Acquisition and retirementsCapital leaseGoodwillNet incomeOwnershipProperty taxRepairs and maintenance Retirement work orderRevenueSubsidiary ledgerWorking papers Select the necessary words from the list of possibilities to complete the following statements.StatementsAns1. The plant and equipment budget is designed to controlof property items.A company may not actually own property recorded as an asset, instead the company may have rights to the2.asset under the terms of aA December 30 acquisition of a new plant asset was recorded after year-end rather than prior to year-end.3.Such an error does not usually result in a significant misstatement ofA dollar minimum ordinarily should be established to be used by accounting personnel for distinguishing4.between capital andexpenditures.In the auditors' first examination of a new client that has changed auditors, the beginning balances of property,5.plant, and equipment accounts may be substantiated by referring to the predecessor auditors'

The preparation, designing, and documentation of internal controls are that of the management. Once,…

Business

Accounting

A

Century 21 Accounting Multicolumn Journal

11th Edition

ISBN:9781337679503

Author:Gilbertson

Publisher:Gilbertson

Chapter19: Accounting For Plant Assets, Depreciation, And Intangible Assets

Section19.4: Disposing Of Plant Assets

Problem 1WT

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It is assumed that this year the company also changed the location of the production line to a new factory. One of the conditions that allows production in the new factory is that company must, at the end of the useful life of factory, dismantle the factory and repair any environmental damage caused to the land on which it is situated. Require: For this information, identify the audit risk to be consider in planning audit and audit procedures to response these risk.
You were assigned to audit the Property, plant and equipment account of your continuing audit client Lolita Corp. for the period ended December 31, 2021. The PPE file in the permanent working paper and in the prior year working paper included the following schedule: All assets were acquired at the inception of operations at the beginning of 2019 and are being depreciated through the following policies: Office Building – Double-declining balance over 20 years (10% salvage value based on cost) Factory Building – SYD over 15 years (10% salvage value based on cost) Office Equipment – Straight-line method over 8 years (no salvage value) Factory Machineries – SYD over 10 years (10% salvage value based on cost) Transactions for 2021 were as follows: An new elevator system costing P800,000 was installed on the company’s Office Building and was completed in early January. On March 31, the company traded a new factory machinery with a cash…
You were assigned to audit the Property, plant and equipment account of your continuing audit client Lolita Corp. for the period ended December 31, 2021. The PPE file in the permanent working paper and in the prior year working paper included the following schedule: All assets were acquired at the inception of operations at the beginning of 2019 and are being depreciated through the following policies: Office Building – Double-declining balance over 20 years (10% salvage value based on cost) Factory Building – SYD over 15 years (10% salvage value based on cost) Office Equipment – Straight-line method over 8 years (no salvage value) Factory Machineries – SYD over 10 years (10% salvage value based on cost) Transactions for 2021 were as follows: An new elevator system costing P800,000 was installed on the company’s Office Building and was completed in early January. On March 31, the company traded a new factory machinery with a cash…
The information provided to you is as follows: Purchase of machinery (!/9/2019) instead of € 32,400 with cash was registered as a purchase of different materials of equal value. The result of the error was to calculate and recognize the consumption of the various materials (theentire amount of the various materials) and not to calculate the depreciation of the machines (annual depreciation 3.240 €). Correction of accounting error is carried out 1/1/2020. The correction record is requested a) if the error was found in the fiscal year (2020) and b) if the error was found in the next financial year (2021) i.e. the error while the correction entry was made in 2020 takes place on 1/1/2021.
Which of the following controls will most likely justify a reduced assessed level ofcontrol risk for the existence assertion for equipment?(1) Internal auditors periodically select equipment items in the fixed assets masterfile and locate the related equipment on company premises.(2) Department heads are asked to provide information to the accounting department each quarter about any equipment no longer in use or somewhat damaged.(3) All contracts of equipment purchases are reviewed by both the controller andattorney to verify that legal title transfers to the client and that none representoperating leases.(4) As part of quarterly and annual inventory physical counts, factory equipment islisted and subsequently reconciled to the fixed asset master file.
The following are independent errors: a. In January 2019, repair costs of 9,000 were debited to the Machinery account. At the beginning of 2019, the book value of the machinery was 100,000. No residual value is expected, the remaining estimated life is 10 years, and straight-line depreciation is used. b. All purchases of materials for construction contracts still in progress have been immediately expensed. It is discovered that the use of these materials was 10,000 during 2018 and 12,000 during 2019. c. Depreciation on manufacturing equipment has been excluded from manufacturing costs and treated as a period expense. During 2019, 40,000 of depreciation was accounted for in that manner. Production was 15,000 units during 2019, of which 3,000 remained in inventory at the end of the year. Assume there was no inventory at the beginning of 2019. Required: Prepare journal entries for the preceding errors discovered during 2020. Ignore income taxes.
You have been asked to carry out the audit of the property plant and equipment of Simons Engineering Limited for the year ended 31 March. The draft accounts show the following movements on non current assets in the year: Freehold Land & Buildings Plant & Machinery Motor Vehicles TOTAL Cost or Valuation GHC GHC GHC GHC At 1st April 353,000 406,000 173,000 932,000 Additions 292,000 86,000 65,000 443,000 Disposals - (29,000) (47,000) (76,000) At 31st March 645,000 463,000 191,000 1,299,000 Freehold Land & Buildings Plant & Machinery Motor Vehicles TOTAL Depreciation GHC GHC GHC GHC At 1st April 132,000 187,000 74,000 393,000 Charge for the year 12,900…
You have been asked to carry out the audit of the property plant and equipment of Simons Engineering Limited for the year ended 31 March. The draft accounts show the following movements on non current assets in the year: Freehold Land & Buildings Plant & Machinery Motor Vehicles TOTAL Cost or Valuation GHC GHC GHC GHC At 1st April 353,000 406,000 173,000 932,000 Additions 292,000 86,000 65,000 443,000 Disposals - (29,000) (47,000) (76,000) At 31st March 645,000 463,000 191,000 1,299,000 Freehold Land & Buildings Plant & Machinery Motor Vehicles TOTAL Depreciation GHC GHC GHC GHC At 1st April 132,000 187,000 74,000 393,000 Charge for the year 12,900…
Which of the following accounting policies is an example of costs versus benefits constraint being exercised in the disclosure of financial information? Inventory is valued at lower of cost or market. Property, plant and equipment are appraised and revalued every three years. Biological assets are stated at fair value unless the fair value cannot be measured reliably. Research and development costs are expensed as incurred.
Equipment acquisitions that are misclassified as maintenance expense most likely wouldbe detected by an internal control that provides for(1) segregation of duties of employees in the accounts payable department.(2) authorization by the board of directors of significant equipment acquisitions.(3) investigations of variances within a formal budgeting system.(4) independent verification of invoices for disbursements recorded as equipmentacquisitions.
A weakness in internal control over recording purchased equipment may cause the auditor to: a. Review the subsidiary ledger to ascertain whether depreciation was taken on each item of equipment during the year. b. Inspect certain items of equipment in the plant and trace those items to the accounting records. c. Trace additions to the "other assets" account to search for equipment that is still on hand but no longer being used. d. Select certain items of equipment from the accounting records and locate them in the plant. e. Review salvage value estimates for reasonableness.
Explain what impact these errors would have hadover the last year and how you will correct them so you can prepare accurate financial statements.Expenditures:• Normal repair and maintenance on the manufacturing facility were capitalized.• The cost of taxes on new equipment used in business operations was expensed.• The shipping costs on new equipment used in business operations were expensed.• The cost of a minor repair on existing equipment used in business operations was capitalized.Assets:• Land next to the production facility held for use next year as a place to build a warehouse wasdepreciated.• Land held for future resale when the value increases was classified as Property, Plant, andEquipment but not depreciated.• Equipment used in the production process was classified as an investment.