Explore BrainMass
Share

Explore BrainMass

    Rem Inc. produces electronic components for sale to manufact

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Rem Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems. In connection with her examination of Rem's financial statements for the year ended December 31, 2007, Maggie Zeen, CPA, completed field work 2 weeks ago. Ms. Zeen now is evaluating the significance of the following items prior to preparing her auditor's report. Except as noted, none of these items have been disclosed in the financial
    statements or notes.
    Item 1
    A 10-year loan agreement, which the company entered into 3 years ago, provides that dividend payments may not exceed net income earned after taxes subsequent to the date of the agreement. The balance of retained earnings at the date of the loan agreement was $420,000. From that date through December 31, 2007, net income after taxes has totaled $570,000 and cash dividends have totaled $320,000. On the basis of these data, the staff auditor assigned to this review concluded that there was no retained earnings restriction at December 31, 2007.
    discuss any additional disclosures in the financial statements and notes that the auditor should recommend to her client. (The cumulative effect of the four items should not be considered

    © BrainMass Inc. brainmass.com October 10, 2019, 2:55 am ad1c9bdddf
    https://brainmass.com/business/finance/rem-inc-produces-electronic-components-for-sale-to-manufact-400033

    Solution Preview

    Rem Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems. In connection with her examination of Rem's financial statements for the year ended December 31, 2007, Maggie Zeen, CPA, completed field work 2 weeks ago. Ms. Zeen now is evaluating the significance of the following items prior to preparing her auditor's report. Except as noted, none of these items have been disclosed in the financial
    statements or notes.
    Item 1
    A 10-year loan agreement, which the company entered into 3 years ...

    Solution Summary

    Rem Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems. In connection with her examination of Rem's financial statements for the year ended December 31, 2007, Maggie Zeen, CPA, completed field work 2 weeks ago. Ms. Zeen now is evaluating the significance of the following items prior to preparing her auditor's report. Except as noted, none of these items have been disclosed in the financial
    statements or notes.
    Item 1
    A 10-year loan agreement, which the company entered into 3 years ago, provides that dividend payments may not exceed net income earned after taxes subsequent to the date of the agreement. The balance of retained earnings at the date of the loan agreement was $420,000. From that date through December 31, 2007, net income after taxes has totaled $570,000 and cash dividends have totaled $320,000. On the basis of these data, the staff auditor assigned to this review concluded that there was no retained earnings restriction at December 31, 2007.
    discuss any additional disclosures in the financial statements and notes that the auditor should recommend to her client. (The cumulative effect of the four items should not be considered

    $2.19