Below are two independent situations: A. Grinner and Greeter, CPAs, were engaged to perform an audit of the financial statements of Happy, Inc. Happy's management would not allow Grinner and Greeter to confirm any of the accounts receivable. All other auditing procedures were performed as considered necessary by Grinner and Gr
When performing procedures in a search of unrecorded liabilities, auditors can utilize various sources of evidence/information (e.g. documents, files, management and clerical personnel). Required: list at least five, but not more than seven, sources of evidence/information for the search for unrecorded liabilities.(Do not wr
1. What are the criteria for classifying an item as a current liability? What are some examples of current liabilities? Why is it important to classify a portion of long-term debt on a yearly basis as a current liability? What is the implication of misclassifying a liability as current or long-term? How can misclassification of
Distinguish between an expense (expired cost) and an asset. Distinguish between current and long-term assets. Distinguish between current and long-term liabilities. Review Apple's balance sheet and provide two examples of each of the above categories. Discuss retained earnings and how income or loss and dividends
During 2010, Eaton Co. introduced a new product carrying a 2-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2010 and 2011 are as foll
Mott Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Mott $2.00 each. Mott estimates that 40% of the coupons will be redeemed. Data for 2010 and 2011 are as follows. 2010 2011 Bags
A company offers a cash rebate of $1 on each $4 package of light bulbs sold during 2010. Historically, 10% of customers mail in the rebate form. During 2010, 4,000,000 packages of light bulbs were sold, and $140,000 in $1 rebates are mailed to customers. What is the rebate expense and liability, respectively, on the 2010 fina
1. On November 1, 2011, Quantum Technology, a geothermal energy supplier, borrowed $8.30 million cash to fund a geological survey. The loan was made by Nevada BancCorp under a noncommitted short-term line of credit arrangement. Quantum issued a nine-month, 13% promissory note. Interest was payable at maturity. Quantum's fiscal p
Health care issues 1. Does the legislation include proven medical liability reforms? 2. Why or why not? 3. Support your position based on research.
7) When supplies ordered by a governmental unit are received at an actual price which is more than the estimated price on the purchase order, the Encumbrance Control account is: A. debited for the estimated price on the purchase order B. credited for the actual price on the purchase order C. credited for the or
2. Jo is a CPA working as the CFO of a publicly held corporation. The CEO, John, asks the Jo to overstate estimated accrued liabilities. What are Jo's, and John's civil and criminal liabilities with regard to John's request?
C 10 - Reporting & Analyzing Liabilities  1. Does your company use short-term or long-term financing to acquire a majority of funds it needs? Please explain without going into too much detail about your company. 2. What are the advantages of using long-term debt versus short-term debt? Discuss the impact base on their ava
Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect a company's total assets, liabilities, and stockholders' equity. Assets Liabilities Stockholders 'Equity (1) Declaring a cash dividend (2) Paying the cash dividend declared in (1) (3) Declaring a stock divi
1. Devin contributes land (adjusted basis of $30,000; fair market value of $100,000) to Thompson, Inc., in exchange for all of its stock. The land is encumbered by a mortgage of $27,000 which Thompson, Inc. assumes. The transaction qualifies for non-recognition treatment under code section 351. Compute Devin's adjusted basis for
There are two types of current liabilities that must be estimated. Describe them and explain why they must be estimated. How are the financial statements affected if they are not estimated?
Wilde Corporation owns 30% of the outstanding stock of Bernie, Inc. Bernie recorded net income of $10M and paid dividends of $3M in 2005. For each of the following ratios, state the effect (higher, lower or no effect) that the use of the equity method would have on Wilde's financial ratios compared to the use of the cost method
What are the arguments for and against requiring banks to mark all assets and liabilities to market continuously? Relate your arguments to managing credit risk and interest rate risk.
The accountant for the Linville Company forgot to make an adjusting entry to record revenue earned but not yet billed to customers. The effect of this error is: 1. An overstatement of assets and of net income offset by an understatement of stockholders' equity. 2. An overstatement of net income and an understatement of as
You were in the final stages of your audit of the financial statements of Scott Corporation for the year ended December 31, 20X0, when you were consulted by the corporation's president, who believes there is no point to your examining the 20X1 voucher register and testing data in support of 20X0 entries. He stated that (1)
See attachment for proper format. The information presented here represents selected data from the December 31, 2010, balance sheets and income statements for the year then ended for three firms. Calculate the missing amounts for each firm. Firm A Firm B Firm C Total assets, 1
1. What factors should a company consider when selecting a depreciation method? 2. Why would you say is it important to separate current liabilities from long-term liabilities?
Question 1 1. Sales taxes payable is a/an: a)estimated liability. b)contingent liability. c)current liability for retailers. d)business expense. Question 2 1. Phildell Phoenix is paid on a monthly basis. For the month of January of the current year, he earned a total of $8,288. FICA tax for social secu
Gage Co. purchases land and constructs a service station and car wash for a total of $360,000. At January 2, 2010, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $400,000 and immediately leased from the oil company by Gage. Fair value of the land at time of t
Tom Perry recently completed the first month of his landscaping business and has contacted you for help in preparing financial statements. While he understands that liabilities are the debts his business owes, he is a little confused about the difference between current and long-term liabilities. His business currently owes the
Use account titles for the transactions: Cash, Accounts Payable, Notes Payable, Interest Payable, Unearned Ticket Revenue, Ticket Revenue, Supplies Expense, Discount, and Interest Expense. Scenario 1: On April 1, 2009 Williams Company borrowed $100,000 from National Bank. The note is a 10%, nine month note. Interest accrues q
a. What is a contingency, and how does it differ from a liability? b. Under what conditions should a contingency be reported as if it were a liability? c. What are some examples of contingencies that a company might face? Explain.
Hardin, Sutton, and Williams has operated a local business as a partnership for several years. All profits and losses have been allocated in a 3:2:1 ratio, respectively. Recently, Williams has undergone personal financial problems, and is insolvent. To satisfy William's creditors, the partnership has deiced to liquidate. The
Wilson Company is involved in a litigation suit concerning the clean-up of old underground oil storage tanks on property it sold to a housing development company five years ago. The attorneys for Wilson Company cannot give a best estimate for the probable liability; however, the attorneys state that the liability to Wilson Comp
A gift card is a liability correct and an unearned income correct. What happens if the gift card is never used and how long will it stay on the books as a liability? What happens to the money that the organization has for unused gift cards?
1. Digby has a leverage of 1.81 This means that: (Assume leverage is calculated as Assets/Equity) 2. On July 31st, the Baldwin Corporation's balance sheet reported: Total Assets of $87.248 million Total Common Stock of $2.540 million Cash of $4.020 million Retained Earnings of $20.016 million. What were the Baldwi