Prepare the journal entries for each of the situations above.
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As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients.
| 1. | Monty Corp. is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 4,000 shares of its $20 par value common stock. The owners’ asking price for the land was $125,000, and the fair value of the land was $118,000. | |
| 2. | Wildhorse Co. is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 19,000 shares of its $8 par value stock. At the time of the exchange, the land was advertised for sale at $269,000. The stock was selling at $9 per share. |
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- As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients. 1. Bramble Corp. is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 5,000 shares of its $19 par value common stock. The owners’ asking price for the land was $123,500, and the fair value of the land was $117,000. 2. Crane Company is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 21,000 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at $275,000. The stock was selling at $11 per share. Prepare the journal entries for each of the situations above. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the…As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients. 1. LR Corporation is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 5,000 shares of its $20 par value common stock. The owners’ asking price for the land was $120,000, and the fair value of the land was $110,000. 2. Vera Corporation is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 20,000 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at $250,000. The stock was selling at $11 per share. Prepare the journal entries for each of the situations above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)As an auditor for the CPA firm of Bunge and Dodd, you encounter the following situations in auditing different clients. Desi Corporation is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 5,000 shares of its $20 par value common stock. The owners’ asking price for the land was $120,000, and the fair market value of the land was $115,000. Lucille Corporation is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 20,000 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at $250,000.The stock was selling at $12 per share. Instructions: Prepare the journal entries for each of the situations above.
- As an auditer for cpa firm of Hickson and Calvert you encounter the following situations in auditing different clients 1. Skysong,inc is closely held corporation whos stock is not publicly traded on december 5, the corporation acquired land by issuing $3000 share of its $20 per a value common stock .the owner asking price for land was $121500 and the fair value of the land was $116500 2.oriole company is a publicly held corporation whose common stock is traded on the securities markets. On june 1, its acquired land by issuing 19000 shares of its $10 per a valua stock .at the time of the exchange the land was advertised for sale at $260000. The stock was selling at $11 per a share. Prepare the journal entries for each of the situations aboveIn order to expand its operations, Barton Corp. raised $5million in a public offering of common stock, and also negotiated a $2 million loanfrom First National Bank. In connection with this financing, Barton engaged Hanover &Co., CPAs, to audit Barton’s financial statements. Hanover knew that the sole purpose ofthe audit was so that Barton would have audited financial statements to provide to FirstNational Bank and the purchasers of the common stock. Although Hanover conductedthe audit in conformity with its audit program, Hanover failed to detect material actsof embezzlement committed by Barton Corp.’s president. Hanover did not detect theembezzlement because of its inadvertent failure to exercise due care in designing theaudit program for this engagement.After completing the engagement, Hanover issued an unqualified opinion on Barton’sfinancial statements. The financial statements were relied upon by the purchasers ofthe common stock in deciding to purchase the shares. In…Ingram is a Certified Public Accountant (CPA) employed by Jordan, Keller and Lane, CPAs, to audit Martin Enterprises, Inc., a fast-growing service firm that went public two years ago. The financial statements Ingram audited were included in a proxy statement proposing a merger with several other firms. The proxy statement was filed with the Securities and Exchange Commission and included several inaccuracies. First, approximately $1 million, or more than 20 percent, of the previous year’s “net sales originally reported” had proven nonexistent by the time the proxy statement was filed and had been written off on Martin’s own books. This was not disclosed in the proxy statement, in violation of Accounting Board Opinion Number 9. Second, Martin’s net sales for the current year were stated as $11.3 million when in fact they were less than $10.5 million. Third, Martin’s net profits for the current year were reported as $700,000, when the firm actually had no earnings at all. a. What civil…
- Monicker Co. engaged the audit firm of Gasner & Gasner to audit its financial statements that Monicker was going to use in connection with a public offering of its securities. Monicker's stock regularly trades on the NASDAQ. The audit was completed and the auditor issued an unqualified opinion on the financial statements, which Monicker submitted to the SEC along with the registration statement. Three hundred thousand shares of Monicker common stock were sold to the public at $13.50 per share. Eight months later, the stock fell to $2 per share when it was disclosed that several large loans to two "paper" companies owned by one of the directors were worthless. The loans were secured by the stock of the borrowing corporation and by Monicker stock owned by the director. These facts were not disclosed in the financial statements. The director and the two corporations are insolvent. Considering these facts, indicate whether each of the following statements is true or false, and briefly…Monicker Co. engaged the audit firm of Gasner & Gasner to audit its financial statements that Monicker was going to use in connection with a public offering of its securities. Monicker's stock regularly trades on the NASDAQ. The audit was completed and the auditor issued an unqualified opinion on the financial statements, which Monicker submitted to the SEC along with the registration statement. Three hundred thousand shares of Monicker common stock were sold to the public at $13.50 per share. Eight months later, the stock fell to $2 per share when it was disclosed that several large loans to two "paper" companies owned by one of the directors were worthless. The loans were secured by the stock of the borrowing corporation and by Monicker stock owned by the director. These facts were not disclosed in the financial statements. The director and the two corporations are insolvent. Considering these facts, indicate whether each of the following statements is true or false, and briefly…Discuss the following situations in the context of the independence of the auditor, showing clearly the principles involved: i.The audit manager in charge of the audit assignment of GEDA Ltd holds 5,000 ordinary shares (@ GH¢1 each) in the company (total shares in issue – 500,000). The audit partner holds no shares. ii.The total fee income of SAGE & Associates, a local audit firm, is GH¢700,000. The recurring audit fee receivable from Celestial Ltd, a private company is GH¢100,000. iii.The audit partner of an auditing firm is responsible for two audit assignments, Aman Ltd and Silta Ltd. Aman Ltd has recently tendered for a contract with Silta Ltd for the supply of material quantities of goods over a number of years. Silta Ltd has asked the audit partner to advice on the matter.
- While auditing the financial statements of Petty Corporation, the certified public accounting firm of Trueblue and Smith discovered that its client’s legal expense account was abnormally high. Further investigation of the records indicated the following: a. Since the beginning of the year, several disbursements totaling $15,000 had been made to the law firm of Swindle, Fox, and Kreip.b. Swindle, Fox, and Kreip were not Petty Corpora- tion’s attorneys.c. A review of the canceled checks showed that they had been written and approved by Mary Boghas, the cash disbursements clerk.d. Boghas’s other duties included performing the endof-month bank reconciliation.e. Subsequent investigation revealed that Swindle, Fox, and Kreip are representing Mary Boghas in an unrelated embezzlement case in which she is the defendant. The checks had been written in payment of her personal legal fees.1. What control procedures could Petty Corporation have employed to prevent this unauthorized use of cash?…J, B & J, Certified Public Accountants, has audited the Highcredit Corporation for the past five years. Recently, the Securities and Exchange Commission (SEC) has commenced an investigation of Highcredit for possible violations of Federal securities law. The SEC has subpoenaed all of J, B & J’s working papers pertinent to the audit of Highcredit. Highcredit insists that J, B & J not turn over the documents to the SEC. What action should J, B & J take? Why?Mark Williams, CPA, was engaged by Jackson Financial Development Company to audit the financial statements of Apex Construction Company, a small closely held corporation. Williams was told when he was engaged that Jackson Financial needed reliable financial statements that would be used to determine whether to purchase a substantial amount of Apex Construction’s convertible debentures at the price asked by the estate of one of Apex’s former directors. Williams performed his audit in a negligent manner. As a result of his negligence, he failed to discover substantial defalcations by Carl Brown, the Apex controller. Jackson Financial purchased the debentures, but it would not have done so if the defalcations had been discovered. After discovery of the fraud, Jackson Financial promptly sold them for the highest price offered in the market at a $70,000 loss. If Apex Construction also sues Williams for negligence, what are the probable legal defenses Williams’s attorney would raise?…
