You are the audit manager at Deloitte and you are finalising the audits for 30 June 2021. The following
independent and material matters have come to your attention:
1. WorldCom.Social Ltd provides social housing to approximately 1500 tenants at below normal market
rents. WorldCom.Social is a reporting entity under the Corporations Act. During the year, there has been
a review of the basis for calculating the lives of the houses owned by the organisation. Previously, these
houses were assessed to have a useful life of 30 years, but this has now been changed to 50 years.
During your audit work, you reviewed the WorldCom.Social Ltd asset management policy which only
plans for maintaining and upgrading properties up to 30 years old. You also found that, during the year,
WorldCom.Social Ltd demolished a house that it built in 1989.
2. Enron Ltd is a holding company with a few wholly owned subsidiaries. One of these, Kingsemi Co.,
Ltd, is a self-sustaining foreign subsidiary with manufacturing and distribution facilities throughout South-
East Asia. The group accounts of Enron and its subsidiaries consist of the consolidated statements of
Enron and its subsidiaries and exclude those of Kingsemi Co., which are attached separately. The
consolidated statements include a note stating that the directors believe it is misleading to consolidate
Kingsemi Co. because its operations are very different from those of the rest of the group and are
carried out under significantly different conditions. The note includes details of intercompany balances
and transactions.
3. Newmont Goldcorp Pty Ltd, is a family run business, operating a small goldmine. The board is
represented by Mr. Cristiano Ronaldo and his brother, Mr. Hugo Ronaldo, who are also the predominant
shareholders. In the final audit meeting, Mr. Hugo has told you he suspects that the vein they are
presently mining will last 13 months at the least to 17 months at the most. He has also noted that after
they extract the gold, they will close the business, let the license expire and retire to Madeira. Mr. Hugo
then showed you a land-surveyor’s report confirming his statement regarding the amount of gold in the
vein. This information has not been disclosed in the financial report.
4. CARE Australia is a non-for-profit organisation and a non-reporting entity. In the last three years, you
have been performing their audits in accordance with its constitution. The financial reports are prepared
by another accounting firm on behalf of CARE Australia’s board of directors, because CARE Australia
does not have internal accounting expert to perform this function. During your review of the internal
control structure, you acknowledged that CARE Australia did not have adequate controls over the
collection of income to enable you to be satisfied that all income received was recorded. However, you
have been satisfied that the organisation has accurately accounted for all income recorded.
You are required to:
A) Identify the type of auditor’s report to be issued for each of the above situations.
B) Justify your answer by discussing the relevant audit issues you have considered in forming your
opinion.

How is co-expression induced?

Problem 4.3 part 2

On October 5, 2015, you purchase a $10,000 T-note that matures on August 15, 2027. (Settlement occurs two dayws after purchase, so you receive actual ownership of the bond on October 7, 2015). The coupon rate on the T-note is 4.375% and the current price quoted on the bond is 105.250%. The last coupon payment occurred on May 15, 2015 (145 days before settlement) and the next coupon payment will be paid on November 15, 2015 (39 days from settlement).

A) Calculate the annual yield to maturity (based on the clean price) for the bond purchased on October 7, 2013, and maturing on August 15, 2024 (or in 10.8603 years).

B) Explain in an essay of at least one full paragraph exactly why the bond in this problem is selling at a premium (ignore the accrued interest). That is, explain exactly why investors would be willing to pay more than face value for this bond, and in your answer address the issue of how newly issued bonds compete with this bond, which is being sold in the secondary market as a previously issued bond.      

On December 1, 2020, Progressive Corp. issued $5,000,000 (par value), 12%, 5-year
convertible bonds for $5,026,000 plus accrued interest. The bonds were dated April 1, 2020
with interest payable April 1 and October 1. If the bonds had NOT been convertible, they
would have sold for $5,006,000. The bond premium/discount is amortized each interest
period on a straight-line basis. Progressive does NOT value the equity component at zero.
Progressive’s fiscal year end is September 30.
On October 1, 2021, half of these bonds were converted into 35,000 no par common shares.
Accrued interest was paid in cash at the time of conversion.

Required
a. Prepare the entry to record the interest expense at April 1, 2021. Assume that interest
payable was credited when the bonds were issued (round to nearest dollar).
b. Prepare the entry to record the conversion on October 1, 2021. Use the book value
method. Assume that the entry to record amortization of the bond premium/discount
and interest payment has been made.

Brilliant Design Company makes custom chairs for individual customers. Brilliant Design Company is a job-order costing manufacturer that applies overhead on the basis of Direct Labor Cost. At the beginning of the year, to establish a predetermined overhead rate, Brilliant Design Company estimated total $700 in overhead costs and total $1,000 in direct labor cost.

On October 1, there was one job in process, Job 243, with a cost of $1,300.

Jobs 244, 245, and 246 were started during the month of October. Data on costs added during the month are as follows:

Job 245 was completed and the client was billed at cost plus 55%. All other jobs remained in process.

Q23. What is the manufacturing overhead applied to Job 243?

Q24. what is the total manufacturing overhead for job 245?

Q25. what is the Balance in work of process in October 31?

Q26. what is the price of Job 245?

Fitbit, Inc., reported the following information for the nine-month period ended October 1, 2016. Items are in thousands of dollars.

4. Prepare a statement of cash flows for the nine months ended October 1, 2016. (Cash outflows should be entered as negative amounts. Enter your answers in thousands.)

Blanton Plastics, a household plastic product manufacturer, borrowed $7 million cash on October 1, 2018, to provide working capital for year-end production. Blanton issued a four-month, 15% promissory note to L&T Bank under a prearranged short-term line of credit. Interest on the note was payable at maturity. Each firm’s fiscal period is the calendar year.

Required:
1. Prepare the journal entries to record (a) the issuance of the note by Blanton Plastics and (b) L&T Bank’s receivable on October 1, 2018.
2. Prepare the journal entries by both firms to record all subsequent events related to the note through January 31, 2019.
3. Suppose the face amount of the note was adjusted to include interest (a noninterest-bearing note) and 15% is the bank’s stated discount rate. (a) Prepare the journal entries to record the issuance of the noninterest-bearing note by Blanton Plastics on October 1, 2018, the adjusting entry at December 31, and payment of the note at maturity. (b) What would be the effective interest rate?
  

Blanton Plastics, a household plastic product manufacturer, borrowed $14 million cash on October 1, 2018, to provide working capital for year-end production. Blanton issued a four-month, 12% promissory note to L&T Bank under a prearranged short-term line of credit. Interest on the note was payable at maturity. Each firm’s fiscal period is the calendar year.
   
Required:
1. Prepare the journal entries to record (a) the issuance of the note by Blanton Plastics and (b) L&T Bank’s receivable on October 1, 2018.
2. Prepare the journal entries by both firms to record all subsequent events related to the note through January 31, 2019.
3. Suppose the face amount of the note was adjusted to include interest (a noninterest-bearing note) and 12% is the bank’s stated discount rate. (a) Prepare the journal entries to record the issuance of the noninterest-bearing note by Blanton Plastics on October 1, 2018, the adjusting entry at December 31, and payment of the note at maturity. (b) What would be the effective interest rate?

Harris Company borrowed $60,000 on a two-year, 8% note dated October 1, 2016.Interest is payable annually on October 1, 2017, and October 1, 2018, the maturity date of the note.The company prepares its financial statements on a calendar year basis.Prepare all journal entries relating to the note for 2016, 2017, and 2018.

On January 1, 2017, Roma Company leased a tractor. The lease agreement qualifies as a capital lease and calls for payments of $10,000 per year (payable each year on January 1, starting in 2018) for eight years. The annual interest rate on the lease is 10%. Roma Company uses a calendar-year reporting period.

Prepare the journal entry for January 1, 2017, to record the leasing of the tractor:

Prepare the journal entry for December 31, 2017, to recognize the interest expense for the year 2017.

Prepare the journal entry to record the first lease payment.

Prepare the journal entry for December 31, 2018, to recognize the interest expense for the year 2018.

Prepare the journal entry to record the January 1, 2019 lease payment.

Galaxy Lighting Company manufactures and sells lighting fixtures. Estimated sales for the next three months are:

Sales for August were $400,000 and December is estimated as $420,000. All sales are on account. Galaxy Lighting Company estimates that 80% of the accounts receivable are collected in the month of sale with the remaining 20% collected the following month. The units sell for $40 each.

Generally, 60% of purchases are due and payable in the month of purchase with the remainder due the following month. Purchase cost per unit for materials is $18. The company maintains an end-of-the-month inventory of 1,000 units plus 10% of next month’s unit sales. August’s ending inventory is estimated at 1,875 units and November’s ending inventory is estimated as 2,500 units. The accounts payable balance on August 31 is expected to be $13,500 and should be paid in September.

A) Prepare a sales budget in dollars and units for September, October, and November.

B) Prepare a schedule of cash receipts from customers.

C) Prepare a purchases budget for September, October and November.

D) Prepare a schedule of cash payments for purchases.