Financial Assertions and Audit Objectives. You are engaged to examine the financial statements of Spillane Company for the year ended December 31. Assume that on November 1, Spillane borrowed $500,000 from Second National Bank to finance plant expansion. The long-term note agreement provided for the annual payment of principal and interest over five years. The existing plant was pledged as security for the loan. Due to the unexpected difficulties in acquiring the building site, the plant expansion did not begin on time. To use the borrowed funds, management decided to invest in stocks and bonds and on November 16, invested the $500,000 in publicly traded securities
Required:
Develop specific assertions (audit objectives) related to securities (assets) based on management’s five (PCAOB) general assertions.

Answer:

Assertion 1) Existence or occurrence: the company must provide the loan documents along with proof that they actually purchased the stocks and bonds using the loan money. It would also help to have a document explaining why the building site couldn't be acquired as planned.

Assertion 2) Rights and obligations: all the legal paperwork regarding the loan, the mortgage on the existing plant and the stocks and bond paperwork must be presented.

Assertion 3) Completeness: all the relevant information must be readily available including building titles, inventories, equipment, cash receipts, etc. The auditor should be allowed to physically visit the plant and confirm the documents.

Assertion 4) Valuation and allocation: information regarding the current market values of the building, inventories and equipment should be given. The auditor should be able to confirm if the depreciation values and market values are consistent. Also, the auditor must have access to accounts receivables and should be able to analyze them to check for any inconsistencies.

Assertion 5) Presentation and disclosure: the auditor should be able to check expense accounts and capitalization accounts, and analyze them. E.g. equipment or machinery repairs must be treated as expenses and not capitalized.

discuss the importance of diversity in all its forms in an organization and provide specific examples/scenarios.

Atlantic Video, a small video rental store in Philadelphia, is open 24 hours a day, and-due to its proximity to a major business school-experiences customers arriving around the clock. A recent analysis done by the store manager indicates that there are 30 customers arriving every hour, with a standard deviation of interarrival times of 2 minutes. This arrival pattern is consistent and is independent of the time of day. The checkout is currently operated by one employee, who needs on average 1.7 minutes to check out a customer. The standard deviation of this check-out time is 3 minutes, primarily as a result of customers taking home different numbers of videos.

Required:
a. If you assume that every customer rents at least one video (i.e., has to go to the checkout), what is the average time a customer has to wait in line before getting served by the checkout employee (i.e., waiting time in queue)?
b. If there are no customers requiring checkout, the employee is sorting returned videos, of which there are always plenty waiting to be sorted. How many videos can the employee sort over an 8-hour shift (assume no breaks) if it takes exactly 1.5 minutes to sort a single video?
c. What is the average number of customers who are at the checkout desk, either waiting or currently being served?

Marc and Michelle are married and earned salaries this year of $64,000 and $12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc contributed $2,500 to an individual retirement account, and Marc paid alimony to a prior spouse in the amount of $1,500 (under a divorce decree effective June 1, 2005). Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $2,000 child tax credit for Matthew. They are also able to claim $2,900 in recovery rebate credit ($2,400 for Marc and Michelle and $500 for Matthew). Assume they did not receive the recovery rebate in advance. Marc and Michelle paid $6,000 of expenditures that qualify as itemized deductions and they had a total of $3,500 in federal income taxes withheld from their paychecks during the year. (Use the tax rate schedules).
A. What is Marc and Michelle’s gross income?
B. What is Marc and Michelle’s adjusted gross income?
C. What is the total amount of Marc and Michelle’s deductions from AGI?
D. What is Marc and Michelle’s taxable income?
E. What is Marc and Michelle’s taxes payable or refund due for the year?

Assume that Ms. Sawyer's salary is $35,000, up from $31,000 last year, while the CPI is 187.5 this year, up from 180 last year. This means that Ms. Sawyer's real income has ____________ since last year.

Precision Systems manufactures CD burners and currently sells 18,500 units annually to producers of laptop computers. Jay Wilson, president of the company, anticipates a 15 percent increase in the cost per unit of direct labor on January 1 of next year. He expects all other costs and expenses to remain unchanged. Wilson has asked you to assist him in developing the information he needs to formulate a reasonable product strategy for next year.

You are satisfied that volume is the primary factor affecting costs and expenses and have separated the semivariable costs into their fixed and variable segments. Beginning and ending inventories remain at a level of 1,000 units. Current plant capacity is 20,000 units. The following are the current-year data assembled for your analysis.

Sales price per unit $100
Variable costs per unit:
Direct materials $10
Direct labor $20
Manufacturing overhead and selling and administrative expenses 30 60
Contribution margin per unit (40%) $40
Fixed costs $390,000

Required:
a. What increase in the selling price is necessary to cover the 15 percent increase in direct labor cost and still maintain the current contribution margin ratio of 40 percent?
b. How many units must be sold to maintain the current operating income of $350,000 if the sales price remains at $100 and the 15 percent wage increase goes into effect?
c. Wilson believes that an additional $700,000 of machinery (to be depreciated at 20 percent annually) will increase present capacity (20,000 units) by 25 percent. If all units produced can be sold at the present price of $100 per unit and the wage increase goes into effect, how would the estimated operating income before capacity is increased compare with the estimated operating income after capacity is increased? Prepare schedules of estimated operating income at full capacity before and after the expansion.

Promises Made in Consideration of Marriage. After twenty-nine years of marriage, Robert and Mary Lou Tuttle were divorced. They admitted in court that before they were married, they had signed a prenuptial agreement. They both acknowledged that the agreement had stated that each would keep his or her own property and anything derived from that property. Robert came into the marriage owning farmland, while Mary Lou owned no real estate. During the marriage, ten different parcels of land, totaling about six hundred acres, were acquired, and two corporations, Tuttle Grain, Inc., and Tuttle Farms, Inc., were formed. A copy of the prenuptial agreement could not be found.

Required:
Can the court enforce the agreement without a writing? Why or why not?

Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2021 with a refund liability of $360,000. During 2021, Halifax sold merchandise on account for $12,100,000. Halifax's merchandise costs is 70% of merchandise selling price. Also during the year, customers returned $594,000 in sales for credit, with $328,000 of those being returns of merchandise sold prior to 2021, and the rest being merchandise sold during 2021. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year.

Required:
1. Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of merchandise that was sold during 2021, and (c) adjust the refund liability to its appropriate balance at year-end.
2. What is the amount of the year-end refund liability after the adjusting entry is recorded?

1a. Record the actual sales return of merchandise sold prior to 2021.
1b. Record the cost of merchandise returned for goods sold prior to 2021.
1c. Record the actual sales return of merchandise sold during 2021.
1d. Record the cost of merchandise returned for goods sold during 2021.
1e. Record the year-end adjusting entry for estimated returns.
1f. Record the adjusting entry for the estimated return of merchandise to inventory.

3. What is the amount of the year-end refund liability after the adjusting entry is recorded?

In 2010, Toyota recalled millions of automobiles to fix a potentially hazardous problem known as sudden acceleration. Writing in the Wall Street Journal, James Stewart gave investors the following advice: "Toyota shares were over $90 as recently as Jan. 19, 2010. They closed Tuesday (February 02, 2010) at $78.18, which strikes me as a modest decline under the circumstances. If I owned shares, I’d seize the chance to get out.

Required:
Would a believer in the efficient markets theory be likely to follow Stewart's advice?

In the official government National Income and Product Accounts​ (NIPA), what component of investment includes purchases of new​ houses?

A company has the following aging schedule of its accounts receivable with the estimated percent uncollectible:______.
Age Group Amount Receivable Estimated Percent Uncollectible
Not yet due $ 175,000 4 %
0-60 days past due $ 40,000 10 %
61-120 days past due $ 10,000 30 %
More than 120 days past due $ 5,000 60 %
Assuming the balance of Allowance for Uncollectible Accounts is $3,000 (credit) before adjustment, which of the following would be recorded in the year-end adjusting entry?

The Board acknowledges your analysis and agrees with your conclusion. They are now curious about how Charles Schwab can use strategies of a mature industry to increase its revenue. You present them two options. One is to implement a product proliferation strategy to establish a presence in the niches that the new entrants are targeting. This strategy has proven to be very successful in the past and can be a very timely advantage. Another plausible strategy is product development to enhance current products. Research shows that the current product line is still fresh in the consumers’ eyes. Which is the wiser choice?

Read the following paragraph and copy and paste the sentence which contains the central idea:

The strength in global growth is broad-based across countries that growth has recently exceeded its post-crisis average across almost all major DM and EM countries. Among advanced economies, the three-month moving average of the CAI has been particularly strong in the Euro area and Sweden (around 2pp above their post-crisis average), Japan (1.3pp) and the US (1.1pp). A number of EM economies have recently outpaced their post-crisis average, although growth is likely still below potential in a number of emerging economies.

You are analyzing two companies that manufacture electronic toys--Like Games Inc. and Our Play Inc. Like Games was launched eight years ago, whereas Our Play is a relatively new company that has been in operation for only the past two years. However, both companies have an equal market share with sales of $200,000 each. You've gathered up company data to compare Like Games and Our Play. Last year, the average sales for industry competitors was $510,000. As an analyst, you want to make comments on the expected performance of these two companies in the coming year. You've collected data from the companies' financial statements. This information is listed as follows:
Like Games
Accounts receivable: 5,400
Net fixed assets: 110,000
Total assets: 190,000
Our Play
Accounts receivable: 7,800
Net fixed assets: 160,000
Total assets: 250,000
Industry Average
Accounts receivable: 7,700
Net fixed assets: 433,500
Total assets: 469,200
Using this information, complete the following statements in your analysis.
1. A _____ days of sales outstanding represents an efficient credit and collection policy. Between the two companies, _____ is collecting cash from its customers faster than _____, but both companies are collecting their receivables less quickly than the industry average.
2. Our Play's fixed assets turnover ratio is _____ than that of Like Games. This could be because Our Play is a relatively new company, so the acquisition cost of it fixed assets is _____ that the recorded cost of Like Games's net fixed assets.
3. Like Games's total assets turnover ratios is _____, which is _____, than the industry's average total assets turnover ratio. In general, a higher total assets turnover ratio indicates greater efficiency.

Based on the preceding information, which of the following is an consolidating entry needed to prepare a full set of consolidated financial statements at December 31, 20X8:

A. Common Stock 200,000
Retained Earnings 150,000
Income from Tester Co. 40,000
Dividends declared 10,000
Investment in Tester Co. 285,000
NCI in NA of Tester Co. 95,000

B. Depreciation Expense 5,000
Income from Tester Co. 4,000
NCI in NI of Tester Co. 1,000

C. Common Stock 200,000
Retained Earnings 150,000
Income from Tester Co. 30,000
NCI in NI of Tester Co. 10,000
Dividends declared 10,000
Investment in Tester Co. 285,000
NCI in NA of Tester Co. 95,000

D. Patents 50,000
Accumulated Depreciation 10,000
Investment in Tester Co. 30,000
NCI in NA of Tester Co. 10,000

Generating ideas often includes brainstorming or brainwriting. These techniques can be an effective way to produce the best ideas if they are done correctly. Read the scenario, and then identify how the brainstorming or brainwriting process could be improved. Jeanne, a girls’ outdoor adventure leader, created a meeting agenda to address a problem her troop had. Their cookie fundraiser was in trouble: The mint chocolate chip cookies were not selling. Jeanne wanted the girls to come up with new cookie ideas and innovative ways to sell them. The group began the session by yelling out cookie ideas ranging from real mud pies to snickerdoodles in the shape of a bear. It was an amazing session; everyone participated. The group came up with 50 new cookie ideas in less than 12 minutes, but they could remember only a few of them at the end of the meeting. To improve the group’s brainstorming, Jeanne should:_________

a. Use flip-charts and classify ideas
b. Create an agenda
c. Encourage out-of-the-box thinking

Choose whether the following situation represents crowdsourcing, crowd-storming, or crowdfunding. You own a local coffeeshop. Recently, you noticed that customers were doodling on your white paper cups. Intrigued, you set up a contest, and asked your customers to submit their best doodles to you. You chose your favorite doodle, and put it on a reusable cup. This is an example of:

a. Crowd-storming
b. Crowdsourcing
c. Crowdfunding

Consider an economy described by the following equations:

Y=C+I+G
C=120+0.8×(Y−T)
I=500−50×r G=150
T=125

where Y is GDP, C is consumption, I is investment, G is government purchases, T is taxes, and r is the interest rate. If the economy were at full employment (that is, at the natural rate of output), GDP would be $2,850.

Identify the equation(s) each of the following statements describes.

a. It is a function of disposable income.
b. It depends on the interest rate.

The marginal propensity to consume in this economy is:____________ .

Suppose the central bank's policy is to adjust the money supply to maintain the interest rate at 3%, so r = 3. When the interest rate is 3%, GDP is __________$ .

GDP at an interest rate of 3% is the full-employment level.
a. True
b. False

Assuming no change in monetary policy, (a decrease, an increase) in government purchases by ____ would restore GDP to the full-employment level. (Note: Assume that such change in fiscal policy has no crowding-out effect.) Assuming no change in fiscal policy, (a decrease. an increase) in the interest rate by ___ would restore GDP to the full-employment level.

________ is used to make purchases while ________ is the total collection of pieces of property that serve to store value.

The accounts in the ledger of Dependable Delivery Service contain the following balances on July 31, 2022.

Accounts Receivable $11,400
Prepaid Insurance $1,800
Accounts Payable 7,400
Maintenance and Repairs Expense 1,200
Cash 15,940
Service Revenue 15,500
Equipment 59,360
Dividends 800
Utilities Expense 950
Common Stock 40,000
Insurance Expense 600
Salaries and Wages Expense 8,400
Notes Payable, due 2024 31,450
Salaries and Wages Payable 900
Retained Earnings (July 1, 2022) 5,200

Required:
Prepare classified balance sheet for July 31, 2022.

CAM charges for retail leases in a shopping mall must be calculated. The retail mall consists of a total area of 2.8 million square feet, of which 800,000 square feet has been leased to anchor tenants that have agreed to pay $2 per rentable square foot in CAM charges. In-line tenants occupy 1.3 million square feet, and the remainder is a common area, which the landlord believeswill require $8 per square foot to maintain and operate each year. If the owner is to cover total CAM charges, how much will in-line tenants have to pay per square foot?

The rule of 70 indicates that a 6% annual increase in the level of real GDP would lead to the output doubling in approximately _____ years.

The following table reports real income per person for several different economies in the years 1960 and 2010. It also gives each economy's average annual growth rate during this period. For example, real income per person in Niger was $945 in 1960, and it actually declined to $570 by 2010. Niger's average annual growth rate during this period was -1.01%, and it was the poorest economy in the table in the year 2010. The real income-per-person figures are denominated in U.S. dollars with a base year of 2005. The following exercises will help you to understand the different growth experiences of these economies.

Economy Real Income per Person in 1960 Real Income per Person in 2010 Annual Growth Rate
(Dollars) (Dollars) (Percent)
Canada 12,946 35,810 2.06
United Kingdom 11,884 32,034 2.00
Korea 1,610 28,702 5.93
Hong Kong 4,518 44,070 4.66
Guatemala 1,985 3,859 1.34

Indicate which economy satisfies each of the following statements.

Statement Canada Guatemala Hong Kong Korea Niger United Kingdom
This economy had the highest level of real income per person in the year 2010.
This economy experienced the fastest rate of growth in real income per person from 1960 to 2010.

Consider the following list of four economies. Which economy began with a level of real income per person in 1960 that was well below that of the United Kingdom and grew fast enough to catch up with and surpass the United Kingdom's real income per person by 2010?

a. Canada
b. Guatemala
c. Hong Kong
d. Korea

Freeport-McMoRan Copper & Gold Inc., headquartered in Phoenix, Arizona, is a leading international mining company of copper, gold, and molybdenum. Its revenues were over $16 billion with net income of nearly $2 billion in a recent year.

Assume that in February 2020, Freeport-McMoRan paid $800,000 for a mineral deposit in Indonesia. During March, it spent $70,000 in preparing the deposit for exploitation. It was estimated that 1,000,000 total cubic yards could be extracted economically. During 2020, 60,000 cubic yards were extracted. During January 2021, the company spent another $6,000 for additional developmental work that increased the estimated productive capacity of the mineral deposit.

Required:
a. Compute the acquisition cost of the deposit in 2020.
b. Compute depletion for 2020.
c. Compute the net book value of the deposit after payment of the January 2021 developmental costs.

On September 1, Boylan Office Supply had an inventory of 30 calculators at a cost of $18 each. The company uses a perpetual inventory system. During September, the following transactions occurred.
Sept. 6 Purchased with cash 80 calculators at $20 each from Guthrie Co.
Sept. 9 Paid freight of $80 on calculators purchased from Guthrie Co.
Sept. 10 Returned 3 calculators to Guthrie Co. for $63 cash (including freight) because they did not meet specifications.
Sept. 12 Sold 26 calculators costing $21 (including freight) for $31 each on account to Lee Book Store, terms n/30.
Sept. 14 Granted credit of $31 to Lee Book Store for the return of one calculator that was not ordered.
Sept. 20 Sold 30 calculators costing $21 for $32 each on account to Orr's Card Shop, terms n/30.
Journalize the September transactions.

Tommy is from a small town and quit high school to get married. He and his wife have five kids, and his wife stays home with the children. Tommy is a hard worker and strives to provide for his family, although his skills are limited. Tommy has been a butcher for his entire career. He has been with his present company, a large retail grocer, for the past six years performing the same job. There are twelve people in the meat department, and each one specializes in cutting certain types of meat. Tommy's job is to cut ribeye steaks. Cutting ribeye steaks is very precise and requires holding and using a knife in the same way every day. This requirement has started to cause Tommy pain in his right hand. Although Tommy still likes his work, he is getting a little bored of the repetition and is bothered by the pain.

The quality of Tommy’s work has not suffered, but the store managers can tell that he is getting bored. What could they do to keep him better engaged?

a. Purchase special ergonomic mats to help with the pain associated with standing on the hard floor every day.
b. Motivate Tommy by giving him feedback about how skilled he is in cutting ribeye and explain that customers visit the store for his custom steaks.
c. Offer Tommy more money because he is so good at cutting meat.
d. Cross train the employees in the meat department, so beef cutters can learn how to cut pork and vice versa.
e. Administer a work personality quiz to Tommy to see if there is another area in the store where he could move to, such as the produce department.

Brett, the manager at Warson’s Diner, plans to promote Keisha, one of the waitresses, to the position of an assistant manager. However, the owner, being racially biased, prevents him from doing so. Later, when Brett wants to promote one of the delivery boys to waiter, the owner again vetoes his recommendation on the grounds that his customers would feel uncomfortable having a black man deliver their food. Brett, extremely frustrated, offers Keisha and the delivery boy their promotions as he finds them deserving. Subsequently, Brett gets fired. Which of the following holds true in this scenario?

a. Brett has a cause of action against Warson’s Diner for retaliatory discharge under Title VII of the Civil Rights Act of 1964.
b. Brett has a cause of action against Warson’s Diner based on the bona fide occupational qualification defense.
c. Brett is liable for racial discrimination because as a manager he failed to change the company’s policy regarding promotion of African-Americans.
d. Brett is liable because he failed to follow the instructions provided by his employer.

On December 15, 2013, Rigsby Sales Co. sold a tract of land that cost $3,600,000 for $4,500,000. Rigsby appropriately uses the installment sale method of accounting for this transaction. Terms called for a down payment of $500,000 with the balance in two equal annual installments payable on December 15, 2014, and December 15, 2015. Ignore interest charges. Rigsby has a December 31 year-end. In its December 31, 2013, balance sheet, Rigsby would report:

a. Realized gross profit of $100,000.
b. Deferred gross profit of $100,000.
c. Installment receivables (net) of $3,200,000.
d. Installment receivables (net) of $4,

A deposit of $10,000 is made a year from now, a second deposit of $10,000 is made at the end of the year 5, and a deposit of $3000 is made at the end of year 8. The account earns 6% interest. You want to withdraw an equal amount, X at the end of each year for the next 10 years. What is the amount of X if the goal is to empty the account

During 2020, PC Software Inc. developed a new personal computer database management software package. Total expenditures on the project were $3,000,000, of which 40% occurred after the technological feasibility of the product had been established. The product was completed and offered for sale on January 1, 2021. During 2021, revenues from sales of the product totaled $4,800,000. The package is expected to be successfully marketable for five years, and the total revenues over the life of the product are estimated to be $20,000,000.
Required
A. Prepare the journal entry to account for the development of this product in 2020.
B. Prepare the journal entry to record the amortization of capitalized computer software development costs in 2021.
C. What disclosures are required in the December 31, 2021, financial statements regarding computer software costs?
At December 31, 2021, the unamortized software intangible asset totals ______. This is equal to _____ originally capitalized less amortization in 2021 of _______. The amount charged to expense as amortization of software intangible asset in 2021 was ______. The estimated net realizable value of computer software is greater than the remaining unamortized software intangible asset.

Joni Metlock Inc. has the following amounts reported in its general ledger at the end of the current year.
Organization costs $22,300
Trademarks 12,700
Discount on bonds payable 35,300
Deposits with advertising
agency for ads to promote
goodwill of company 10,300
Excess of cost over fair
value of net identifiable
assets of acquired subsidiary 75,300
Cost of equipment acquired for
research and development projects;
the equipment has an alternative future use 85,300
Costs of developing a secret formula for a
product that is expected to be marketed for
at least 20 years 79,600
On the basis of this information, compute the total amount to be reported by Metlock for intangible assets on its balance sheet at year-end.

f Europe has a real GDP growth rate of 5%, and the United States has a real GDP growth rate of 6%, while money growth in Europe is 7%, and money growth in the United States is 5%, what would the monetary exchange rate model predict for exchange rates in the long run