Question: Owen Co. is considering the following alternative

> A client applies manufacturing overhead to inventory on the basis of $3.47 per direct labor hour. Explain how the auditor will evaluate the reasonableness of total direct labor hours and manufacturing overhead in the ending inventory of finished goods.

> Assume that the auditor tested an account receivable with a balance of $3,000 and determined that the audited value was $2,700. That is, the auditor determined the receivable was overstated by $300. What is the projected misstatement (excluding the incre

> Describe a contingency. What conditions are required for a contingent liability to exist?

> What procedures do auditors typically follow to address the completeness of disclosures?

> State the relationship between the following: a. ARO and sample size b. Population size and sample size c. TER and sample size d. EPER and sample size

> Distinguish among difference estimation, ratio estimation, mean-per-unit estimation, and stratified mean-per-unit estimation. Give one example in which each can be used.

> Explain the circumstances under which an auditor should perform audit tests primarily designed to uncover fraud in the payroll and personnel cycle.

> Briefly explain why accounting standards related to fair value estimates make the audit of financial instruments more complex.

> Explain why an auditor compares the “date of deposit according to the books” to the “date of disbursement according to the books” on an interbank transfer schedule to detect kiting.

> For the audit of Carbald Supply Company, Carole Wever, CPA, is conducting a test of sales for 9 months of the year ended December 31, 2019. Included among her audit procedures are the following: 1. Electronically re-add the sales journal and trace the ba

> In your audit of Aviary Industries for calendar year 2019, you found number of matters that you believe represent possible adjustments to the company’s books. These matters are described below. Management’s attitude is that “once the books are closed, th

> The following tests of controls and substantive tests of transactions audit procedures for acquisitions and cash disbursements are to be used in the audit of Ward Publishing Company. You concluded that internal control appears effective and a reduced ass

> You are assigned to the December 31, 2019, audit of Sea Gull Airframes, Inc. The company designs and manufactures aircraft superstructures and airframe components. You observed the physical inventory at December 31 and are satisfied that it was properly

> You are the manager in the audit of Vernal Manufacturing Company and are turning your attention to the income statement accounts. The in-charge auditor assessed control risk for all cycles as low, supported by tests of controls. There are no major inhere

> Roost and Briley, CPAs, are doing the audit of Leggert Lumber Co., an international wholesale lumber broker. Because of the nature of their business, payroll is the largest expense. You are the in-charge auditor on the engagement responsible for developi

> Under what circumstances would an auditor choose to confirm information such as the right of return or special sales terms in addition to the customer balance?

> Explain why proper presentation of debt balances and related disclosures is important from a creditor’s perspective.

> Financial statement data for years ending December 31 for Holland Company follows: a. Determine the inventory turnover for 2016 and 2015. b. Determine the number of days’ sales in inventory for 2016 and 2015. Use 365 days and round to

> For the year ending August 31, 2016, Mammalia Medical Co. mistakenly omitted adjusting entries for (1) depreciation of $5,800, (2) fees earned that were not billed of $44,500, and (3) accrued wages of $7,300. Indicate the combined effect of the errors on

> Two income statements for Fuller Company follow: Prepare a horizontal analysis of Fuller Company’s income statements. Fuller Company Income Statements For Years Ended December 31 2016 2015 Fees earned $680,000 $850,000 Operating e

> The following data were taken from Mesa Company’s balance sheet: a. Compute the ratio of liabilities to stockholders’ equity. b. Has the creditor’s risk increased or decreased from December 31, 2015

> Dillin Inc. reported the following on the company’s statement of cash flows in 2016 and 2015: Eighty percent of the net cash flow used for investing activities was used to replace existing capacity. a. Determine Dillinâ€&#1

> McMahon Inc. reported the following on the company’s statement of cash flows in 2016 and 2015: Seventy percent of the net cash flow used for investing activities was used to replace existing capacity. a. Determine McMahonâ€

> Amy Austin established an insurance agency on March 1 of the current year and completed the following transactions during March: a. Opened a business bank account with a deposit of $50,000 in exchange for common stock. b. Purchased supplies on account, $

> A summary of cash flows for Sentinel Travel Service for the year ended August 31, 2016, follows: The cash balance as of September 1, 2015, was $89,000. Prepare a statement of cash flows for Sentinel Travel Service for the year ended August 31, 2016.

> Noric Cruises Inc. reported the following results for the year ended October 31, 2016: Retained earnings, November 1, 2015 $12,400,000 Prepare a retained earnings statement for the fiscal year ended October 31, 2016. Net income 2,350,000 Cash divid

> During the taking of its physical inventory on December 31, 2016, Waterjet Bath Company incorrectly counted its inventory as $728,660 instead of the correct amount of $719,880. Indicate the effect of the misstatement on Waterjet Bath’s December 31, 2016,

> On July 1, 2016, Livingston Corporation, a wholesaler of manufacturing equipment, issued $46,000,000 of 20-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of $42,309,236. Interest on the bonds is payable semiannually on Decem

> Financial statement data for years ending December 31 for Edison Company follows: a. Determine the ratio of sales to assets for 2016 and 2015. b. Does the change in the ratio of sales to assets from 2015 to 2016 indicate a favorable or an unfavorable t

> A summary of cash flows for Ousel Travel Service for the year ended November 30, 2016, follows: Prepare a statement of cash flows for Ousel Travel Service for the year ended November 30, 2016. Cash receipts: Cash received from customers $1,465,000

> Rockwell Inc. reported the following results for the year ended June 30, 2016: Prepare a retained earnings statement for the fiscal year ended June 30, 2016. Retained earnings, July 1, 2015 . $3,900,000 Net income 714,000 Cash dividends declared 10

> Chloe Co. sold $300,000 of equipment during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 5% of the sales price. On June 20, a customer required a $90 part replacement, plus $42 of labor under the warran

> During the taking of its physical inventory on August 31, 2016, Kate Interiors Company incorrectly counted its inventory as $366,900 instead of the correct amount of $378,500. Indicate the effect of the misstatement on Kate Interiors’ August 31, 2016, ba

> Financial statement data for years ending December 31 for Latchkey Company follows: a. Determine the ratio of sales to assets for 2016 and 2015. b. Does the change in the ratio of sales to assets from 2015 to 2016 indicate a favorable or an unfavorable

> Valley Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on July 31, 2016, follows: The following business transactions were completed by Valley Realty during August 2016: Aug. 1. Purchased offi

> Using the following accounts and balances, prepare the Stockholders’ Equity section of the balance sheet. Five-hundred thousand shares of common stock are authorized, and 40,000 shares have been reacquired. Common Stock, $120 par $

> On October 23, 2016, Wilkerson Company had a market price of $40 per share of common stock. For the previous year, Wilkerson paid an annual dividend of $1.20. Compute the dividend yield for Wilkerson Company.

> Financial statement data for years ending December 31 for Robinhood Company follows: a. Determine the accounts receivable turnover for 2016 and 2015. b. Determine the number of days’ sales in receivables for 2016 and 2015. Use 365 day

> Journalize the entries to record the following selected bond investment transactions for Hall Trust: a. Purchased for cash $300,000 of Oates City 4% bonds at 100 plus accrued interest of $3,000. b. Received first semiannual interest payment. c. Sold $150

> On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item, as shown in Exhibit 10. Inventory Quantity Cost per Unit Market Value per Unit (Net Realli

> Hahn Flooring Company’s perpetual inventory records indicate that $1,333,150 of merchandise should be on hand on December 31, 2016. The physical inventory indicates that $1,309,900 of merchandise is actually on hand. Journalize the adjusting entry for th

> Balance sheet data for Brimstone Company follows: a. Determine the working capital and current ratio for 2016 and 2015. b. Does the change in the current ratio from 2015 to 2016 indicate a favorable or an unfavorable trend? 2016 2015 Current assets

> Using the following data for Sentinel Travel Service as well as the retained earnings statement shown in Practice Exercise 1-5B, prepare a balance sheet as of August 31, 2016: Exercise 1-5B: Using the income statement for Sentinel Travel Service shown

> Using the following accounts and balances, prepare the Stockholders’ Equity section of the balance sheet. Two hundred fifty thousand shares of common stock are authorized, and 17,500 shares have been reacquired. Common Stock, $60 p

> On June 30, 2016, Setzer Corporation had a market price of $100 per share of common stock. For the previous year, Setzer paid an annual dividend of $4.00. Compute the dividend yield for Setzer Corporation.

> Using the bond from Practice Exercise 12-5A, journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar. Exercise 12-5A: On the first day of the fiscal year, a company issues a $2,000,000, 8%, fi

> Financial statement data for years ending December 31 for Chiro-Solutions Company follows: a. Determine the accounts receivable turnover for 2016 and 2015. b. Determine the number of days’ sales in receivables for 2016 and 2015. Use 3

> On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item, as shown in Exhibit 10. Inventory Quantity Cost per Unit Market Value per Unit (Net Realli

> Castle Furnishings Company’s perpetual inventory records indicate that $675,400 of merchandise should be on hand on November 30, 2016. The physical inventory indicates that $663,800 of merchandise is actually on hand. Journalize the adjusting entry for t

> Balance sheet data for HQ Properties Company follows: a. Determine the working capital and current ratio for 2016 and 2015. b. Does the change in the current ratio from 2015 to 2016 indicate a favorable or an unfavorable trend? 2016 2015 Current as

> Using the following data for Ousel Travel Service as well as the retained earnings statement shown in Practice Exercise 1-5A, prepare a balance sheet as of November 30, 2016: Exercise 1-5A: Using the income statement for Ousel Travel Service shown in

> On April 1, 2016, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April: a. Opened a business bank account with a deposit of $24,000 in exchange for common stock. b. Paid rent on office and equipment

> On January 1, 2016, Valuation Allowance for Available-for-Sale Investments had a zero balance. On December 31, 2016, the cost of the available-for-sale securities was $24,260, and the fair value was $26,350. Prepare the adjusting entry to record the unre

> Financial data for Bonita Company follows: a. Compute the ratio of cash to monthly cash expenses. b. Interpret the results computed in (a). For Year Ended December 31, 2016 $ 187,180 Cash on December 31, 2016 Cash flow from operations (458,400)

> Using the income statement for Sentinel Travel Service shown in Practice Exercise 1-4B, prepare a retained earnings statement for the year ended August 31, 2016. Barb Schroeder invested an additional $36,000 in the business in exchange for common stock,

> On January 1, 2016, Valuation Allowance for Available-for-Sale Investments had a zero balance. On December 31, 2016, the cost of the available-for-sale securities was $78,400, and the fair value was $72,600. Prepare the adjusting entry to record the unre

> On the first day of the fiscal year, a company issues a $2,000,000, 8%, five-year bond that pays semiannual interest of $80,000 ($2,000,000 × 8% × ½), receiving cash of $2,170,604. Journalize the bond issuance.

> The payroll register of Konrath Co. indicates $13,200 of social security withheld and $3,300 of Medicare tax withheld on total salaries of $220,000 for the period. Earnings of $35,000 are subject to state and federal unemployment compensation taxes at th

> Guzman Company received a 60-day, 5% note for $54,000 dated July 12 from a customer on account. a. Determine the due date of the note. b. Determine the maturity value of the note. c. Journalize the entry to record the receipt of the payment of the note a

> National Furniture Company has 25,000 shares of cumulative preferred 2% stock, $75 par and 200,000 shares of $10 par common stock. The following amounts were distributed as dividends: Determine the dividends per share for preferred and common stock for

> Financial data for Otto Company follows: a. Compute the ratio of cash to monthly cash expenses. b. Interpret the results computed in (a). For Year Ended December 31, 2016 $ 69,350 Cash on December 31, 2016 Cash flow from operations (114,000)

> Using the income statement for Ousel Travel Service shown in Practice Exercise 1-4A, prepare a retained earnings statement for the year ended November 30, 2016. Shane Ousel invested an additional $50,000 in the business in exchange for common stock durin

> Milo Corporation purchased land for $540,000. Later in the year, the company sold a different piece of land with a book value of $270,000 for $180,000. How are the effects of these transactions reported on the statement of cash flows?

> The following accounts, with the balances indicated, appear in the ledger of Codigo Co. on December 1 of the current year: The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December: Dec. 1. Issued Ch

> On January 1, 2016, Valuation Allowance for Trading Investments had a zero balance. On December 31, 2016, the cost of the trading securities portfolio was $41,500, and the fair value was $46,300. Prepare the December 31, 2016, adjusting journal entry to

> After the accounts have been adjusted at April 30, the end of the fiscal year, the following balances were taken from the ledger of Nuclear Landscaping Co.: Journalize the four entries required to close the accounts. Retained Earnings. $643,600 Div

> On June 1, 2016, Herbal Co. received $18,900 for the rent of land for 12 months. Journalize the adjusting entry required for unearned rent on December 31, 2016.

> The revenues and expenses of Sentinel Travel Service for the year ended August 31, 2016, follow: Prepare an income statement for the year ended August 31, 2016. Fees earned . $750,000 Office expense 295,000 Miscellaneous expense 12,000 Wages expens

> On January 1, 2016, Valuation Allowance for Trading Investments had a zero balance. On December 31, 2016, the cost of the trading securities portfolio was $385,000, and the fair value was $357,400. Prepare the December 31, 2016, adjusting journal entry t

> Using the bond from Practice Exercise 12-3A, journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. Exercise 12-3A: On the first day of the fiscal year, a company issues a $1,200,000, 9%,

> On October 12, Belleville Co. borrowed cash from Texas Bank by issuing a 30-day note with a face amount of $70,000. a. Determine the proceeds of the note, assuming the note carries an interest rate of 6%. b. Determine the proceeds of the note, assuming t

> The revenues and expenses of Ousel Travel Service for the year ended November 30, 2016, follow: Prepare an income statement for the year ended November 30, 2016. Fees earned. $1,475,000 ..... Office expense 320,000 ......... Miscellaneous expense 2

> Olde Wine Corporation has 250,000 shares of $40 par common stock outstanding. On February 15, Olde Wine Corporation declared a 2% stock dividend to be issued May 2 to stockholders of record on March 27. The market price of the stock was $52 per share on

> The payroll register of Konrath Co. indicates $13,200 of social security withheld and $3,300 of Medicare tax withheld on total salaries of $220,000 for the period. Federal withholding for the period totaled $43,560. Provide the journal entry for the peri

> At the end of the current year, Accounts Receivable has a balance of $1,975,000; Allowance for Doubtful Accounts has a credit balance of $19,670; and sales for the year total $28,550,000. Using the aging method, the balance of Allowance for Doubtful Acco

> Prepare journal entries for each of the following: a. Issued a check to establish a petty cash fund of $750. b. The amount of cash in the petty cash fund is $115. Issued a check to replenish the fund, based on the following summary of petty cash receipts

> After the accounts have been adjusted at October 31, the end of the fiscal year, the following balances were taken from the ledger of Smart Delivery Services Co.: Journalize the four entries required to close the accounts. Retained Earnings $3,550,

> Prepare a journal entry on December 23 for dividends of $20,000.

> Beginning inventory, purchases, and sales for 30xT are as follows: Assuming a perpetual inventory system and using the weighted average method, determine (a). the weighted average unit cost after the May 23 purchase, (b). the cost of the merchandise s

> Staley Inc. reported the following data: Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Net income $280,000 Depreciation expense . 48,000 Loss on disposal of equipment 19,520 Incr

> Pettygrove Inc. reported the following data: Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Net income $405,000 Depreciation expense .... 45,000 Gain on disposal of equipment 36,9

> The following three identical units of Item BZ1810 are purchased during November: Assume that one unit is sold on November 30 for $90. Determine the gross profit for November and ending inventory on November 30 using the (a). first-in, first-out (FIFO)

> The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are shown in Problem 6-1B. Problem 6-1B: The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending

> The following accounts appear in an adjusted trial balance of Kangaroo Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability; (d) long-term liability; or (e) stockh

> Data on the physical inventory of Ashwood Products Company as of December 31, 2016, follows: Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Instructions: Deter

> Saverin, Inc. produces and sells outdoor equipment. On July 1, 2016, Saverin, Inc. issued $62,500,000 of 10-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of $66,747,178. Interest on the bonds is payable semiannually on Decemb

> On July 1, 2016, Merideth Industries Inc. issued $28,500,000 of 10-year, 8% bonds at a market (effective) interest rate of 9%, receiving cash of $26,646,292. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the

> PepsiCo, Inc., reported the following information about its long-term debt in the notes to a recent financial statement (in millions): Long-term debt is comprised of the following: a. How much of the long-term debt was disclosed as a current liability

> On June 30, Collins Management Company purchased land for $400,000 and a building for $560,000, paying $360,000 cash and issuing a 5% note for the balance, secured by a mortgage on the property. The terms of the note provide for 20 semiannual payments of

> Gabriel Co. produces and distributes semiconductors for use by computer manufacturers. Gabriel Co. issued $600,000 of 10-year, 8% bonds on May 1 of the current year at face value, with interest payable on May 1 and November 1. The fiscal year of the comp

> The prepaid insurance account had a beginning balance of $9,600 and was debited for $12,900 of premiums paid during the year. Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance related to future per

> The financial statements for Nike, Inc., are presented in Appendix B at the end of the text. What is the major source of financing for Nike? Appendix B: Year Ended May 31, (In millions, except per share data) Income from continuing operations: 2013

> A business had revenues of $640,000 and operating expenses of $715,000. Did the business (a) incur a net loss or (b) realize net income?

> What is a mortgage note?

> Assume the same data as in Exercise 12–19, except that the current interest rate is 12%. Will the present value of your winnings using an interest rate of 12% be more than the present value of your winnings using an interest rate of 5%?

> Adele Corp., a wholesaler of music equipment, issued $22,000,000 of 20-year, 7% callable bonds on March 1, 2016 at their face amount, with interest payable on March 1 and September 1. The fiscal year of the company is the calendar year. Journalize the en

> The total assets and total liabilities (in millions) of Green Mountain Coffee Roasters, Inc. and Starbucks Corporation follow: Determine the stockholders’ equity of each company. Green Mountain $3,616 Starbucks Assets $8,219 Liabi

> On July 31, 2016, the balances of the accounts appearing in the ledger of Serbian Interiors Company, a furniture wholesaler, are as follows: Prepare the July 31, 2016, closing entries for Serbian Interiors Company. Accumulated Depr.-Building Admini

> Based on the data presented in Exercise 5-23, journalize the closing entries. Exercise 5-23: On October 31, 2016, the balances of the accounts appearing in the ledger of Prestige Furnishings Company, a furniture wholesaler, are as follows: $ 980,0

> For a recent year, OfficeMax and Staples are two companies competing in the retail office supply business. OfficeMax had a net income of $34,894,000, while Staples had a net loss of $210,706,000. OfficeMax had preferred stock of $28,726,000 with preferre