A manager is explaining to a staff auditor how various situations might affect the audit opinion. For each of the following scenarios, identify the appropriate reporting option by matching the scenario with the opinion type from the list provided. Assume that any financial statement effect is material, unless otherwise noted and that US auditing standards are followed.

Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose that a random sample of companies yielded the following data:

Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Use a 5% level of significance. Find (or estimate) the P-value.

You are the founder of a start-up.  You incorporated a C corporation and currently own 1,000,000 shares as the founder. You raised $500,000 from friends and family using a convertible note, which will convert into equity if and when there is a “valuation event”, that is if and when your start-up manages to attract funds from a venture capital fund (at which point a valuation will be assigned to the company). The note provides that when the principal of the note ($500,000) converts into equity, the conversion will be done on the basis of a company valuation that may not exceed a total of $5 million (this is a “valuation cap” clause, meaning, friends and family get shares on the basis of the same valuation as the fund unless it is in excess of $5 million, in which case friends and family get shares on the basis of a $5 million valuation).

Your start-up is doing well. You are finally generating revenue and pitching to potential investors, including a VC fund “VC”. At this point you need VC to invest $10 million in your company in order to grow – if you secure this investment, you do not expect the company to produce any earnings for five years (though the company generates revenue, it still has negative earnings), but at the end of year 5 you anticipate to turn profitable and generate net income of about $16 million. VC knows that a firm comparable to yours with current earnings of $10 million was just sold for $100 million.

1. VC is concerned that you may need more than $10 million to get to the result where the company is generating net income of $16 million at the end of year 5. They introduce language in the investment agreement to be protected against any potential dilution of their interest in the event of subsequent funding rounds. If another funding round is needed at the end of year 3, in the amount of $12 million, what ownership percentage would the new investor insist upon if they wanted to get a 20% annual rate of return on their investment? How many new shares would need to be issued to this new investor? How many additional new shares would need to be issued to VC (to protect VC against dilution)? [hint: you need to first figure out total shares outstanding -- assume the dilution is shared with friends and family, meaning they just keep the shares they had]

2. Assuming that such additional funding round is indeed needed – what would happen to your ownership percentage, as the founder? How would this impact how much money you would make if the company were to eventually be sold for $200 million at the end of year 5?

Equity in Net Income and Noncontrolling Interest in Net Income

Palm Resorts acquired its 70 percent interest in Sun City on January 1, 2017, for $41,750,000. The fair value of the 30 percent non‑

controlling interest at the date of acquisition was $14,750,000. Sun City’s date‑of‑acquisition reported net

assets of $5,000,000 were carried at amounts approximating fair value, but it had unrecorded identifiable

intangibles, capitalizable per ASC Topic 805, valued at $7,500,000. These intangibles are determined to

have limited lives, amortized on a straight-line basis over five years. It is now December 31, 2020, and

Sun City reports net income of $10,000,000.

Required

a. Calculate the amount of goodwill originally reported for this acquisition, and its allocation to the

controlling and noncontrolling interests.

b. Calculate equity in net income and the noncontrolling interest in net income for 2020, assuming

goodwill from this acquisition is impaired by $2,000,000 in 2020

AMP Corporation (calendar-year-end) has 2020 taxable income of $1,900,000 for purposes of computing the §179 expense. During 2020, AMP acquired the following assets: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

a. What is the maximum amount of §179 expense AMP may deduct for 2020?

b. What is the maximum total depreciation, including §179 expense, that AMP may deduct in 2020 on the assets it placed in service in 2020, assuming no bonus depreciation? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Softwood Limited, which has only one product, has provided the following data concerning its operations for September:

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

Required:

i. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.

ii. Prepare a contribution format income statement for the month using variable costing.

iii. For the past 5 years, Shirin Nadia has been working as a Management Accountant at Meridian Energy – a leading power company based in New Zealand. However, she has recently seen a job advertisement for a Senior Management Accountant at Auckland Museum. Shirin applied for the position and subsequently progressed towards the final interview stage. While she was going through the final interview process, an interview panel member asked her how the performance report of the Auckland Museum would be different from Meridian Energy (i.e., her current employer). Imagine yourself as Shirin and write down your response to the panel member’s question.[Maximum word limit: 240 words].

You are graduating in May 2020 with a B.S. and want to attend graduate school full time for two years for an MBA. Though scholarships, support from your parents, and savings, you don’t have any debt for your undergraduate education, and you've agreed to pay for graduate school on your own. You estimate that you will need to borrow about $40,000 in each of the next two years: $40,000 in August 2020 and $42,000 in August 2021. The term of each loan will be 15 years, paid monthly. Your first payment will be due October 1, 2020 and the first payment of the second loan will be due October 2, 2021. You’ve researched student loans and found the following rates that are guaranteed not to be any higher over the next 20 years: Direct unsubsidized loans – capped at $20,500 @6.08% for fifteen years Direct PLUS loans @ 7.08% for fifteen years There are also origination fees – that are subtracted from the loan amount you receive but does not affect the principal or monthly payment. The rates are: Direct unsubsidized loans: 1.059% Direct PLUS loans: 4.236% Question 1 1 Point How much money do you expect to receive in August 2020? Question 2 1 Point How much money do you expect to receive in August 2021? Question 3 1 Point What will be the remaining principal in October 2020? Question 4 1 Point What will be the remaining principal in November 2021? Question 5 1 Point What is the total monthly payment in August 2020? Question 6 1 Point What is the total monthly payment in July 2025? Question 7 1 Point What is the remaining principal in August 2028? Question 8 1 Point How much do you expect to pay in total for both loans? Question 9 1 Point What is the effective simple interest rate for the Direct unsubsidized loans: (interest + Origination fees)/(Loans)? Question 10 1 Point What is the effective simple interest rate for the Direct PLUS loans (interest + Origination fees)/(Loans)

On February 1, 2018, Cromley Motor Products issued 6% bonds, dated February 1, with a face amount of $80 million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $80,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Determine the price of the bonds issued on February 1, 2018.
2-a. Prepare amortization schedules that indicate Cromley’s effective interest expense for each interest period during the term to maturity.
2-b. Prepare amortization schedules that indicate Barnwell’s effective interest revenue for each interest period during the term to maturity.
3. Prepare the journal entries to record the issuance of the bonds by Cromley and Barnwell’s investment on February 1, 2018.
4. Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2020.

NOTE: I only need required3 and 4 for BarnWell

Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2020. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

07/31/2018 Record the receipt of interest for Barnwell Company.

12/31/2018 Record the accrued interest for Barnwell Company.

01/31/2019 Record the receipt of interest for Barnwell Company.

07/31/2019 Record the receipt of interest for Barnwell Company

12/31/2019 Record the accrued interest for Barnwell Company.

01/31/2020 Record the receipt of interest for Barnwell Company

On January 2, 2020, Dove, Inc. acquired a 25% interest in the outstanding voting ordinary shares of Cabot Enterprises for a cost of P900,000. This investment provides Dove with the ability to exercise significant influence over Cabot and classified the investment as investment in associates. The acquisition cost of the investment is in excess of the book value by P140,000; the excess is attributable to goodwill which is to be amortized over 20 year. During 2020, Cabot Enterprises reported net income of P312,000 and paid total cash dividends of P220,000. At December 31, 2020, the balance account Investment in Associates in Cabot should have a carrying value of?

Assume today is March 16, 2016. Natasha Kingery is 30 years old and has a Bachelor of Science degree in computer science.
She is currently employed as a Tier 2 field service representative for a telephony corporation located in Seattle,
Washington, and earns $38,000 a year that she anticipates will grow at 3% per year. Natasha hopes to retire at age 65 and
has just begun to think about the future.
Natasha has $75,000 that she recently inherited from her aunt. She invested this money in 30-year Treasury Bonds. She is
considering whether she should further her education and would use her inheritance to pay for it.
She has investigated a couple of options and is asking for your help as a financial planning intern to determine the financial
consequences associated with each option. Natasha has already been accepted to both of these programs, and could start
either one soon.
One alternative that Natasha is considering is attaining a certification in network design. This certification would
automatically promote her to a Tier 3 field service representative in her company. The base salary for a Tier 3
representative is $10,000 more than what she currently earns and she anticipates that this salary differential will grow at a
rate of 3% a year as long as she keeps working. The certification program requires the completion of 20 Web- based courses
and a score of 80% or better on an exam at the end of the course work. She has learned that the average amount of time
necessary to finish the program is one year. The total cost of the program is $5000, due when she enrolls in the program.
Because she will do all the work for the certification on her own time, Natasha does not expect to lose any income during
the certification.
Another option is going back to school for an MBA degree. With an MBA degree, Natasha expects to be promoted to a
managerial position in her current firm. The managerial position pays $20,000 a year more than her current position. She
expects that this salary differential will also grow at a rate of 3% per year for as long as she keeps working. The evening
program, which will take three years to complete, costs $25,000 per year, due at the beginning of each of her three years in
school. Because she will attend classes in the evening, Natasha doesn’t expect to lose any income while she is earning her
MBA if she chooses to undertake the MBA.
1. Determine the interest rate she is currently earning on her inheritance by going to Yahoo! Finance
(http://finance.yahoo.com) and typing the word “Treasury” in the search field and picking the 30 year yield
(ticker: ^TYX) off the dynamic menu that appears. Then go to “Historical Prices” (located in the left column) and
enter the appropriate date, March 16, 2016 to obtain the closing yield or interest rate that she is earning. Use this
interest rate as the discount rate for the remainder of this problem.
2. Create a timeline in Excel for her current situation, as well as the certification program and MBA degree options,
using the following assumptions:
Salaries for the year are paid only once, at the end of the year.
The salary increase becomes effective immediately upon graduating from the MBA program or being certified.
That is, because the increases become effective immediately but salaries are paid at the end of the year, the first
salary increase will be paid exactly one year after graduation or certification.
3. Calculate the present value of the salary differential for completing the certification program. Subtract the cost of
the program to get the NPV of undertaking the certification program.
4. Calculate the present value of the salary differential for completing the MBA degree. Calculate the present value of
the cost of the MBA program. Based on your calculations, determine the NPV of undertaking the MBA.
5. Based on your answers to Questions 3 and 4, what advice would you give to Natasha? What if the two programs
are mutually exclusive? That is, if Natasha undertakes one of the programs there is no further benefit to
undertaking the other program. Would your advice be different?