Question: The funded status of Patel Paneling Inc.’
The funded status of Patel Paneling Inc.’s defined benefit pension plan and the balances in prior service cost and the net gain—pensions, are given below ($ in thousands): 
Retirees were paid $270,000, and the employer contribution to the pension fund was $245,000 at the end of 2024. The expected rate of return on plan assets was 10%, and the actuary’s discount rate is 7%. There were no changes in actuarial estimates and assumptions regarding the PBO. Required: Determine the following amounts for 2024: 1. Actual return on plan assets. 2. Loss or gain on plan assets. 3. Service cost. 4. Pension expense. 5. Average remaining service life of active employees (used to determine amortization of the net gain).
> You are the partner on the audit of Data save Inc., a small publicly held corporation that manufactures high-speed disk drives for the computer industry. The audit of Data save had been progressing satisfactorily until you were about a month away from is
> Auditors assess the risks of material misstatement and then design further audit procedures. a. Describe the auditors’ approach to identifying and assessing the risks of material misstatement. b. Describe likely responses when an audit is considered to b
> Gordon & Moore, CPAs, were the auditors of Fox & Company, a brokerage firm. Gordon & Moore examined and reported on the financial statements of Fox, which were filed with the Securities and Exchange Commission. Several of Fox’s customers were swindled
> Bill Jones is a partner with Adel son & Co., a one office CPA firm located in Tucson, Arizona. He is the engagement partner on the audit team of NRG, LTD, a public company and he has just discovered that his wife Sophia owns 100 shares of NRG, shares wo
> The CPA firm Hank and Henry LLP is performing its first integrated audit of their recently acquired public client Wigly Corporation. Wigly has been in existence for 10 years. Wigly Corporation has two branch locations and has a monthly performed manageme
> In the audit of Wheat Inc. for the year ended December 31, you discover that the client had been drawing checks as creditors’ invoices became due but had not been mailing the checks immediately. Because of a working capital shortage, some checks have bee
> Use the Code of Professional Conduct (available at pub.aicpa.org/code of conduct) to research each of the circumstances presented in Problem 3-41 and address whether Bell & Greer’s independence is impaired. Provide the section of the Independence Rule an
> Metropolitan Corporation has a significant investment in a closely-held corporation, Wake Forest Company. Metropolitan’s investment does not enable the company to exercise significant influence over the operating and financial operations of Wake Forest
> Assume that you are auditing the financial statements of Young Manufacturing Co. Management of Young has designed a review control for cash disbursements using data analytics. The company’s software examines all disbursements for duplicate payments, unus
> Carson Inc. is a private company that manufactures heavy machinery. The company has an active audit committee and board of directors. The audit committee consists of two outside directors and Howard Kress, the company chief financial officer. The audit c
> Assume that you are auditing the financial statements of Wexler Inc. Wexler’s financial statements include a number of significant estimates. a. Describe the desired internal controls over the processes for developing accounting estimates b. Describe how
> Robert Tailor, CPA, is planning the audit of The Neighborhood Store, a local grocery cooperative. Because The Neighborhood Store is a small business operated entirely by part-time volunteer personnel, internal control is weak. Tailor has decided that he
> Many companies have implemented COSO’s enterprise risk management framework to assist them in managing risks. a. Are public companies required by the SEC to implement COSO’s enterprise risk management framework? Explain. b. Describe two of the components
> Auditors identify “significant risks” when performing their audits. a. Explain what is meant by a significant risk. b. What factors do auditors consider in assessing whether a risk is a significant risk? c. Describe how a significant risk should be treat
> Assume that you are auditing the financial statements of Wagner Pharma Co. for the year ending June 30, 20X1. Wagner has very large warehouses where it stores its numerous prescription drug products. The company tracks inventory with a radio frequency id
> Warren Manufacturing Company retains you on April 1 to perform an audit for the fiscal year ending June 30. During the month of May, you make extensive studies of internal control over inventories. All goods purchased pass through a receiving department
> Micro core Corp., a high-technology company, utilizes the following procedures for recording materials and transferring them to work in process. (1) Upon receipt of raw materials by stores, the storekeeper prepares a stock-in report with part number and
> Note: This simulation integrates concepts first presented in Chapter 5 (see Figure 5.1 for Assertions about Account Balances) and information from throughout the procedural chapters (Chapters 10 through 16) rather than only Chapter 16 coverage. This prob
> Described below are potential financial statement misstatements that are encountered by auditors in the audit of inventory and cost of goods sold. a. Management of a chain of discount department stores systematically overstates inventory quantities at se
> Howe Pharmaceutical Company produces a number of drugs that are regulated by various agencies, including, in the United States, the federal Food and Drug Administration (FDA). These agencies issue licenses that approve drugs for sale and establish specif
> International Trading Co., a client of your CPA firm, has requested your advice on the following problem. It has three clerical employees who must perform the following functions: (1) Maintain general ledger. (2) Maintain accounts payable ledger. (3) Mai
> Match the following definitions (or partial definitions) to the appropriate term. Each term may be used once or not at all.
> Wren, Inc., a nonpublic company, retains Ying and Company CPA to audit its financial statements and internal control. Sarah Smith, the senior on the audit prepared the following first draft of an unmodified report: Respond as to the accuracy of the follo
> For each term in the first column, select the partial (or compete) definition or illustration. Each partial (or complete) definition or illustration may be used only once, or not at all.
> Match each the following statements with the appropriate type of auditors’ opinion (each auditors’ report may be used once, more than once, or not at all): A. Adverse. D. Disclaimer. Q. Qualified. U. Unmodified.
> John Wilson wishes to use no statistical sampling to select a sample of his client’s 3,000 accounts receivable, which total $4,500,000. He believes that $225,000 represents a reasonable tolerable misstatement. He also has assessed both the combination of
> The auditors of Kansas Corporation wish to use a structured approach to no statistical sampling to evaluate the reasonableness of the accounts receivable. Kansas has 30,000 receivable accounts with a total book value of $5,000,000. The auditors have asse
> Select the best answer for each of the following questions. Explain the reasons for your selection. 16 If the auditors had identified a number of items in the population that they considered individually significant (e.g., perhaps three accounts exist th
> Assume you are testing the internal controls over sales transactions for the Tidwell Co. audit. You have tested the general controls and found them to be operating effectively. You are now testing the application controls over sales transactions and have
> Ratio estimation and difference estimation are two widely used variables sampling plans. a. Under what conditions are ratio estimation or difference estimation appropriate sampling plans for estimating the total dollar value of a population? b. What rela
> Linda Williams is auditing the financial statements of Western Industries. In the performance of mean-per-unit estimation of credit sales, Williams took a sample of 200 of the 10,000 items in the population (book value $6,000,000). The sample’s average b
> You are the auditor of Unet Inc., an auto air-conditioner service and repair company, and you have decided to use the mean-per-unit method to test the existence and gross valuation of recorded accounts receivable. The client’s records include 10,000 acco
> James Duffney, CPA, has randomly selected and audited a sample of 100 of Will-Mart’s accounts receivable. Will-Mart has 6,000 accounts receivable accounts with a total book value of $6,000,000. Duffney has determined that the account’s tolerable misstate
> Select the best answer for each of the following questions. Explain the reasons for your selection. a. The auditors are using unratified mean-per-unit sampling to audit accounts receivable as they did in the prior year. Which of the following changes in
> Use the replies presented in the preceding problem for this problem. a. Use the ratio method to calculate: (1) Projected misstatement. (2) Estimated total audited value. b. Use the difference estimation method to calculate: (1) Projected misstatement. (2
> Brittany Petro wishes to use mean-per-unit sampling to evaluate the reasonableness of the book value of the accounts receivable of Littler, Inc. littler has 10,000 receivable accounts with a total book value of $1,500,000. Petro estimates the population&
> Len Wagner, CPA, is considering the use of monetary unit sampling in examining the sales transactions and accounts receivable of Mason Wholesale Company. Required: a. How does the definition of the items in an accounts receivable population vary between
> The auditors wish to test the valuation of accounts receivable in the audit of Desert Enterprises of Bullhead City. The client has $500,000 of total recorded receivables, composed of 850 accounts. The auditors have determined the following: The auditors
> Kevin koi, CPA, was engaged to audit Tolle Company’s financial statements for the year ended December 31, 20X0. After obtaining an understanding of Tolle’s internal control, koi decided to obtain audit evidence about the effectiveness of both the design
> You have been assigned to the audit of Utopia Industries Inc. for the year ended December 31, 20X1. The company makes components for communications and defense applications. To obtain an understanding of the methods of revenue recognition used by such bu
> On January 1, 2024, Canseco Plumbing Fixtures purchased equipment for $30,000. Residual value at the end of an estimated four-year service life is expected to be $2,000. The company expects the equipment to operate for 10,000 hours. Calculate depreciatio
> The following is an excerpt from a disclosure note in The Clorox Company’s annual report for the fiscal year ended June 30, 2020: Required: 1. What amount did Clorox report in its balance sheet related to the pension plan at June 30, 2
> The information below pertains to the retiree health care plan of Thompson Technologies: Thompson began funding the plan in 2024 with a contribution of $127,000 to the benefit fund at the end of the year. Retirees were paid $52,000. The actuaryâ
> Sachs Brands’ defined benefit pension plan specifies annual retirement benefits equal to 1.6% × service year’s × final year’s salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire
> Stockton Labeling Company has a retiree health care plan. Employees become fully eligible for benefits after working for the company eight years. Stockton hired Misty New burn on January 1, 2024. As of the end of 2024, the actuary estimates the total net
> Century-Fox Corporation’s employees are eligible for postretirement health care benefits after both being employed at the end of the year in which age 60 is attained and having worked 20 years. Jason Snyder was hired at the end of 2001
> Reproduced below are the journal entries related to Illustration 17–12 in this chapter that Global Communications used to record its pension expense and funding in 2024 and the new gain and loss that occurred that year. To focus on the
> Actuary and trustee reports indicate the following changes in the PBO and plan assets of Lakeside Cable during 2024: Required: 1. Determine Lakeside’s pension expense for 2024, and prepare the appropriate journal entries to record the e
> The following pension-related data pertain to Metro Recreation’s noncontributory, defined benefit pension plan for 2024 ($ in thousands): Required: Prepare a pension spreadsheet that shows the relationships among the various pension ba
> Lewis Industries adopted a defined benefit pension plan on January 1, 2024. By making the provisions of the plan retroactive to prior years, Lewis incurred a prior service cost of $2 million. The prior service cost was funded immediately by a $2 millio
> Refer to the situation described in BE 11–17. Assume that the present value of the estimated future cash flows generated from the division’s assets is $22 million and that their fair value approximates fair value less costs to sell. What amount of impair
> The Collar Company has a defined benefit pension plan. Pension information concerning the fiscal years 2024 and 2025 are presented below ($ in millions): Information Provided by Pension Plan Actuary: a. Projected benefit obligation as of December 31, 202
> Refer to the situation described in P 17–10. Assume Electronic Distribution prepares its financial statements according to International Financial Reporting Standards (IFRS). Also assume that 10% is the current interest rate on high-quality corporate bon
> Electronic Distribution has a defined benefit pension plan. Characteristics of the plan during 2024 are as follows: The expected long-term rate of return on plan assets was 8%. There were no AOCI balances related to pensions on January 1, 2024, but at th
> Sachs Brands’ defined benefit pension plan specifies annual retirement benefits equal to 1.6% × service year’s ×final year’s salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire a
> Corning-Howell reported taxable income in 2024 of $120 million. At December 31, 2024, the reported amount of some assets and liabilities in the financial statements differed from their tax bases as indicated below: The total deferred tax asset and deferr
> Arndt, Inc., reported the following for 2024 and 2025 ($ in millions): a. Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2024 for $60 million. The cost is tax deductible in 2024. b. Expenses include $2 milli
> Sherrod, Inc., reported pretax accounting income of $76 million for 2024. The following information relates to differences between pretax accounting income and taxable income: a. Income from installment sales of properties included in pretax accounting i
> You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company’s income tax position based on the following: 1. Pretax accounting income was $45 million and taxable income was $8 million for the
> The De Ville Company reported pretax accounting income on its income statement as follows: Included in the income of 2024 was an installment sale of property in the amount of $50,000. However, for tax purposes, De Ville reported the income in the year ca
> Zakary Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2024 through 2027 except for differences in depreciation on an operational asset. The asset cost $120,000 and is depreciate
> Refer to the situation described in BE 11–17. Assume that the undiscounted sum of estimated future cash flows is $24 million instead of $28 million. What amount of impairment loss should C&R report in its income statement?
> Dixon Development began operations in December 2024. When lots for industrial development are sold, Dixon recognizes income for financial reporting purposes in the year of the sale. For some lots, Dixon recognizes income for tax purposes when collected.
> Times-Roman Publishing Company reports the following amounts in its first three years of operation: The difference between pretax accounting income and taxable income is due to subscription revenue for one year magazine subscriptions being reported for t
> Shyer Co. reports net operating income (loss) for financial reporting and tax purposes in each year as follows: Shyer’s 2020 NOL is driven by an unfortunate obsolescence of its primary product. Given great uncertainty in Shyerâ
> True Developers, Inc., sells plots of land for industrial development. True recognizes income for financial reporting purposes in the year it sells the plots. For some of the plots sold this year, True took the position that it could recognize the income
> The long-term liabilities section of CPS Transportation’s December 31, 2023, balance sheet included the following: a. A lease liability with 15 remaining lease payments of $10,000 each, due annually on January 1: The incremental borrowi
> Fore Farms reported a pretax operating loss of $137 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $5 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 202
> Fore Farms reported a pretax operating loss of $137 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $5 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 202
> Alsip Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. AL sup recognizes service revenue for financial reporting purposes when the services are performed.
> Mid-South Auto Leasing leases vehicles to consumers. The attraction to customers is that the company can offer competitive prices due to volume buying. On September 30, 2024, the company leased a delivery truck to a local florist, Anything Grows. The fi
> Each of the four independent situations below describes a sales-type lease in which annual lease payments of $10,000 are payable at the beginning of each year. Each is a finance lease for the lessee. Determine the following amounts at the beginning of th
> Refer to the situation described in BE 11–14. Assume that 2022 depreciation was incorrectly recorded as $32,000. This error was discovered in 2024. (1) Record the journal entry needed in 2024 to correct the error. (2) What is depreciation on the building
> On January 1, 2024, Rick’s Pawn Shop leased a truck from Corey Motors for a six-year period with an option to extend the lease for three years. Rick’s had no significant economic incentive as of the beginning of the lease to exercise the three-year exte
> On January 1, 2024, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value
> On January 1, 2024, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $80,000 each, beginning December 31, 2024, and on each December 31 through 2026. The lessor,
> Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians’ Leasing purchased a lithotripter from Rand for $2,000,000 and leased it to Mid-South Urologists Group, Inc.
> On January 1, 2024, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portio
> Abbott Equipment leased a protein analyzer to Werner Chemical, Inc., on September 30, 2024. Abbott purchased the machine from Nutrias, Inc., at a cost of $6 million. The five-year lease agreement calls for Werner to make quarterly lease payments of $391,
> Werner Chemical, Inc., leased a protein analyzer on September 30, 2024. The five-year lease agreement calls for Werner to make quarterly lease payments of $391,548, payable each September 30, December 31, March 31, and June 30, with the first payment on
> On January 1, 2024, Worcester Construction leased International Harvester equipment from Waltham Lease Corp. Waltham Lease Corp purchased the equipment from Wellesley Harvester at a cost of $958,158. Worcester’s borrowing rate for similar transactions is
> On January 1, 2024, Harlan Consulting entered into a three-year lease for new office space agreeing to lease payments of $7,000 in 2024, $6,000 in 2025, and $5,000 in 2026. Payments are due on December 31 of each year with the first payment being made on
> On January 1, 2024, Harlan Consulting entered into a three-year lease for new office space agreeing to lease payments of $5,000 in 2024, $6,000 in 2025, and $7,000 in 2026. Payments are due on December 31 of each year with the first payment being made on
> Refer to the situation described in BE 11–14. Assume that instead of changing the useful life and residual value, in 2024 the company switched to the double-declining-balance depreciation method. How should Robotics account for the change? What is deprec
> On January 1, 2024, Nguyen Electronics leased equipment from Navels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Navels. The equipment cost Navels $1,236,552 and has an expecte
> Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Co. for a non-cancelable stated lease term of four years ending December 31, 2028, at which time possession of the le
> Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Co. for a four-year period ending December 31, 2028, at which time possession of the leased asset will revert back to
> On December 31, 2024, Rhone-Metro Industries leased equipment to Western Soya Co. for a four-year period ending December 31, 2028, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost Rhone-Metro $365,760 and h
> At the beginning of 2024, VHF Industries acquired a machine with a fair value of $6,074,700 by signing a four year lease. The lease is payable in four annual payments of $2 million at the end of each year. Required: 1. What is the effective rate of inte
> Lathery Leasing purchased a single-engine plane for $400,000 and leased it to Red Baron Flying Club for its fair value of $645,526 on January 1, 2024. Terms of the lease agreement and related facts were a. Eight annual payments of $110,000 beginning Janu
> Lathery Leasing purchased a single-engine plane for its fair value of $645,526 and leased it to Red Baron Flying Club on January 1, 2024.Terms of the lease agreement and related facts were a. Eight annual payments of $110,000 beginning January 1, 2024, t
> On December 31, 2024, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45,114. The lease agreement specified annual payments of $11,000 beginning December 31, 2024, the beginning of
> Bran if Leasing leases mechanical equipment to industrial consumers under sales-type leases that earn Bran if a 10% rate of return for providing long-term financing. A lease agreement with Branson Construction specified 20 annual payments beginning Decem
> Terms of a lease agreement and related facts were as follows: a. The lease asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value (straight-line depreciation). b. Annual lease payments at the beginning of
> At the beginning of 2022, Robotics Inc. acquired a manufacturing facility for $12 million. $9 million of the purchase price was allocated to the building. Depreciation for 2022 and 2023 was calculated using the straight-line method, a 25-year useful life
> On January 1, 2024, Lecco Leasing leased equipment to Quality Services under a finance/sales-type lease designed to earn Lecco a 12% rate of return for providing long-term financing. The lease agreement specified a. Ten annual payments of $56,000 beginni
> Newton Labs leased chronometers from Brookline Instruments on January 1, 2024. Brookline Instruments manufactured the chronometers at a cost of $200,000. The chronometers have a fair value of $260,000. Appropriate adjusting entries are made quarterly. R
> On January 1, 2024, Ghosh Industries leased a high-performance conveyer to Karrie Company for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Ghosh. The equipment cost Ghosh $956,000 and has a
> High Time Tours leased rock-climbing equipment from Adventures Leasing on January 1, 2024. High Time has the option to renew the lease at the end of two years for an additional three years for $8,000 per quarter. Adventures purchased the equipment at a c
> Universal Leasing leases electronic equipment to a variety of businesses. The company’s primary service is providing alternate financing by acquiring equipment and leasing it to customers under long-term leases. Universal earns interest under these arran
