During 2020, Sheridan Company started a construction job with a contract price of $1,376,000. The job was completed in 2022. The following information is available. The contract is non-cancellable.

Calculate the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

During 2020, Skysong Company started a construction job with a contract price of $1,590,000. The job was completed in 2022. The following information is available.

Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

eTextbook and Media

List of Accounts

Prepare all necessary journal entries for 2021

Silvia is a teacher employed by SCHE Education at their Melbourne campus. She lives in Pakenham with her family on the outskirts Melbourne about 60 kilometres from the campus. Silvia only attends the campus on Thursdays and Fridays when she takes her classes and the remaining three days a week she works from home. She prefers to work from home because she dislikes the long commute and because she feels that she can research more effectively from home. She only sees students in her office at the campus on Thursdays and Fridays. All student contact on the other days is via email.

Silvia’s home office and work library occupies 20% of the total space in her home. Her outgoings in relation to her home for the current financial year are as follows:

• Rent – $31,200
• Electricity and heating costs – $1,600
• Cleaning lady – $2,500
• Home telephone (10% of which is for university use) – $2,000
• Mobile telephone bill (50% of which is for university use) – $1,250

Required:

Calculate how much of the above outgoings are a deductible expense for Silvia.

Silvia is a teacher employed by SCHE Education at their Melbourne campus. She lives in Pakenham with her family on the outskirts Melbourne about 60 kilometres from the campus. Silvia only attends the campus on Thursdays and Fridays when she takes her classes and the remaining three days a week she works from home. She prefers to work from home because she dislikes the long commute and because she feels that she can research more effectively from home. She only sees students in her office at the campus on Thursdays and Fridays. All student contact on the other days is via email.

Silvia’s home office and work library occupies 20% of the total space in her home. Her outgoings in relation to her home for the current financial year are as follows:

• Rent – $31,200
• Electricity and heating costs – $1,600
• Cleaning lady – $2,500
• Home telephone (10% of which is for university use) – $2,000
• Mobile telephone bill (50% of which is for university use) – $1,250

Required:

Calculate how much of the above outgoings are a deductible expense for Silvia.

Silvia is a teacher employed by SCHE Education at their Melbourne campus. She lives in Pakenham with her family on the outskirts Melbourne about 60 kilometres from the campus. Silvia only attends the campus on Thursdays and Fridays when she takes her classes and the remaining three days a week she works from home. She prefers to work from home because she dislikes the long commute and because she feels that she can research more effectively from home. She only sees students in her office at the campus on Thursdays and Fridays. All student contact on the other days is via email.

Silvia’s home office and work library occupies 20% of the total space in her home. Her outgoings in relation to her home for the current financial year are as follows:

• Rent – $31,200
• Electricity and heating costs – $1,600
• Cleaning lady – $2,500
• Home telephone (10% of which is for university use) – $2,000
• Mobile telephone bill (50% of which is for university use) – $1,250

Required:

Calculate how much of the above outgoings are a deductible expense for Silvia.

You are an Audit Senior currently planning the 30 June 20X8 audit of Steel Limited, an Australian-owned company that produces and exports steel to India. At a recent planning meeting with Steel Limited’s senior staff, you obtained the following overview of this year’s operations:

Tight checks by Australian custom officials to halt the smuggling of scrap steel have delayed several shipments of steel. These delays have angered Indian customers who are threatening to deduct 20% from the amounts owing as compensation for lost production time.

One of Steel Limited’s customers, Construction Limited, is claiming that the latest batch of steel it received was found to have very high levels of cheap additives such as boron. Such additives used to reinforce concrete can affect the metal’s strength when it is welded. Boron can make welds more likely to crack, weakening structures. Construction Limited is refusing to pay its account, which is allegedly five months overdue. Steel Limited has claimed to have launched an investigation into the allegations, but as yet not been able to substantiate them.

70% of the suppliers from which Steel Limited sources it’s iron ore stock are owned by US firms, which demand payment in $US prior to the iron ore being supplied. In January, Steel Limited upgraded its accounts payable system to a fully integrated package that automatically updates the general ledger when creditor entries are made. Some problems have been experienced with the creditors ledger, which is split into $US and $AUD amounts. In some cases, $US amounts have been recorded as $AUD, resulting in inaccurate creditor balances. Month-end rollovers have also proved problematic, with creditor balances being incorrectly re-set to zero at the first of every month. This has required each creditor’s history to be re-entered manually each month, a time-consuming process that is taking accounting staff away from their normal duties.

During the period, the Australian dollar has remained steady against the Indian Rupee, although it fell by about 3% against the US dollar. Debtors are invoiced in $US at the time of shipment, and payment is received in $US one month after the shipment is delivered. It takes around six weeks for the charter vessels to travel from Steel Limited’s shipyard at Ausfold Bay to India. A recent downturn in the Indian economy is affecting forward orders, which have fallen by 15%.

Required: Prepare a memorandum to the audit manager, outlining your risk assessment relating to Steel Limited. When making your risk assessment:

(a) Identify three (3) key account balances from the information provided that are subjected to an increase in audit risk. Briefly explain what factors increase the audit risk associated with the three (3) accounts identified. In your explanation, please mention the key assertion(s) at risk of material misstatement and the components of the audit risk model affected for each account identified.

(b) Identify how the audit plan will be affected and recommend specific audit procedures to address the risks associated with each account identified.

Martin MFG company uses balance sheet approach to calculate allowance for doubtful accounts and bad debt expense. Current policy is to reserve 20% gross accounts receivable as an allowance for uncollectible accounts.

Martin MFG company issued 10% stated rate bonds in 2020. Effective market rate of interest for these bonds is 8%.

Select all statements that are true regarding the information above. Ignore taxes and any cost of goods sold.

Reducing the percentage of gross accounts receivable reserved in the allowance for uncollectible accounts will increase net income

Increasing the percentage of gross accounts receivable reserved in the allowance for uncollectible accounts will increase net income

Reducing the amount of accounts receivable written off by $1,000 will increase net income

Increasing the amount of accounts receivable written off by $1,000 will increase net income

If given option to deliver inventory in either 2020 or 2021 waiting to deliver inventory to customers until 2021 will increase revenue in 2020

If given option to deliver inventory in either 2020 or 2021 delivering inventory to customers in 2020 will increase revenue in 2020

Using income statement approach to calculate bad debt expense will always result in lower bad debt expense versus the balance sheet approach

Using direct write off method to calculate bad debt expense will always result in lower bad debt expense versus the balance sheet approach

Increasing the stated rate of the bonds would have increased the price of the bonds at issuance

Increasing the market rate used to price the bonds would have increased the price of bonds at issuance

Present value of bonds issued is higher than face value

Present value of bonds issued is lower than face value

On January 1, 2020, Grouper Company sold 12% bonds having a maturity value of $550,000 for $591,698, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2020, and mature January 1, 2025, with interest payable December 31 of each year. Grouper Company allocates interest and unamortized discount or premium on the effective-interest basis.

Correct answer iconYour answer is correct.

Prepare the journal entry at the date of the bond issuance. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

eTextbook and Media

List of Accounts

Partially correct answer iconYour answer is partially correct.

Prepare a schedule of interest expense and bond amortization for 2020–2022. (Round answer to 0 decimal places, e.g. 38,548.)

eTextbook and Media

List of Accounts

Partially correct answer iconYour answer is partially correct.

Prepare the journal entry to record the interest payment and the amortization for 2020. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Scenario:

UAENATIVE is a SME company based in Ajman, UAE, with a shop front retailing a range of native products (including a range of pearl jewelry, traditional wooden furniture, art, pottery, cosmetic and perfumery). They are a small family-owned business with capitalization of AED20M, annual sales of AED3M, increasing at three percent per annum, and net profits of eight percent of total sales. The younger members of the management team are university educated, with the others industry experienced. However, in an ever- changing industry, their future business is uncertain.

Their main business is the wholesale sale of UAE native cultural products to International commercial retailers; however, they do supply to UAE domestic and commercial retailers (currently 50 percent of sales and 50 percent of profits).

While UAENATIVE manufacture majority of its own products, but their main suppliers for the raw material are based in Al-Ain and RAK. Supplier relations are all paper-based transactions, while long-term contracts are managed using email and facsimile transmission of orders.

The UAENATIVE management team is keen to expand the retail sales, which are potentially very profitable for the company and to improve relations with suppliers. To do this one member of the management team (who recently graduated from the Ajman University) has suggested the company create new supply chain management system.

You have been called in as an IT consultant. UAENATIVE wants to know how IT could be used to develop a supplier management system to improve the company’s operations. The company is keen to leave as much open as possible – you have been told that it is a ‘clean sheet’ strategy but cannot consume more than half the profits of next year’s business. The Chief Executive, Mr. A2Z, needs: Part1) System Planning, Part 2) System Analysis.

PART 1) : Analyzing the Business Case and Managing System Projects – 10 marks

Hints: Perform SWOT analysis, assess request feasibility from operational, economic, technical, and schedule perspectives, create WBS, and perform critical path analysis

PART 2): Requirement Engineering and Data and Process Modeling – 10 marks

Hint: Documentation of techniques that will be used for gathering system requirements, data flow diagrams and object modeling using UML

1. USCom, a US computer manufacturer, will be delivering a large computer system to a German firm in six months. USCom expects to receive a payment of €1.5 million at that time. Currently the spot rate is US $1.45/€, and the six-month forward rate is US $1.47/€. Suppose that the firm also has the following information from the options market:

• Six-month call option premium is US $0.0195 per euro and the exercise price is $1.42,
• Six-month call option premium is US $0.0005 per euro and the exercise price is $1.48,
• Six-month put option premium is US $0.0012 per euro and the exercise price is $1.44,
• Six-month put option premium is US $0.0032 per euro and the exercise price is $1.46.

1. Describe how USCom can hedge the currency risk with forwards and options. What are the differences between forwards and options as hedging instruments?
2. If in six months the spot rate is US $1.43/€, what are the profits and losses on the hedging strategies? What if the spot rate is US $1.48/€? Based on your calculations, which strategy is most preferable when you make the hedging decision and why?
3. If euro futures are also available, how would you hedge the currency risk with futures? What are the differences between futures and forwards?