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Problem 5. You were engaged by Kuting Corp. to audit its financial Statements for the first time. In examining the company's books, you discovered that certain adjustments had been overlooked at the end of 2013 and 2014. Moreover, you also discovered that other Items had been erroneously recorded. The said omissions and other failures for each year are noted below: 2014 2013 256, 000 582, 400 172, 800 313, 600 376,000 Prepaid Insurance Accrued salaries and wages Accrued interest income Advances from customers Capital expenditures charged as repairs expense Audit notes: a. Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year. b. Capital expenditures had been recorded as repairs but should have been charged to the Machinery account; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%. Based on the above and the result of your audit, answer the following: 14. What is the total effect of the errors on the 2014 net income? a. Understated by 251, 000 c. Understated by 213, 400 d. Overstated by 253. 800 h. Overstated by 216 200 205, 200 520, 000 142, 000 374,000 348,000

Problem 5. You were engaged by Kuting Corp. to audit its financial Statements for the first time. In examining the company's books, you discovered that certain adjustments had been overlooked at the end of 2013 and 2014. Moreover, you also discovered that other Items had been erroneously recorded. The said omissions and other failures for each year are noted below: 2014 2013 256, 000 582, 400 172, 800 313, 600 376,000 Prepaid Insurance Accrued salaries and wages Accrued interest income Advances from customers Capital expenditures charged as repairs expense Audit notes: a. Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year. b. Capital expenditures had been recorded as repairs but should have been charged to the Machinery account; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%. Based on the above and the result of your audit, answer the following: 14. What is the total effect of the errors on the 2014 net income? a. Understated by 251, 000 c. Understated by 213, 400 d. Overstated by 253. 800 h. Overstated by 216 200 205, 200 520, 000 142, 000 374,000 348,000

Auditing: A Risk Based-Approach (MindTap Course List)
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter9: Auditing The Revenue Cycle.
Section: Chapter Questions
Problem 12RQSC
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Problem 5. You were engaged by Kuting Corp. to audit its financial Statements for the first time. In examining the company's books, you discovered that certain adjustments had been overlooked at the end of 2013 and 2014. Moreover, you also discovered that other Items had been erroneously recorded. The said omissions and other failures for each year are noted below: 2014 205, 200 2013 256, 000 582, 400 172, 800 313, 600 376, 000 Prepaid Insurance Accrued salaries and wages Accrued interest income Advances from customers Capital expenditures charged as repairs expense Audit notes: a. Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year. b. Capital expenditures had been recorded as repairs but should have been charged to the Machinery account; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%. Based on the above and the result of your audit, answer the following: 14. What is the total effect of the errors on the 2014 net income? a. Understated by 251, 000 b. Overstated by 216, 200 15. What is the total effect of the errors on the company's working capital as of December 31, 2014? a. Understated by 103, 400 b. Overstated by 620, 600 c. Understated by 213, 400 d. Overstated by 253, 800 520, 000 142, 000 374, 000 348,000 a. Understated by 202, 200 c. Understated by 177, 200 d. Overstated by 546, 800 b. Overstated by 76, 600 16. If remained unadjusted, what will be the effect of the errors to the company's December 31, 2014 accumulated profits? c. Understated by 177, 200 d. Overstated by 570, 600
Transcribed Image Text:Problem 5. You were engaged by Kuting Corp. to audit its financial Statements for the first time. In examining the company's books, you discovered that certain adjustments had been overlooked at the end of 2013 and 2014. Moreover, you also discovered that other Items had been erroneously recorded. The said omissions and other failures for each year are noted below: 2014 205, 200 2013 256, 000 582, 400 172, 800 313, 600 376, 000 Prepaid Insurance Accrued salaries and wages Accrued interest income Advances from customers Capital expenditures charged as repairs expense Audit notes: a. Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year. b. Capital expenditures had been recorded as repairs but should have been charged to the Machinery account; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%. Based on the above and the result of your audit, answer the following: 14. What is the total effect of the errors on the 2014 net income? a. Understated by 251, 000 b. Overstated by 216, 200 15. What is the total effect of the errors on the company's working capital as of December 31, 2014? a. Understated by 103, 400 b. Overstated by 620, 600 c. Understated by 213, 400 d. Overstated by 253, 800 520, 000 142, 000 374, 000 348,000 a. Understated by 202, 200 c. Understated by 177, 200 d. Overstated by 546, 800 b. Overstated by 76, 600 16. If remained unadjusted, what will be the effect of the errors to the company's December 31, 2014 accumulated profits? c. Understated by 177, 200 d. Overstated by 570, 600
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