1. On June 1, King Company paid $7,200 for one year of advertising, in advance. King Company recorded the transaction by debiting Prepaid Advertising and crediting Cash.

Required: Journalize the adjusting entry on December 31.

Note: Assume that the advertising is used evenly throughout the year

2. By the end of December, Brown Company has completed work, earning $2,500. Brown company has neither billed the clients nor recorded any of the revenue.

Required:
Journalize the adjusting entry on December 31.

3. On January 2, 2020, Collins Company purchased land that cost $500,000, a building on the land that cost $910,000, and equipment that cost $73,000. The building has an estimated useful life of 28 years. The equipment has an estimated useful life of 10 years.

Required:

Prepare the property, plant, and equipment section of the balance sheet as of December 31, 2020.

Note: Use straight-line depreciation with no salvage value.

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:

During August, 9,405 hours of direct labor time were needed to make 19,500 units of the Jogging Mate. The direct labor cost totaled $53,609 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,500 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,500 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.50 per direct labor-hour. During August, the company incurred $45,144 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

(For requirements 3 through 5, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows: Standard Hours Standard Rate per Hour Standard Cost 27 minutes $5.80 $2.61 During August, 9,475 hours of direct labor time were needed to make 19,700 units of the Jogging Mate. The direct labor cost totaled $54,008 for the month.

Required: 1. What is the standard labor-hours allowed (SH) to makes 19,700 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,700 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.70 per direct labor-hour. During August, the company incurred $53,060 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

(For requirements 3 through 5, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)

Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:

During August, 9,550 hours of direct labor time were needed to make 19,800 units of the Jogging Mate. The direct labor cost totaled $53,480 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,800 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,800 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.50 per direct labor-hour. During August, the company incurred $45,840 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

(For requirements 3 through 5, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)

5. You are evaluating a firm’s shares which are currently sold for $22 for investment. You are using 10% of the margin of safety that is applied to the value per share. Use the following information. Last year the firm posted sales of $500 million. You expect sales to grow at 10 percent for 3 years and 8 percent for another two years before the firm matures with a sales growth rate of about 4%. Assume that the company currently has 25% operating margin which will increase to 27% in year 3 and after. Corporate tax rate and will remain at the current rate of 25%. Interest is paid at after-tax cost of debt rate of 5%. The company has $250 million debt which is a quarter of assets. Use CAPM to calculate the company’s cost of equity (Risk free rate is 2%, market risk premium is 8% and the company’s equity beta is 1.20). Capital expenditures will be 10% of sales and depreciation will be 1% of sales every year. Company also invests 0.5% of sales in expanding net working capital every year. The number of shares outstanding is 30 million. Would you invest in this stock? Solve the problem in Excel and copy-paste your tables to your word document – make sure they are organized, properly labeled and readable. (25 points)

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:

During August, 9,460 hours of direct labor time were needed to make 19,400 units of the Jogging Mate. The direct labor cost totaled $59,598 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,400 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,400 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.50 per direct labor-hour. During August, the company incurred $45,408 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

(For requirements 3 through 5, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:

During August, 9,505 hours of direct labor time were needed to make 19,700 units of the Jogging Mate. The direct labor cost totaled $53,228 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,700 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,700 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.50 per direct labor-hour. During August, the company incurred $45,624 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

(For requirements 3 through 5, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows: Standard Hours Standard Rate per Hour Standard Cost 27 minutes $5.60 $2.52 During August, 9,390 hours of direct labor time were needed to make 19,200 units of the Jogging Mate. The direct labor cost totaled $51,645 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 19,200 Jogging Mates? 2. What is the standard labor cost allowed (SH × SR) to make 19,200 Jogging Mates? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor efficiency variance? 5. The budgeted variable manufacturing overhead rate is $4.10 per direct labor-hour. During August, the company incurred $46,950 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

Heraklion Co is a manufacturer of footballs and is a new audit client for your firm. You are an audit supervisor of Spinalonga & Co. and are currently preparing for the forthcoming interim and final audit for the year ending 31 October 2016. You are required to document and assess the sales system, recommend control improvements to deal with a specific fraud issue as well as undertake substantive testing of revenue.

Sales ordering, goods dispatched and invoicing

Heraklion Co sells footballs to a range of large and small sports equipment retailers in several countries. Sales are ma de through a network of sales staff employed by Heraklion Co, but new customer leads are generated through a third party company. Sales staff are responsible for assessing new customers' creditworthiness and proposing a credit limit which is then authorized by the sales director. The sales staff have monthly sales targets and are able to use their discretion in granting sales discounts up to a maximum of 10%. They then record any discount granted in the customer master data file.

The sales staff visit customer sites personally and orders are completed using a two-part pre-printed order form. One copy is left with the customer and the other copy is retained by the sales person. The sales order number is based on the sales person's own identification (ID) number.

The company markets itself on being able to dispatch all orders within three working days. Once the order is taken, the sales person emails the finance department and warehouse dispatch team with the customer ID and the sales order details and from this a pick list is generated. Sequentially numbered goods dispatched notes are completed and filed in the warehouse.

Sequentially numbered invoices are generated using the pick lists for quantities and the customer master data file for prices. Standard credit terms for customers are 30 days and on a monthly basis sales invoices which are over 90 days outstanding are notified to the relevant sales person to chase payment directly with the customer.

Required:

(a) Describe TWO methods for documenting the sales system, and for each explain ONE advantage and ONE disadvantage of using this method.      

(b) Identify and explain SEVEN deficiencies in the sales system of Heraklion Co and provide a recommendation to address each of these deficiencies.

Note: Prepare your answer using two columns headed Control deficiency and Control recommendation respectively.                                                                                                                                

(c)     Describe substantive procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to Heraklion Co's revenue.      

In the fall 0f 2008 Countrywide Morgage Corporation announced that the private information for thousands of their customers, including social security numbers and loan numbers, had been compromised. Countrywide offered these customers a free 2-year subscription to a credit protection service. Should this action shield Countrywide from customer lawsuits? Could Countrywide do more? Should they? Given that it was a Countrywide employee who sold the data, does this change Countrywide's responsibilities toward the affected customers? Explain why or why not.

Answer in 3 paragraphs.