Materiality is set at $60,000 for CookC a large public company. CookC averages $20,000 transactions per month and $46,000 of these transactions are at or above the company's materiality standards. There have been no errors or irregularities noted by company management. Is the materiality level appropriately set for CookC? Please explain the logic of your answer and thinking process.

Materiality is set at $60,000 for CookC a large public company. CookC averages $20,000 transactions per month and $46,000 of these transactions are at or above the company's materiality standards. There have been no errors or irregularities noted by company management. Is the materiality level appropriately set for CookC? Please explain the logic of your answer and thinking process.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter16: Accounting For Accounts Receivable

Section: Chapter Questions

Problem 2CP

See similar textbooks

Similar questions

During the current fiscal year, the L Corp. has added $6,000 to inventories. The net income is $10,000, but the cash has only risen by $4,000. The CEO comes to to you in a rage and demands that you clarify how the firm might have generated $10,000 as there is only $4,000 in the bank.
The following information is taken from Marsh Marsh Supermarkets Supermarkets annual report: During the first quarter, we made several decisions resulting in a $13 million charge to earnings. A new accounting pronouncement, FAS 121, required the Company to take a $7.5 million charge. FAS 121 dictates how companies are to account for the carrying values of their assets. This rule affects all public and private companies. The magnitude of this charge created a window of opportunity to address several other issues that, in the Company’s best long term interest, needed to be resolved. We amended our defined benefit retirement plan, and took significant reorganization and other special charges. These charges, including FAS 121, totaled almost $13 million. The result was a $7.1 million loss for the quarter and a small net loss for the year. Although these were difficult decisions because of their short term impact, they will have positive implications for years to come. Marsh Supermarkets’…
Elitz and Van Aken, CPAs, offer three types of services to clients: auditing, tax, and small business accounting. Based on experience and projected growth, the following billable hours have been estimated for the year ending December 31, 2020: Service Billable Hours Audit Department: Staff 22,400 Partners 7,900 Tax Department: Staff 13,200 Partners 5,500 Small Business Accounting Department: Staff 3,000 Partners 600 The average billing rate for staff is $160 per hour, and the average billing rate for partners is $350 per hour. Prepare a professional fees earned budget for Elitz and Van Aken, CPAs, for the year ending December 31, 2020, using the following column headings and showing the estimated professional fees by type of service rendered and add additional rows in the table as needed:
Ferraro Consulting provides risk management services to individuals and to corporate clients. The company closes its temporary accounts once each year on December 31. The company recently issued the following income statement as part of its annual report: FERRARO CONSULTING INCOME STATEMENT FOR THE YEAR ENED DCEMBER 31, 2011 Revenue: Consulting revenue—individual clients $ 40,000 Consulting revenue—corporate clients 160,000 $200,000 Expenses: Advertising expense $16,000 Depreciation expense: computers 24,000 Rent expense 9,600 Office supplies expense . .• 4,400 Travel expense 57,800 Utilities expense 3,300 Telephone and Internet expense 1,900 Salaries expense 155,500 Interest expense 2,500 275,000 Net loss $ (75,000) The firm's statement of retained earnings indicates that a $25,000 cash dividend was declared and paid in 2011. a. Prepare the…
Broke Corp. reports operating expenses in two categories (1) selling and (2) general administrative. The adjusted trial balance at December 31, 2021, including the following expenses: Accounting and legal fees 120,000 Advertising 150,000 Freight-out 80,000 Interest 70,000 Loss on sale of long-term investment 30,000 Officers’ salaries 225,000 Rent for office space 220,000 Sales salaries and commissions 140,000One-half of the rented space is occupied by the Sales Department. How much is Broke’s…
Nicole Martins is the controller at UMC Corp., a publicly traded manufacturing company. Last year, UMC had annual sales revenue of $15 million. The first quarter of this year just ended, and Nicole needs to prepare a trial balance so she can prepare the quarterly financial statements. However, the trial balance is out of balance by $750 (credits exceed debits). Nicole is running out of time aside as the report is due today! Therefore, she decides to balance by plugging the $750 into the account called depreciation expense account. She chooses this account because it is one that is adjusted during the year end. Three basic principles of accrual accounting are that revenue must be recognized in the period it is earned, expenses must be recorded in the period they support revenue and are generated, and debits equal credits. Does this violate any of these basic principles? If so, which ones? When the trial balance does not balance, what might this indicate? Explain the ethical issues…
During March, Perpetual Envy Inc. provides $20,000 in consulting services for a customer. The customer paid $10,000; the other $10,000 was on account. Which of the following statements about these transactions is correct? Multiple Choice Cash increases by $10,000, Consulting Revenue increases by $10,000, and Accounts Receivable increases by $20,000. Accounts Receivable increases by $10,000, Liabilities decrease by $10,000, and Stockholders' Equity increases by $20,000. Cash increases by $10,000, Accounts Receivable increases by $10,000, and Consulting Revenue increases by $20,000. Revenues increase by $10,000, liabilities decrease by $10,000, and stockholders' equity is unchanged.
Discuss how each of the following transactions for Watson, International, will affect assets, liabilities, and stockholders’ equity, and prove the company’s accounts will still be in balance. An investor invests an additional $25,000 into a company receiving stock in exchange. Services are performed for customers for a total of $4,500. Sixty percent was paid in cash, and the remaining customers asked to be billed. An electric bill was received for $35. Payment is due in thirty days Part-time workers earned $750 and were paid. The electric bill in “C” is paid.
An inexperienced accounting intern at Krazy Karim prepared the following income statement for the fiscal period 2020. Krazy Karim Income Statement As of December 31, 2020 Revenues: Unearned Revenue 50,000 Services provided to customers 73,000 Accounts Receivable 3,500 Common Stock 21,000 Loan from Bank 17,500 Total Revenues 165,000 Expenses Payments to Principal Portion of Long-term Debt 40,000 Operating Expenses 26,000 Dividends 5,000 Equipment…
Nicole Martins is the controller at UMC Corp., a publicly-traded manufacturing company. Last year, UMC had annual sales revenue of $15 million. The first quarter of this year just ended, and Nicole needs to prepare a trial balance so she can prepare the quarterly financial statements. However, the trial balance is out of balance by $750 (credits exceed debits). Nicole is running out of time aside as the report is due today! Therefore, she decides to balance by plugging the $750 into the account called depreciation expense account. She chooses this account because it is one that is adjusted during the year-end. Three basic principles of accrual accounting are that revenue must be recognized in the period it is earned, expenses must be recorded in the period they support revenue and are generated, and debits equal credits. 1) Does this violate any of these basic principles? If so, which ones? 2) When the trial balance does not balance, what might this indicate? 3) Explain the ethical…
PlantTita Company reported the following data for the current year: Legal and audit fees P10,000Rent for office space equally shared by sales and accounting 150,000Transportation out 20,000Officer’s salaries 80,000Insurance 5,000Sales representative salaries 80,000Transportation in 15,000Doubtful accounts 2,000Loss on sale of trading investments 10,000Advertising expenses 50,000Office supplies used 8,000 16. What amount should be classified as administrative expenses?a. P190,000b. P180,000c. P200,000d. P195,000 17. What amount should be classified as distribution expenses?a. P300,000b. P235,000c. P220,000d. P225,000
Assume Down, Incorporated, was organized on May 1 to compete with Despair, Incorporated—a company that sells de-motivational posters and office products. Down, Incorporated, encountered the following events during its first month of operations. Received $34,000 cash from the investors who organized Down, Incorporated Borrowed $19,000 cash and signed a note due in two years. Ordered equipment costing $16,000. Purchased $10,000 in equipment, paying $2,000 in cash and signing a six-month note for the balance. Received the equipment ordered in (c), paid for half of it, and put the rest on account. Prepare a classified balance sheet at May 31. Include Retained Earnings with a balance of zero.