Before the audit report was signed, the audit team encountered the following situation. Treat each situation independently and assume the remaining financial statements are fine.

1) A property owned by Cook’s Furniture Ltd was sold to Lidia Preston, the wife of Howard Cook in June 2020. The property has a market value of four million and was sold at 3.2 million. Management did not disclose this in the financial statement because they believed this was a private matter. The disposal of this asset has been appropriately accounted for on the financial statements (e.g. the asset was removed from PPE and the loss of disposal was correctly recognised as an expense).

2) The subsequent selling price of the ready-made furniture range suggests the inventory valuation as at 30 June 2020 should be written down by $48,000 but management only wrote $38,000 off as per the financial statements because they were confident that they can increase the selling price again in 2021 after people settling back to normality.

3) Carl Cook decided to retire in 2021 due to health reasons, Carl is willing to sell his shareholding to the remaining shareholders. However, the BoD decided to explore the potential of selling the business. By the time to sign the 2020 financial statements, the company has not commenced a negotiation with any potential buyer. The BoD said to the auditor that they may not sell the business if they cannot get a good deal. Carl’s retirement decision is disclosed on the financial statements, but not the intention to sell the business.

REQUIRED: For each of the above situation:

a) Discuss the audit procedure that the auditor needs to perform in relation to each situation.

b) Explain which audit opinion is appropriate for each situation.

Question 4 Amy Dyken, controller at Marigold Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Marigold’s financial statements. Below is selected financial information for the fiscal year ended June 30, 2020.

Marigold Pharmaceutical Industries Selected Balance Sheet Information June 30, 2020

Long-term debt Notes payable, 10% $1,020,000

8% convertible bonds payable 5,080,000

10% bonds payable 6,110,000

Total long-term debt $12,210,000

Shareholders’ equity Preferred stock, 6% cumulative, $50 par value, 98,000 shares authorized, 24,500 shares issued and outstanding $1,225,000

Common stock, $1 par, 10,200,000 shares authorized, 1,020,000 shares issued and outstanding 1,020,000

Additional paid-in capital 3,990,000

Retained earnings 5,900,000

Total shareholders’ equity $12,135,000

The following transactions have also occurred at Marigold

. 1. Options were granted on July 1, 2019, to purchase 200,000 shares at $15 per share. Although no options were exercised during fiscal year 2020, the average price per common share during fiscal year 2020 was $20 per share.

2. Each bond was issued at face value. The 8% convertible bonds will convert into common stock at 50 shares per $1,000 bond. The bonds are exercisable after 5 years and were issued in fiscal year 2019.

3. The preferred stock was issued in 2019.

4. There are no preferred dividends in arrears; however, preferred dividends were not declared in fiscal year 2020.

5. The 1,020,000 shares of common stock were outstanding for the entire 2020 fiscal year.

6. Net income for fiscal year 2020 was $1,530,000, and the average income tax rate is 20%.

For the fiscal year ended June 30, 2020, calculate the following for Marigold Pharmaceutical Industries. (Round answers to 2 decimal places, e.g. $2.45.)

(a) Basic earnings per share.

(b) Diluted earnings per share.

Amy Dyken, controller at Marigold Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Marigold’s financial statements. Below is selected financial information for the fiscal year ended June 30, 2020.

The following transactions have also occurred at Marigold.

For the fiscal year ended June 30, 2020, calculate the following for Marigold Pharmaceutical Industries. (Round answers to 2 decimal places, e.g. $2.45.)

(a) Basic earnings per share.

(b) Diluted earnings per share.

Amy Dyken, controller at Waterway Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Waterway’s financial statements. Below is selected financial information for the fiscal year ended June 30, 2020.

Waterway Pharmaceutical Industries
Selected Balance Sheet Information
June 30, 2020
Long-term debt      
Notes payable, 10% $990,000
8% convertible bonds payable       5,030,000
10% bonds payable 5,880,000
Total long-term debt $11,900,000
       
Shareholders’ equity      
Preferred stock, 5% cumulative, $50 par value, 107,000 shares authorized, 26,750 shares issued and outstanding $1,337,500
Common stock, $1 par, 9,800,000 shares authorized, 980,000 shares issued and outstanding 980,000
Additional paid-in capital 3,940,000
Retained earnings 6,110,000
Total shareholders’ equity $12,367,500

The following transactions have also occurred at Waterway.

1.       Options were granted on July 1, 2019, to purchase 190,000 shares at $15 per share. Although no options were exercised during fiscal year 2020, the average price per common share during fiscal year 2020 was $20 per share.
2.       Each bond was issued at face value. The 8% convertible bonds will convert into common stock at 50 shares per $1,000 bond. The bonds are exercisable after 5 years and were issued in fiscal year 2019.
3.       The preferred stock was issued in 2019.
4.       There are no preferred dividends in arrears; however, preferred dividends were not declared in fiscal year 2020.
5.       The 980,000 shares of common stock were outstanding for the entire 2020 fiscal year.
6.       Net income for fiscal year 2020 was $1,490,000, and the average income tax rate is 20%.

For the fiscal year ended June 30, 2020, calculate the following for Waterway Pharmaceutical Industries. (Round answers to 2 decimal places, e.g. $2.45.)

(a) Basic earnings per share.

Basic earnings per share      
$ (?)

(b) Diluted earnings per share.

Diluted earnings per share      
$ (?)

Stellar Company in its first year of operations provides the following information related to one of its available-for-sale debt securities at December 31, 2020.

What is the amount of the credit loss that Stellar should report on this available-for-sale security at December 31, 2020?

Prepare the journal entry to record the credit loss, if any (and any other adjustment needed), at December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Assume that the fair value of the available-for-sale security is $53,200 at December 31, 2020, instead of $40,200. What is the amount of the credit loss that Stellar should report at December 31, 2020?

Assume the same information as for part (c). Prepare the journal entry to record the credit loss, if necessary (and any other adjustment needed), at December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Below is a table of the growth of the Corona Virus in USA and the requests for masks.

Using causal with masks being the dependent variable. Generate a forecast for the number of masks requested based on the number of Corona cases in the USA. Use a linear regression line. Write the equation as y-hat = a + bx. X is the number of Corona cases and y-hat is the number of masks requested.

What is the value of "a"?

What is the value of "b" ? (Three decimals for both answer.)

Required information

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 285 units, where 270 are from the January 30 purchase, 5 are from the January 20 purchase, and 10 are from beginning inventory.

Exercise 5-3 Perpetual: Inventory costing methods LO P1

Required:
1. Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification.
2. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average.
3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO.
4. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.

Required information 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. Date Activities Units Acquired at Cost Units sold at Retail Jan. 1 Beginning inventory 150 units @ $ 7.50 = $ 1,125 Jan. 10 Sales 110 units @ $ 16.50 Jan. 20 Purchase 80 units @ $ 6.50 = 520 Jan. 25 Sales 90 units @ $ 16.50 Jan. 30 Purchase 200 units @ $ 6.00 = 1,200 Totals 430 units $ 2,845 200 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 230 units, where 200 are from the January 30 purchase, 5 are from the January 20 purchase, and 25 are from beginning inventory. Exercise 5-3 Perpetual: Inventory costing methods LO P1 Required: 1. Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification. 2. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average. 3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO. 4. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.

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 285 units, where 270 are from the January 30 purchase, 5 are from the January 20 purchase, and 10 are from beginning inventory.

Exercise 6-3 Perpetual: Inventory costing methods LO P1

Required:
1. Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification.
2. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average.
3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO.
4. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.