B. Haziq a senior auditor in charge is called upon to audit client, Momo Motors, which manufactures and supplies automobile parts all over the country. During the financial year 30 June 2019, the company had expanded its operations by opening new sites in a few strategic locations across the country. Mid-January the management appointed an experienced chartered certified accountant to set up an internal audit department. However, by April 2019, the company reported a negative cash flow for the year with sales going down in one of its sites due to the fierce competition in the automobile industry and with the slow economic development in the country. An extensive range of spare parts is held, for which perpetual inventory records are kept, but no continuous checking is conducted by the storekeeper. Meanwhile car servicing and body repairs are carried out in workshops by employed and sub-contracted service engineers where most jobs are stated and finished in a day, but the invoice are immediately prepared upon completion. In last financial year end the company had also faced a change in the management with the resignation of the company’s CEO Mr. Hans Matsu.

Required:
i. Using the information provided, identify, and explain the audit risk to be addressed when planning the final audit of Momo Motors for the year ended 30 June 2019

Assignment: You are the audit senior in charge of field work for the 2017 audit of Curl Up and Dye, Inc., a chain of women’s beauty parlors. Substantive tests reveal that CU&D’s Accounts Receivable account as of December 31, 2017 includes $184,900 due from officers. Minutes indicate that the Board of Directors approved those loans. A member of the audit committee gives you copies of the “demand notes” which appear to be properly signed and dated by the officers who borrowed from the company. You ask the CEO, an officer who owes approximately half of $184,900 due to the company, whether the company will require officers to repay these loans. He replies that officers might someday repay the loans, but it is possible that the Board of Directors will eventually forgive the loans as part of officers’ annual bonuses. $184,900 is a material amount for this audit.

1) What other questions, if any, would you ask for information, if any, would you like to obtain for the existence and valuation assertions?

2) What disclosure is necessary in the company’s financial statements, including notes to the financial statements? Search FASB Acccounting Standards Codification for required disclosure (See below for search method). Cite the Code section(s) that you think is (are) relevant.

3) What journal entry(ies), if any, would you propose?

Making Human Resource Decisions

Scenario:

You are the Director of Human Resources for your company. The CEO has just informed you that the financial state of the company is dire, and as a result, he is approaching the managers of each department and asking them to reduce personnel costs. The company makes its profits primarily on services such as business consulting, cloud-based storage for large companies, and other small miscellaneous business products. The industry has become highly competitive and sales are down. There is not enough revenue at this point to pay all of the salespeople.

You are charged with devising a plan to determine how personnel costs will be reduced. After much deliberation, you decide on three options. Because this is a management dilemma, none of these options are optimal. Further, cost/ benefit analysis has a role in the decision making process, but as you are dealing with people, this type of analysis is complicated and subjective.

Options:

  1.  Lay off employees and use them only as needed on a project or change employment structure (i.e. move some employees to independent contractors)

  2.  Reduce salaries across the board

  3.  Reduce hours and/or benefits for lower-level staff

Instructions:

Choose one of the above options and defend this decision. Use concepts from the chapter to defend your decision.

Q1. You are a senior manager at an automobile company. In an effort to offer a full menu of auto and gas products, your firm is considering an oil exploration project. The CEO has selected the manager of the company’s truck division to oversee the project, and has asked you to evaluate whether the company should proceed with the exploration or not.

To help you evaluate the project, your associate gives you the following information:

1. Should you also ask the associate for similar information on car manufacturers? On truck manufacturers? On automobile companies? Why or why not?
2. Based on the information you have available, calculate an appropriate discount rate assuming for the project that risk free rate is 4%, the expected market return is 8%, and the corporate tax rate is 20%. Assume that the oil exploration project is 84% equity financed.(please show me the detail calculation and steps. )(50 points)

assume cost of debt (return on debt) = risk free rate.

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]

Laker Company reported the following January purchases and sales data for its only product.

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 350 units, where 330 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.

Exercise 5-3 Perpetual: Inventory costing methods LO P1

On January 1, 2016, the following information was drawn from the accounting records of Carter Company: cash of $350; land of $2,250; notes payable of $650; and common stock of $1,300.

a. As of January 1, 2016, what percent of the assets were acquired from retained earnings? (Round your answer to 1 decimal place.)
b. Create an accounting equation using percentages instead of dollar amounts on the right side of the equation. (Round your percentage answers to 1 decimal place.)

c. During 2016, Carter Company earned cash revenue of $620, paid cash expenses of $360, and paid a cash dividend of $56. (Hint: It is helpful to record these events under an accounting equation before preparing the statements.) (Enter any decreases to account balances with a minus sign. Select "NA" if there is no effect on the "Account Titles for Retained Earnings".)

d. Prepare an income statement dated December 31, 2016.

Tanner-UNF Corporation acquired as a long-term investment $320 million of 4.0% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Tanner-UNF paid $290.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $300.0 million.

Question:
Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2022, for $280.0 million. Prepare the journal entry to record the sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

[The following information applies to the questions displayed below.] Laker Company reported the following January purchases and sales data for its only product. Date Activities Units Acquired at Cost Units sold at Retail Jan. 1 Beginning inventory 145 units @ $ 7.00 = $ 1,015 Jan. 10 Sales 105 units @ $ 16.00 Jan. 20 Purchase 70 units @ $ 6.00 = 420 Jan. 25 Sales 85 units @ $ 16.00 Jan. 30 Purchase 190 units @ $ 5.50 = 1,045 Totals 405 units $ 2,480 190 units Required: The Company uses a periodic inventory system. For specific identification, ending inventory consists of 215 units, where 190 are from the January 30 purchase, 5 are from the January 20 purchase, and 20 are from beginning inventory. Determine the cost assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO..

Required information

[The following information applies to the questions displayed below.]
  
Laker Company reported the following January purchases and sales data for its only product.
  

For specific identification, ending inventory consists of 285 units, where 270 are from the January 30 purchase, 5 are from the January 20 purchase, and 10 are from beginning inventory.

Required:

1. Prepare comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,700, and that the applicable income tax rate is 40%.

1. The following information relates to B&B, Inc.’s equipment lease with an inception date of

       January 1:

• Fair value of equipment at lease inception, $114,000
• Lease term, 4 years
• Economic life of property, 5 years
• Implicit interest rate, 7%
• Annual lease payment due on December 31, $32,000
• Present value of the minimum lease payments, $100,883

The equipment reverts back to the lessor at the end of the lease term.

How much is interest expense on the lease for the first year?

1. $5,116
2. $7,062
3. $6,653
4. $4,920

18. B&B Company acquired a truck that cost $110,000. The company estimated it could sell the truck for $15,000 at the end of its estimated useful life of 5 years.

How much is the gain or loss on the sale if straight-line depreciation is used and the asset is sold for $56,200 on December 31, Year 3?

1. $15,200 loss
2. $16,800 loss
3. $17,000 gain
4. $10,200 gain