The comparative statements of financial position of Mikos Inc. as at December 31, 2017 and 2018, and its statement of earnings for the year ended December 31, 2018, are presented below: MIKOS INC. Comparative Statements of Financial Position December 31 2018 2017 Assets Cash $ 10,500 $ 18,500 Short-term investments 70,500 39,500 Accounts receivable 75,500 32,000 Inventories, at cost 57,000 41,500 Prepaid expenses 5,500 9,000 Land 51,000 77,500 Property, plant, and equipment, net 286,000 186,500 Intangible assets 25,500 31,000 $ 581,500 $ 435,500 Liabilities and Shareholders’ Equity Accounts payable $ 18,500 $ 43,000 Income tax payable 9,000 2,500 Accrued liabilities 11,500 -0- Long-term notes payable 125,000 180,000 Contributed capital 230,000 67,500 Retained earnings 187,500 142,500 $ 581,500 $ 435,500 MIKOS INC. Statement of Earnings For the Year Ended December 31, 2018 Sales $ 895,000 Cost of sales $ 445,000 Amortization expense—intangible assets 5,500 Depreciation expense—property, plant, and equipment 34,500 Operating expenses 236,000 Interest expense 13,500 734,500 Earnings before income taxes 160,500 Income tax expense 48,150 Net earnings $ 112,350 Additional information is as follows: a. Land was sold for cash at its carrying amount. b. The short-term investments will mature in February 2019. c. Cash dividends were declared and paid in 2018. d. New equipment with a cost of $167,500 was purchased for cash, and old equipment was sold at its carrying amount. e. Long-term notes of $17,500 were paid in cash, and notes of $37,500 were converted to shares. Required: 1. Prepare a statement of cash flows for Mikos Inc. for the year ended December 31, 2018 by using the indirect method. (Negative answers should be indicated by a minus sign.)

Income statement and balance sheet data for The Athletic Attic are provided below.

THE ATHLETIC ATTIC
Income Statements
For the years ended December 31

2019 2018

  Net sales $11,800,000 $10,300,000

  Cost of goods sold $7,700,000 $6,400,000

       Gross profit $4,100,000 $3,900,000

  Expenses:  

      Operating expenses $1,700,000 $1,650,000

      Depreciation expense $200,000 $200,000

      Interest expense $50,000 $50,000

      Income tax expense $520,000 $450,000

        Total expenses $2,470,000 $2,350,000

  Net income    $1,630,000 $1,550,000

THE ATHLETIC ATTIC
Balance Sheets
December 31

2019 2018 2017

  Assets   

  Current assets:   

      Cash $235,000 $164,000 $224,000   

      Accounts receivable $1,000,000 $750,000 $770,000   

      Inventory $1,735,000 $1,365,000 $1,035,000   

      Supplies $140,000 $110,000 $85,000   

  Long-term assets:   

        Equipment $1,500,000 $1,500,000 $1,500,000   

        Less: Accumulated

depreciation (700,000) (500,000) (300,000)

Total assets $3,910,000 $3,389,000 $3,314,000   

  Liabilities and Stockholders' Equity   

  Current liabilities:   

      Accounts payable $204,000 $135,000 $120,000   

      Interest payable $5,000 $0 $5,000   

      Income tax payable $50,000 $45,000 $40,000   

Long-term liabilities:   

      Notes payable $600,000 $600,000 $600,000   

  Stockholders' equity:   

      Common stock $700,000 $700,000 $700,000   

      Retained earnings $2,351,000 $1,909,000 $1,849,000   

         Total liabilities and

stockholders’ equity $3,910,000 $3,389,000 $3,314,000   

Required:

1. Calculate the following risk ratios for 2018 and 2019: (Round your answers to 1 decimal place.)

2018 2019

Receivables Turnover Ratio    ___ times ___ times

Inventory Turnover Ratio ___ times ___ times

Current Ratio    ___ to 1 ___ to 1

Debt to Equity Ratio ___ % ___ %

2. Calculate the following profitability ratios for 2018 and 2019: (Round your answers to 1 decimal place.)

2018 2019

Gross Profit Ratio ___ % ___ %

Return on Assets ___ % ___ %

Profit Margin ___ % ___ %

Asset Turnover ___ times ___ times

During 2016 (its first year of operations) and 2017, Batali Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2018, Batali decided to change to the average method for both financial reporting and tax purposes.

Income components before income tax for 2018, 2017, and 2016 were as follows ($ in millions):

Dividends of $20 million were paid each year. Batali’s fiscal year ends December 31.

Required:
1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. (Ignore income taxes.)
2. Prepare the 2018–2017 comparative income statements.
3. & 4. Determine the balance in retained earnings at January 2017 as Batali reported using FIFO method and determine the adjustment of balance in retained earnings as on January 2017 using average method instead of FIFO method.

2.

3.Retained earnings balance previously reported using FIFO, Jan. 1, 2017:  

Adjustment to balance for change in inventory methods:

Retained earnings balance using average method, Jan. 1, 2017:

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows: 2018 2019 2020 Cost incurred during the year $ 1,491,000 $ 3,195,000 $ 2,655,400 Estimated costs to complete as of year-end 5,609,000 2,414,000 0 Billings during the year 1,100,000 3,586,000 5,314,000 Cash collections during the year 900,000 2,700,000 6,400,000 Westgate Construction uses the completed contract method of accounting for long-term construction contracts. Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. 2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred). 2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred). 2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred). 3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract. 4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. 2018 2019 2020 Cost incurred during the year $ 2,590,000 $ 3,895,000 $ 3,290,000 Estimated costs to complete as of year-end 5,790,000 3,290,000 0 5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. 2018 2019 2020 Cost incurred during the year $ 2,590,000 $ 3,895,000 $ 4,185,000 Estimated costs to complete as of year-end 5,790,000 4,290,000 0

American Surety and Fidelity buys and sells securities expecting to earn profits on short-term differences in price. For the first 11 months of 2018, gains from selling trading securities totaled $4 million, losses were $11 million, and the company had earned $5 million in investment revenue. The following selected transactions relate to American's trading account and equity securities investment account during December 2018, and the first week of 2019. The company's fiscal year ends on December 31. No trading securities were held by American on December 1, 2018.

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract.
4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

1. Tide Pods are concentrated laundry detergent packets, which have been sold since 2012. Their colorful appearance and small size have led to nearly 7,700 pod-related calls to poison centers for children under 5. In 2017, a series of memes featured Tide Pods as “forbidden fruit.” In January 2018 a (mostly) satirical Tide Pod Challenge appeared, that “encouraged” teenagers to eat tide pods, video the experience, and post it online.
   1. During the first 30 days of 2018, there were 93 calls to poison control centers for teenagers who intentionally ate laundry pods. Typically, the number of calls for teenagers ingesting laundry pods in a month has  = 37 and s = 12. What is the z-score for number of calls in January 2018? What does this imply?
   2. Public was associating increased sharing/view rate of videos tagged “Tide Pod Challenge” with increased calls to poison control centers for eating Tide Pods? For each day in the first 30 days of 2018, the number of YouTube views and poison center calls were measured.  The correlation was r = .41. Is this a significant correlation at the 95% confidence level? Should YouTube take the videos down?
   3. In response to the Tide Pod Challenge, P&G has added warnings about ingesting laundry pods. This may have reduced poisoning incidents involving children. Based on data from the first 15 weeks of 2018, weekly calls for children had an average of 119 and std. deviation of 20. Data from before 2018 had weekly calls of at least 148. Has the number of poisoning incidents decreased? Write the null and alternative hypothesis.
   4. Calculate the test statistic, and with 95% confidence, state your conclusion.

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows: 2018 2019 2020 Cost incurred during the year $ 2,604,000 $ 4,032,000 $ 1,940,400 Estimated costs to complete as of year-end 5,796,000 1,764,000 0 Billings during the year 2,040,000 4,596,000 3,364,000 Cash collections during the year 1,820,000 4,000,000 4,180,000 Westgate recognizes revenue over time according to percentage of completion. Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. 2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred). 2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred). 2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred). 3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract. 4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. 2018 2019 2020 Cost incurred during the year $ 2,604,000 $ 3,820,000 $ 3,220,000 Estimated costs to complete as of year-end 5,796,000 3,120,000 0 5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. 2018 2019 2020 Cost incurred during the year $ 2,604,000 $ 3,820,000 $ 3,960,000 Estimated costs to complete as of year-end 5,796,000 4,140,000 0

Cybernetronics Inc. (Cyber) is a Canadian-owned public company which designs and manufactures communications and control systems. The company's year end is May 31. It is now June 2018.

You, CPA, are the manager for the audit of Cyber and yesterday had met with the treasurer to discuss the year-end audit. The partner responsible for this client has asked you to prepare a report for the client which discusses important financial accounting issues and a memo to him regarding the audit issues you believe are important.

In April 2018, Cyber introduced a price protection policy for its customers to stimulate sales. Cyber promised customers that if it reduced prices after the customer made its purchase Cyber would reduce the customer's liability accordingly or refund the appropriate amount. On June 14, 2018, Cyber reduced its selling prices by 15%. Sales affected by the price protection policy as at May 31, 2018 were recognized in the amount of $2.4 million.

In May 2018, Cyber entered into an arrangement with a real estate company whereby Cyber provided robotic cleaning machines in exchange for free rent at its head office location. The cost of the machines delivered to the real estate company was $900,000 and would have a selling price of $1,500,000. Cyber is not required to pay rent for twelve months commencing June 1, 2018. This represents a savings in lease costs of $1,200,000 to Cyber. This transaction allowed Cyber to reduce its inventory of these machines which management felt was too high. Cyber's draft year-end financial statements do not reflect this transaction.

Senior management of Cyber is concerned about the new requirement to disclose management compensation figures. They want to avoid any criticism that their total compensation is not warranted based on Cyber's financial performance.

*Identify the accounting and audit issues*