Traber Electronics is a small privately owned retailer of electronic equipment and household appliances

ACCOUNTING

Problem 2-37 Traber Electronics is a small privately owned retailer of electronic equipment and household appliances. Traber Electronics is required to provide audited financial statements as part of a due diligence investigation in consideration of a potential acquisition of Traber by a public company. In the interest of time, Traber appointed the audit firm of Makins & Howell, CPAs, without a formal proposal process. Makins & Howell immediately accepted the audit engagement in early October and agreed to the November 1 deadline for the auditor’s report.

Katie Kammins, CPA, was recently promoted to in-charge auditor for Makins & Howell and was assigned to the Traber audit along with Joel Misten, the firm’s university intern. Prior to her assignment to the Traber audit, all of Katie’s audit experience was in the health-care industry. Because most of Katie’s health-care clients had June 30 year ends, Katie was available in October to work on the Traber engagement.

Katie and Joel got right to work. Katie informed Joel that there was no time to test controls, so she instructed him as to the proper procedures for proving the mathematical accuracy of the accounting journals and ledgers and tying the totals to the financial statements. No footnotes or other supplemental disclosures accompanied the financial statements, and there were no prior-year financial statements to be used as a basis of comparison, which helped expedite the audit process.

While Joel was busy with the mathematical tie-ins, Katie analyzed the company’s sales and inventories because these were the most significant revenue and asset accounts. For sales, Katie reviewed the monthly sales reports and learned that several large contracts had been accounted for on the percentage of completion method. Although she wasn’t sure about the propriety of the profits recognized, Katie held a series of discussions with Traber’s controller, who assured Katie that the profits had been recorded in accordance with generally accepted accounting principles.

For inventories, Katie observed the items in the retail store, noting the reasonableness of their descriptions and saleable condition. She was not present when Traber Electronics conducted its annual physical count of the inventory. She did not examine the inventory at the company’s warehouse because it represented less than half of the value of the asset account.

One week before the deadline, Makins & Howell provided its standard audit report, which included an unqualified opinion on Traber’s financial statements.

Required:
Refer to each of the 10 GAAS and indicate how the actions of Makins & Howell or its employees resulted in violations of these standards.

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2-9 The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year

ACCOUNTING

2-9 The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year ended September 30, 2012:

Revenues:
Property taxes $27,000,000
Sales taxes 13, 216,000
Fees and fines 1,124,000
Licenses and permits 1,921,000
Intergovernmental 868,000
Investment earnings 654,000
Expenditures:
Current:
General government 8,192,000
Public safety 24,444,000
Public works 6,211,000
Health and sanitation 1,693,000
Culture and recreation 2,154,000
Debt service – principal 652,000
Debt service – interest 821,000
Proceeds of long-term, capital-related debt 2,210,000
Transfer to special revenue fund 1,119,000
Special item – proceeds from sale of land 821,000
Fund balance, October 1, 2011

From the information given above, prepare, in good form, a General Fund Statement of Revenue, Expenditures, and Changes in Fund Balances for the City of Eastern Shores General Fund for the Year Ended September 30, 2012.

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BC Company uses a job order cost accounting system. During the month of April, the following events occurred

ACCOUNTING

BC Company uses a job order cost accounting system. During the month of April, the following events occurred:

(a) Purchased raw materials on credit, $32,000.
(b) Raw materials requisitioned: $25,800 as direct materials and $10,500 indirect materials.
(c) Paid factory payroll for the month totaling $37,700 which includes $8,200 indirect labor.
(d) Assigned the factory payroll to jobs and overhead.

Make the necessary journal entries to record the above transactions and events.

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2-8. The following information is available for the preparation of the government-wide financial statements for the city of Northern Pines for the year ended June 30, 2012

2-8. The following information is available for the preparation of the government-wide financial statements for the city of Northern Pines for the year ended June 30, 2012:

Expenses:
General government $10,300,000
Public safety 22,900,000
Public works 11,290,000
Health and sanitation 6,210,000
Culture and recreation 4,198,000
Interest on long-term debt, governmental type 621,000
Water and sewer system 11,550,000
Parking system 419,000
Revenues:
Charges for services, general government 1,110,000
Charges for services, public safety 210,000
Operation grant, public safety 698,000
Charges for services, health and sanitation 2,555,000
Operating grant, health and sanitation 1,210,000
Charges for services, culture and recreation 2,198,000
Charges for services, water and sewer 12,578,000
Charges for services, parking system 398,000
Property taxes 27,112,000
Sales taxes 20,698,000
Investment earnings, business-type 319,000
Special item – gain on sale of unused land,
Governmental type 1,250,000
Transfer from governmental activities to
Business-type activities 688,000
Net assets, July 1, 2011, governmental activities 11,222,000
Net assets, July 1, 2011, business-type activities 22,333,000

From the previous information, prepare, in good form, a Statement of Activities for the city of Northern Pines for the year ended June 30, 2012. Northern Pines has no component units.

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Q1 Which of the following is true regarding the Budgetary Comparison Schedule

ACCOUNTING

1. Which of the following is true regarding the Budgetary Comparison Schedule?

2. Assume encumbrances do not expire at year-end. $15,000 was encumbered during the prior year for a computer and the actual cost of the computer in the current year is $12,000. How does this affect unreserved fund balance?

3. Which of the following items would typically not need an encumbrance?

4. Which of the following is not considered Required Supplementary Information (RSI)?

5. Fiduciary funds are to use the:

6. Level “A” GAAP for The University of Virginia, a public institution, would be established by the:

7. Which of the following is true regarding the composition of the Comprehensive Annual Financial Report (CAFR)?

8. Under the modified accrual basis of accounting, revenues should be recognized when they are:

9. The Governmental Accounting Standards Board has been given authority to establish accounting and financial reporting standards for:

10. Which of the following is true regarding the government-wide Statement of Activities?

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Balance sheet accounts for Joyner Company contained the following amounts at the end of Years 1 and 2

ACCOUNTING

PROBLEM 15–9 Prepare a Statement of Cash Flows (Indirect Method); Free Cash Flow

Balance sheet accounts for Joyner Company contained the following amounts at the end of Years 1 and 2:

Debit Balance Accounts Year 2 Year 1
Cash $4,000 $21,000
A/R $250,000 $170,000
Inventory $310,000 $260,000
Prepaid Exp $7,000 $14,000
Loan to Hymas Company $40,000 $-
Plant & Equip $510,000 $400,000
Total Debits $1,121,000 $865,000

Credit Balance Accounts
Accum Depreciation $132,000 $120,000
A/P $310,000 $250,000
Accrued Liabilities $20,000 $30,000
Bonds Payable $190,000 $70,000
Deferred Income Taxes $45,000 $42,000
Common Stock $300,000 $270,000
Retained Earnings $124,000 $83,000
Total Credits $1,121,000 $865,000

The company’s income statement for Year 2 follows:

Sales . . . . . . . . . . . . . . . . . . . $900,000
Cost of goods sold . . . . . . . . . 500,000
Gross margin . . . . . . . . . . . . . 400,000
Selling and administrative
expenses . . . . . . . . . . . . . . 328,000
Net operating income . . . . . . . 72,000
Gain on sale of equipment . . . 8,000
Income before taxes . . . . . . . . 80,000
Income taxes . . . . . . . . . . . . . 24,000
Net income . . . . . . . . . . . . . . . $ 56,000

Equipment that had cost $40,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $18,000. Cash dividends totaling $15,000 were declared and paid during Year 2.
Required:
1. Using the indirect method, compute the net cash provided by operating activities for Year 2.
2. Prepare a statement of cash flows for Year 2.
3. Compute the free cash f ow for Year 2.
4. Briefly explain why cash declined so sharply during the year.

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Sam Strother and Shawna Tibbs are senior vice presidents of the Mutual of Seattle

Sam Strother and Shawna Tibbs are senior vice presidents of the Mutual of Seattle. They are co-directors of the company’s pension fund management division, with Strother having responsibility for fixed income securities (primarily bonds) and Tibbs being responsible for equity investments. A major new client, the Northwestern Municipal League, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them.

To illustrate the common stock valuation process, Strother and Tibbs have asked you to analyze the Temp Force Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporarily heavy workloads. You are to answer the following questions.

a. Describe briefly the legal rights and privileges of common stockholders.

AND SO ON

p. Temp Force recently issued preferred stock. It pays an annual dividend of $5, and the issue price was $50 per share. What is the expected return to an investor on this preferred stock?

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The Flying Gator Corporation and its 100%-owned subsidiary, T Corporation, have filed consolidated tax returns for many years

The Flying Gator Corporation and its 100%-owned subsidiary, T Corporation, have filed consolidated tax returns for many years. Both corporations use the hybrid method of accounting and the calendar year as their tax year. During 201 (which is the current year for this problem), they report the operating results. Note the following additional information:

• Flying Gator and T Corporations are the only members of their controlled group.
• Flying Gator’s address is 2101 W. University Ave., Gainesburg, FL 32611. Its employer identification number is 38-2345678. Flying Gator was incorporated on June 11, 2000. Its total assets are $430,000. Stephen Marks is Flying Gator’s president.
• A $50,000 consolidated NOL carryover from the preceding year is available. The NOL is wholly attributable to Flying Gator.
• Flying Gator and T use the first-in, first-out (FIFO) inventory method. T began selling inventory to Flying Gator in the preceding year, which resulted in a $40,700 deferred intercompany profit at the end of the preceding year. Flying Gator is deemed to realize this profit in the current year because it uses the FIFO method. During the current year, T sells additional inventory to Flying Gator, realizing a $300,000 profit. At the end of the current year, Flying Gator holds inventory responsible for $45,100 of this profit.
• Flying Gator receives all its dividends from T. T receives all its dividends from a 60%-owned domestic corporation. All distributions are from E&P.
• Flying Gator receives all its interest income from T. T pays Flying Gator the interest on March 31 of the current year on a loan that was outstanding from October 1 of the preceding year through March 31 of the current year. Flying Gator and T did not accrue any interest at the end of the preceding year because they use the hybrid method of accounting. T pays $5,000 of its interest expense to a third party.
• Officer’s salaries are $80,000 for Flying Gator and $65,000 for T. These amounts are included in salaries and wages in Table.
• Flying Gator’s capital losses include a $9,000 long-term loss on a sale of land to T in the current year. T holds the land at year-end.
• The corporations have no nonrecaptured net Sec. 1231 losses from prior tax years.
• Qualified production activities income for Flying Gator is $340,000 and for T is $(35,000). The applicable percentage for 2010 is 9%.
• Estimated tax payments for the current year are $150,000.

Determine the consolidated group’s 2012 tax liability. Prepare the front page of the consolidated group’s current year corporate income tax return (Form 1120).

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Marilyn Crone owns and operates a public relations firm called Best Foot forward, Inc (A+ Guaranteed)

Marilyn Crone owns and operates a public relations firm called Best Foot forward, Inc. The following amounts summarize her business on August 31, 20XX.

Assets:

Cash 2,200

Accounts receivable          1,500

Land 12,000

Liabilities:

Accounts Payable 8,000

Stockholders’ Equity:

Common Stock              5,000

Retained Earnings 2,700

During September the business completed these transactions:

Issued common stock and received cash of $20,000

Performed service for a client and received cash of $700.

Paid off the beginning balance of accounts payable.

Purchased supplies on account, $1,000.

Collected cash from a customer on account, $1,000.

Received cash of $1,000 and issued common stock.

Consulted for a Senate candidate and billed the client for services rendered, $3,000.

Paid the following business expenses for the month:

Paid office rent, $900.

Paid advertising, $100.

Sold supplies to another business for $100 cash which was the cost of the supplies.

Paid cash dividends of $1,500.

Requirements:

Prepare journal entries for the September transactions.

Prepare the income statement of Best Foot Forward, Inc., for the month ended September 20XX.

Prepare the entity’s statement of retained earnings for the month ended September 30, 20XX.

Prepare the balance sheet at September 30, 20XX

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Norwel company manufactures miniature circuit boards used in wireless phones (A+ Guaranteed)

Norwel company manufactures miniature circuit boards used in wireless phones and personal organizers. On January 2, 2014, Norwel purchased a circuit board stamping machine at a retail price of $12,000. Norwel paid 5% sales tax on this purchase. Norwel paid a contractor $1,400 for a specially wired platform for the machine, to ensure non-interrupted power to the machine. Norwel estimates the machine will have a 4-year useful life, with a residual value of $2,000 at the end of 4 years. Norwel uses straight-line depreciation and employs the half-year convention in accounting for partial-year depreciation (that is, it takes a half year of depreciation in the first year of an asset’s useful life). Norwel’s fiscal year ends on December 31.

1) At what amount should Norwel record the acquisition cost of the machine?

2) What journal entry should Norwel record in 2014?

3) At what amount will the machine be reported in Norwel’s balance sheet at December 31, 2014?

4) On July 1, 2015, Norwel decides to outsource its circuit board operations to Boards-R-Us Inc. As part of his plan, Norwel sells the machine (and the platform) to Boards-R-Us for $7,000. What is the impact of this disposal on Norwel’s 2015 income before taxes?

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