare the journal entry at January 1, 2021, to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account.)
2. Prepare the 2021–2020 comparative income statements beginning with income from continuing operations (adjusted for any revisions). Include per share amounts.

Can you tell me where I went wrong

Exercise 22-14 (b) (indirect method)

Indigo Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:

Additional information:

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Emanuel Products produces coat racks in Toronto, Canada. The accountant has presented you the following budgeted data for the third quarter of 2020. Sales are forecasted to be 70,000 units at a price per unit of $35. The budgeted beginning and ending finished goods inventories are 6,000 and 12,000 units respectively. It is estimated that each rack requires five kilograms of metal at a budgeted price of $3 per kg. The beginning raw materials inventory is estimated as 3,500 kilograms. George Products wants to keep ending raw materials inventory of 5,500 due to fluctuations in demand. Each rack requires 1.4 hours of direct labour and the standard hourly pay rate is $18.

Required: (please show all steps of your computation in proper format)

1. Prepare a sales budget for the third quarter of 2020.

2. Prepare a production budget for the third quarter of 2020. (1.5 marks)

3. Prepare a direct materials purchases budget for the third quarter of 2020. (1.5 marks)

4. Prepare a direct labour budget for the third quarter of 2020. (1 mark)

5. Mr Peter started a business by acquiring a medium sized manufacturing firm. He hired you to work in the accounting department. You are in charge of providing management accounting reports to aid him in the planning and control of operations and make sure that everything the company does is consistent to the plan. He advised you not to implement a standard costing system as he does not see any purpose in doing that. What is your reaction to his advice? If you don’t agree on his idea, how do you convince him to accept the importance of standard costing? (1 mark)

(Total 6 Marks)

Bridgeport Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:

Additional information:

Prepare a statement of cash flows FOR YEAR END DECEMBER 31,2020 using the INDIRECT method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Martinez Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:

Additional information:

Prepare a statement of cash flows using the DIRECT method. (Show amounts that decrease cash flow with either a - sign e.g. -10,000 or in parenthesis e.g. (10,000).)