D’Jais Corporation, a U.S. company, owns 100% of Bar A Corporation, a New Zealand company. Bar A's equipment was acquired on the following dates (amounts are stated in New Zealand dollars):

Jan. 1, 2017 purchased equipment for 40,000 NZ dollars

Jul. 1, 2017 purchased equipment for 80,000 NZ dollars

Jan. 1, 2018 purchased equipment for 50,000 NZ dollars

Jul. 1, 2018 sold equipment purchased on Jan. 1, 2017 for 35,000 NZ dollars

Exchange rates for the NZ dollar on various dates are:

Jan. 1, 2017           $.500                           Jan. 1, 2018           $.530

Jul. 1, 2017           $.520                           Jul. 1, 2018           $.505

Dec. 31, 2017       $.530                           Dec. 31, 2018        $.490

2017 avg. rate       $.515                           2018 avg. rate       $.510

Bar A's equipment has an estimated 5-year life with no salvage value and is depreciated using the straight-line method, calculating depreciation expense on a monthly basis. Bar A's functional currency is the U.S. dollar, but the company uses the NZ dollar for recordkeeping.

Required:

1. Determine the value of Bar A's equipment account on December 31, 2018 in U.S. dollars.

2. Determine Bar A's depreciation expense for 2018 in U.S. dollars.

3. Determine the gain or loss from the sale of equipment on July 1, 2018 in U.S. dollars.

The records for Botox Company show this data for 2010 and 2011:

- For 2010, Botox recorded a probable and estimable contingent liability due to a lawsuit. The range for the loss is $700,000 to $1,000,000. In 2011, the lawsuit is settled and Botox pays the actual loss of $850,000.

- Gross profit on a two-year construction contract begun in 2010 was recorded at $350,000 for 2010 and $600,000 for 2011. Cash received was $50,000 in 2010 and $500,000 in 2011.

- An officer of Botox Company passed away during 2011. Life insurance proceeds from a key officer life insurance policy was $200,000.

- Botox earns $600 per month on a municipal bond investment throughout 2010 and 2011.

- Machinery was acquired in January 2010 for $300,000. Straight-line depreciation over a five-year life (no salvage value) is used. For tax purposes, Tuesday may deduct 30% of the cost in 2010 and 25% of the cost in 2011, with the remainder of the cost being depreciated at 15% per year for the three years 2012-2014.

- Pretax financial income is $1,350,000 in 2010 and $1,500,000 in 2011. The tax rate is 25% for all years.

- Botox Company has no beginning balances of deferred tax assets or liabilities.

(a) Prepare a schedule for 2010 and 2011 starting with pretax financial income and compute taxable income.

(b) Prepare the journal entry to record income taxes for 2011.

You are an Audit Senior currently planning the 30 June 20X9 audit of Technology Limited, an Australian-owned company that produces and exports computer chips to China. At a recent planning meeting with Technology Limited’s senior staff, you obtained the following overview of this year’s operations:

Tight checks by Australian custom officials have delayed several shipments of computer chips. These delays have angered Chinese customers who are threatening to deduct 20% from the amounts owing as compensation for lost production time.

One of Technology Limited’s customers, Blue Chip Limited, is claiming that the latest batch of computer chips it received was found to be faulty. Blue Chip Limited is refusing to pay its account, which is allegedly seven months overdue. Technology Limited has claimed to have launched an investigation into the allegations, but as yet not been able to substantiate them. Technology Limited has suffered significant cash flow problems because another major customer, Creative Limited (Creative), is experiencing financial difficulties. As a result, Creative is taking well over 120 days to pay outstanding amounts, despite Creative’s terms of trade being payment within 30 days. Creative makes up 40 per cent of Technology Limited’s sales and the board has been reluctant to take any action that might adversely affect those sales. Consequently, Technology Limited has had to increase its dependency on its line of credit, and this has caused it to temporarily breach the debt to equity ratio required in its loan covenant with Big Bank Limited.

One of Technology Limited’s major suppliers went bankrupt one month ago, causing major product shortages. To overcome the problem, Peter James, the husband of the finance director, Natalie James, provided electronic components used in the production of computer chips to Technology Limited through his private company Norton Limited. Norton Limited demands payment in $US prior to the electronic components being supplied. There is no formal agreement in place with Peter James, however, the goods are being provided at competitive prices. You are concerned about the electronic components that Peter James’ company is supplying, because his products are new to the market and you have heard some of Technology Limited’s staff complaining that they are of poor quality.

Due to increased competitive pressure, Technology Limited has recently moved the manufacture of some of its computer chips to Bangladesh. Technology Limited saves around 25 per cent in costs compared to the equivalent Australian made items. However, the manufacturing process takes longer and on a few occasions late delivery from Bangladesh has resulted in lost sales.

Last month, a protester suffered a broken leg, allegedly because he was hit by a company truck. The protester is now suing Technology Limited for damages, claiming the contractor was in fact an employee of Technology Limited at the time of the accident, and was acting on Technology Limited’s instructions. Technology Limited is fighting the case and appears to have a reasonable chance of winning; however, the adverse publicity being generated is making the company nervous about its sales in the future.

During the period, the Australian dollar has remained steady against the Chinese Yuan, although it fell by about 3% against the US dollar. Debtors are invoiced in $US at the time of shipment, and payment is received in $US one month after the shipment is delivered. It takes around six weeks for the charter vessels to travel from Technology Limited’s shipyard at Bigmantle Bay to China. A recent downturn in the Chinese economy is affecting forward orders, which have fallen by 15%.

Prepare a memorandum to the audit manager, outlining your risk assessment relating to Technology Limited. When making your risk assessment:

(a) Identify two (2) balance sheet accounts from the information provided that are subjected to an increase in audit risk. Briefly explain what factors increase the audit risk associated with the two (2) account balances identified. In your explanation, please mention the key assertion(s) at risk of material misstatement and the components of the audit risk model affected for each account balance identified.

(b) Identify how the audit plan will be affected and recommend specific audit procedures to address the risks associated with each account balance identified.

You are an Audit Senior currently planning the 30 June 20X9 audit of Technology Limited, an Australian-owned company that produces and exports computer chips to China. At a recent planning meeting with Technology Limited’s senior staff, you obtained the following overview of this year’s operations: Tight checks by Australian custom officials have delayed several shipments of computer chips. These delays have angered Chinese customers who are threatening to deduct 20% from the amounts owing as compensation for lost production time. One of Technology Limited’s customers, Blue Chip Limited, is claiming that the latest batch of computer chips it received was found to be faulty. Blue Chip Limited is refusing to pay its account, which is allegedly seven months overdue. Technology Limited has claimed to have launched an investigation into the allegations, but as yet not been able to substantiate them. Technology Limited has suffered significant cash flow problems because another major customer, Creative Limited (Creative), is experiencing financial difficulties. As a result, Creative is taking well over 120 days to pay outstanding amounts, despite Creative’s terms of trade being payment within 30 days. Creative makes up 40 per cent of Technology Limited’s sales and the board has been reluctant to take any action that might adversely affect those sales. Consequently, Technology Limited has had to increase its dependency on its line of credit, and this has caused it to temporarily breach the debt to equity ratio required in its loan covenant with Big Bank Limited. One of Technology Limited’s major suppliers went bankrupt one month ago, causing major product shortages. To overcome the problem, Peter James, the husband of the finance director, Natalie James, provided electronic components used in the production of computer chips to Technology Limited through his private company Norton Limited. Norton Limited demands payment in $US prior to the electronic components being supplied. There is no formal agreement in place with Peter James, however, the goods are being provided at competitive prices. You are concerned about the electronic components that Peter James’ company is supplying, because his products are new to the market and you have heard some of Technology Limited’s staff complaining that they are of poor quality. Due to increased competitive pressure, Technology Limited has recently moved the manufacture of some of its computer chips to Bangladesh. Technology Limited saves around 25 per cent in costs compared to the equivalent Australian made items. However, the manufacturing process takes longer and on a few occasions late delivery from Bangladesh has resulted in lost sales. Last month, a protester suffered a broken leg, allegedly because he was hit by a company truck. The protester is now suing Technology Limited for damages, claiming the contractor was in fact an employee of Technology Limited at the time of the accident, and was acting on Technology Limited’s instructions. Technology Limited is fighting the case and appears to have a reasonable chance of winning; however, the adverse publicity being generated is making the company nervous about its sales in the future. During the period, the Australian dollar has remained steady against the Chinese Yuan, although it fell by about 3% against the US dollar. Debtors are invoiced in $US at the time of shipment, and payment is received in $US one month after the shipment is delivered. It takes around six weeks for the charter vessels to travel from Technology Limited’s shipyard at Bigmantle Bay to China. A recent downturn in the Chinese economy is affecting forward orders, which have fallen by 15%. Required: Prepare a memorandum to the audit manager, outlining your risk assessment relating to Technology Limited. When making your risk assessment: (a) Identify two (2) balance sheet accounts from the information provided that are subjected to an increase in audit risk. Briefly explain what factors increase the audit risk associated with the two (2) account balances identified. In your explanation, please mention the key assertion(s) at risk of material misstatement and the components of the audit risk model affected for each account balance identified. (b) Identify how the audit plan will be affected and recommend specific audit procedures to address the risks associated with each account balance identified.

Carla Corporation has one temporary difference at the end of 2020 that will reverse and cause taxable amounts of $57,000 in 2021, $61,800 in 2022, and $67,300 in 2023. Carla’s pretax financial income for 2020 is $286,600, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2020.

Compute taxable income and income taxes payable for 2020.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020

Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.”.

On January 1, 2020, The Fio Corporation purchased a machine for $600,000. The corporation estimated a 5-year useful life (or 300,000 units of useful life) and $60,000 residual/salvage value.

45000 Units were produced in 2020.

6 points:

Complete the following table using the indicated depreciation method and year for each row of the table.

4 points:

What would the journal entry be if the straight-line method was used and the machine was sold on 12/31/2020 for $500,000?

Pronghorn Co. provides the following information about its postretirement benefit plan for the year 2020.

Prepare a worksheet inserting January 1, 2020, balances, showing December 31, 2020, balances, and the journal entry recording postretirement benefit expense. (Enter all amounts as positive.)

SLDU INDUSTRIES SDN BHD: THE BLAME GAME IN THE PERFORMANCE MEASUREMENT SYSTEM

At CEO’s Office – 3 January 2014
“How is this possible? We are not able to achieve even 1 percent increment from last year, yet we are having 71 plantations nationwide. An increment of 0.2 percent is not good enough for this company to survive. The head of production department has to look into this matter immediately. I want to see an improvement next year,” Dato‟ Sanusi Ahmad retorted.
He was not satisfied with the company‟s current performance after reviewing the financial reports obtained from the accounting department. There was no significant improvement from year 2012 to 2013 based on the profit before tax. He believed that profitability, growth and shareholder‟s value were important in determining the company‟s performance and it should be consistent with employee performance. Although the company made profit, the amount was quite small and growth was very insignificant. Subsequently, it would adversely affect shareholders‟ value. The main challenge faced by SPI now was to maintain a 15% dividend from their investment set by SLDU.
On 20 January, 2014, Jalil, the head of human resource department was called up by the CEO. “I think we need to do something with our performance measurement system. I am perplexed why our financial performance is lower than expected but our employees scored high marks in their annual performance evaluation. Something is not right here. Please look into this matter immediately,” the CEO demanded.
SLDU’s Human Resources Department
The CEO‟s words rang in his ears loud and clear. Jalil did not waste any time and decided to examine the issue raised by the CEO. The first place he visited was the production site, where he observed the employees for three months. He found the employees to be complacent: they lacked the motivation to meet the set targets and were not bothered with the productivity levels targeted for each department. When he asked the employees, they replied that they were not aware of the urgency to meet the targets and they were merely doing what they needed to do. “What‟s the rush?” they replied. In addition, there was a high frequency of employees on leave. However, he found some of the reasons given to be unacceptable. Jalil wondered if the Heads of Departments were aware of what was actually taking place under their noses.
A week later, Jalil was back in his office. He thought it was a good idea to examine all the records of competencies from each department in order to identify any flaw in the performance evaluation system. For the past few years, SLDU used a new format for performance evaluation and most of the evaluation marks were at the satisfactory level. SLDU followed the concept of the normal distribution in determining the performance marks. The expected shape of the overall marks should be in accordance with the „bell curve‟6. Jalil discovered that the figures was skewed at the extreme values. Further investigation revealed that the evaluation marks given by the immediate supervisors in all departments were always high. Therefore, he decided to conduct a meeting with all Heads of the Departments.
Managing the Managers
In the meeting with all Heads of Departments, on 14 February 2014, Jalil stressed the importance of assessing, monitoring and reviewing employee performance within the stipulated time. He also underlined the significance of employee performance being in harmony with company performance. A company‟s performance was a crucial aspect in determining the company‟s progress within a specific period of time. It indicates the current condition of the company, the opportunities it was seeking, the overall contribution to ensure the company was moving forward and therefore it was important to deliver a company‟s performance target.
There was a lively discussion and exchange of ideas among the Heads of Departments. However, many did not see the need to re-evaluate their employees. “Mr. Jalil, what is the big issue here? We have done our evaluation according to the requirements stated in the assessment forms. We find our employees to be motivated; they understand their roles and responsibilities and deliver on time.” All the managers agreed with Mr. Aziz, who head heads the quality control department. “It is not our problem if the machine breaks down for weeks and we cannot perform the extraction process. I think that is the main reason why we cannot achieve the targeted yield according to the schedule,” said Mr. Ramli, the head of the production department. “Actually, we managed to solve the problem of machine breakdowns and achieved the target accordingly," added Mr. Krisha from the maintenance department.
“We have established a proper Performance Measurement System (PMS). It is a shared responsibility between the organization, employee, reporting managers and reviewing managers. I believe that all of you had attended the training and understand how it works,” Jalil explained. “If we work together to strengthen our performance system, our employees will become much more highly motivated and productive. I am counting on you to give them the necessary feedback,” added Jalil. With their in-depth knowledge and wealth of experience, and having attended a series of talks on performance appraisal, the Heads of Department were well verse on the PMS. The training had been on how to rate KPIs, targets and competencies, and how to derive overall performance ratings. As for Jalil, he knew that he had pressed the right button to make the managers realize their roles.
Jalil realized that some managers were not oriented with the company‟s goals and targets. He felt that these managers merely gave out tasks related to an employee‟s daily routine, and made sure everyone had tasks to do. “That should not be the case. As a manager, there are many other important things to handle, and that include coaching and employee evaluation,” he thought. From his earlier investigation, he found that some managers had not explained to their employees about PMS. To him, it was very important for all employees to be clear about the system, the relationship between the company‟s goals, department goals and the employees‟ responsibilities to achieve these goals, as well as issues related to the grading. Some managers were not following the measurable tools given to them in evaluating employee performance. As far as he was concern, all the managers had attended the performance evaluation training. He felt that the information had not been disseminated properly to every employee at every level of the organization. “I understand that everyone is doing his job here, but still we are not performing up to standard. We have targets to achieve, and we need to do our best to achieve them. We need to be aligned with our CEO‟s mission,” Jalil lamented. To him, the CEO was very ambitious and forward-looking. The CEO believed that in order for a company to succeed, it must have a strong internal control system and now, he had enforced the implementation of a proper evaluation system.
Jalil felt relieved after talking to the Heads of Departments and hoped that they understood the seriousness of the matter and the urgency to re-look at the current performance evaluation practice. Jalil spent hours thinking about how to get the employees geared towards achieving the organizational goals. He felt that the current performance measurement system placed too much emphasis on financial performance measures. Jalil wondered whether they should implement the balanced scorecard (BSC).
Production Department
As head of production department, one of Ramli‟s responsibilities was to ensure the welfare of his employees. He was both a manager and a friend to them, and he felt he needed to do as much as possible to help them. Ramli gave his employees high ratings because annual increments, bonuses and promotions were heavily tied to the performance results. In his opinion, he was doing them a favor and hoped that they would be motivated and continue to perform their best in the future.
“What is so wrong with that?” Ramli asked himself. He thought that by being an understanding manager, it would help to increase the motivation level of his employees. He wanted to make them feel like they were a part of a family and wanted them to enjoy working under him. As a token of appreciation, his employees always brought “presents” for him. To Ramli, it was a “normal practice,” but some of his colleagues frowned upon it and considered it as bribery.
Jalil‟s directive that employee reassessment be carried out caused a bit of worry for Ramli. After the meeting with Jalil, Ramli was seen busy filling up the evaluation forms. Jalil had reminded him to be fair, honest, and rate his employees based on their performance. Ramli felt that he had done what he needed to do, and believed that nothing was wrong with the way he previously evaluated his employees. He felt that Jalil was trying to make this a big issue.
“Of course the CEO has certain targets to achieve, yet we are all human beings who have limitations in doing our work. It is not that we are not trying. I have worked in the company for almost 30 years. Some employees have been working under my supervision for 10 years. I even know their family members and the difficulties they are facing.”
Ramli was puzzled why the productivity graph of his department was not that good despite the excellent individual performance. He strongly believed that his employees were hardworking and did their jobs rather well. He thought that it was normal if his employees took leave occasionally due to family matters or sickness. “After all, they are humans. Aren‟t they allowed to fall sick? They do have responsibilities to their family too,” he reflected.

Current Practice of Performance Measurement System (PMS)
SPI adopted SLDU Group‟s policy and approach in assessing employee performance. SLDU Group‟s definition of performance in the measurement system included both KPIs and competencies. It is a concept of measuring results or output that reinforces the link between individual goals and business strategy. This approach to measuring competencies gives greater emphasis on employee development and enables them to achieve individual goals and align their behavior to the organization's values. The purpose is to enhance employee motivation and to improve business performance.
The two key elements of performance assessment and reward need to be balanced. The first key element was to achieve business results known as „the WHAT‟ and second, was how could the employees demonstrate the shared values and competencies to accomplish the results known as „the HOW.‟ Therefore, the key principles of PMS addressed both the “What” and “How” of individual employee performance in a balanced manner. SLDU‟s PMS stressed the importance of achieving both results and the demonstration of shared values and competencies by all categories of the employees concerned.
The PMS subscribed to the basic idea of “What Gets Measured Gets Done.” It also aligned SLDU Group‟s vision and strategies with individual employee‟s actions, allowing them to understand clearly how their performance directly contributes to the business goals and results. PMS was an integrated system, supported by other key areas of the human resource processes, such as employee compensation, promotion, career development and succession planning. It was a mechanism to differentiate high performers from the others, for the purpose of rewarding and recognition, and other human resource decisions. Performance management within the PMS followed an ongoing cycle of activities throughout the year, unlike traditional employee appraisal, which tend to be perceived as a once a year event. In this respect, SLDU Group‟s performance management cycle comprised of three phases that take place throughout the review period: Performance Planning, Performance Assessment and Performance Rewarding.
The Performance Planning phase can be described as the expectations setting stage, where the appraiser and appraisee work together to create a performance plan. Basically, it consisted of the “WHAT” results; for example objectives, KPIs and targets to be achieved; and the “HOW” for example shared values and competencies that employees need to develop, apply and demonstrate during the course of the PMS cycle. The end product of the planning phase was the mutual agreement on the performance plan and the creation of a development plan to build the required competencies to execute the results effectively.
In the Performance Assessment phase, quantitative targets were independently computed; the supervisor obtained inputs from peers, employees and clients. In short, the assessment was a formal appraisal of the actual results achieved as measured against the plan. It was a culmination of previous reviews (formal and informal) that were undertaken in tracking performance progress. There should not be any major surprises when comparing the actual results with the plan, if employee performance was consistently monitored and tracked, and corrective actions were taken accordingly to modify or improve the plan. The end-review also provided the opportunity for the parties concerned to decide what can be done to improve results, developed the desired competencies and relevant development plans in preparation for the next performance cycle.

The Performance Rewarding phase addressed the outcome and consequences of the business or organizational results achieved and the demonstration of the desired level of competencies to accomplish by the respective employees. Performance results would ultimately determine financial and non-financial rewards, or whatever options deemed necessary.
An MNC, with operations across the globe and employs hundreds of employees, required an effective system to measure its performance to remain competitive in the market. As practiced in other companies, top management together with all Heads of Departments, would have a series of KPI planning sessions. The main purpose was to ensure that the employees‟ KPIs were aligned with the company‟s targets, since their progress would be reflected in the company‟s performance. Undoubtedly, if the employees‟ scores were low, the company score would also be affected.

Two major questions lingered on his mind: Should SLDU relook at how strategic objectives of the company are cascaded down to the departments and eventually to individual employees? Should SLDU implement a balanced scorecard as balanced scorecard focuses on both financial and non-financial measures?

He only had one month from now before the next management meeting.

EX. 10-3

Fiduciary funds are of four major types For each of the following indicate the type of fiduciary fund in which it is most likely the fiduciary activity should be accounted for and reported.

1. Per a trust agreement a state maintains an investment pool in which governments within the state can temporarily invest the proceeds of tax exempt bonds that they have issued. The state will invest only in securities that would not violate IRS arbitrage provisions.

2. A county collects property taxes for towns and cities within its jurisdiction and distributes them to the governments shortly after it receives them.

3. A city solicits donations from its citizens to support a local food bank. Per a trust agreement all funds must be invested in investment grade securities and each year all earnings (except for a percentage equal to an inflation index) must be distributed to the food bank.

4. The state requires banks within its jurisdiction to turn over the balances in savings and checking accounts that have been inactive for a period of five years or more. Per a trust agreement, any amounts that are not claimed by the depositors within six years revert to the state’s general fund.

5. A city makes annual contributions to a qualified OPEB trust fund.

6. Each school within a school district collects parent–teacher association dues and contributions and turns them over to the school district for safe-keeping. The district remits the funds to the associations upon request and makes no decisions, and places no restrictions, as to how they are used.

7. A state university receives cash from a not-for-profit child welfare agency that provides scholarships to students who have graduated out of the foster care system. The agency selects the students and stipulates that the scholarship is intended to cover miscellaneous expenses other than tuition and fees, such as for meals and recreation. The university dispenses the funds to the students upon their requests, usually within days after they have been received from the agency.

8. A state university maintains an endowment to provide one scholarship each year to a student who graduated from Llano County High School. As per the donor’s stipulations in a trust agreement, each year the High School selects the scholarship recipient.