The errors below were noted after the books of CalMart Corporation were audited at the close of 2021 Indicate the effects of each of the following errors with an O for Overstatement, U for understatement and N for no effect in the appropriate column.20202021Earnings Retained Eamings afterclosingRetainedbefore closingEamings Retained Earnings afterdosingNet IncomeAssetLiabilityRetainedbefore closingNet IncomeAssetLiabilityFailure to record purchases ofmerchandise on account ofP2,000 at the end of 2020.Sale of merchandise on accounton December 30,2020 amountingto P2.000 was not recorded untilthe customer paid his account onJanuary 2021.Depreciationequipmentoverstated by P1,000.expense2020inonwas

The overstatement of account is the excess record of that which the amount has to be recorded. Vice…

The errors below were noted after the books of CalMart Corporation were audited at the close of 2021 Indicate the effects of each of the following errors with an O for Overstatement, U for understatement and N for no effect in the appropriate column. 2020 Liability Retained before closing 2021 Liability Earnings Retained Earnings after Net Income Eamings Retained Earnings after dosing Net Income Asset Asset Retained closing before closing Failure to record purchases of merchandise on account of P2.000 at the end of 2020. Sale of merchandise on account on December 30,2020 amounting to P2,000 was not recorded until the customer paid his account on January 2021. Depreciation equipment overstated by P1.000. expense 2020 on was

The errors below were noted after the books of CalMart Corporation were audited at the close of 2021 Indicate the effects of each of the following errors with an O for Overstatement, U for understatement and N for no effect in the appropriate column. 2020 Liability Retained before closing 2021 Liability Earnings Retained Earnings after Net Income Eamings Retained Earnings after dosing Net Income Asset Asset Retained closing before closing Failure to record purchases of merchandise on account of P2.000 at the end of 2020. Sale of merchandise on account on December 30,2020 amounting to P2,000 was not recorded until the customer paid his account on January 2021. Depreciation equipment overstated by P1.000. expense 2020 on was

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 11P: A review of Anderson Corporations books indicates that the errors and omissions pertaining to the...

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The accounting and auditing literature discusses several different types of accounting changes. For each of the changes listed below (a. through c.), indicate whether the auditor should add a paragraph to the audit report, assuming that the change had a material effect on the financial statements and was properly justified, accounted for, and disclosed. Assume that the organization is a U.S. non-public company. a. Change from one GAAP to another GAAP b. Change in accounting estimate not affected by a change in accounting principle c. Change in accounting estimate affected by a change in accounting principle d. Correction of an error c. Change from non-GAAP to GAAP (a special case of correction of an error)
A review of Anderson Corporations books indicates that the errors and omissions pertaining to the balance sheet accounts shown as follows had not been corrected during the applicable years. The net income per the books is: 2017, 10,000; 2018, 12,000; 2019, 15,000; and 2020, 20,000. No dividends were declared during these years and no adjustments were made to retained earnings. The Retained Earnings balance on December 31, 2020, is 50,000. Omissions Required: Determine the correct net income for the years 2017, 2018, 2019, and 2020, and the adjusted balance sheet accounts as of December 31, 2020. Ignore possible income tax effects.
You were assigned to audit the financial statements of Swansea Corporation as at and for the year ended December 31, 2021. Your senior asked you to draft a memo on materiality and tolerable error for your client. Swansea Corporation has incurred substantial net losses due to COVID-19 pandemic. Up to 2019, it has been profitable. Which of the following is least likely to be your starting point in computing materiality? Group of answer choices Normalized net income Net loss Total assets Normalized revenue
You are auditing the financial statements of A Company for the year ended December 31, 2023. The Company's income statements indicated the following net income:2021: P1,200,0002022: P1,490,0002023: P1,325,000An examination of the accounting records for the year ended December 31, 2023 indicates that several errors were made. The following errors were discovered:A. Unused supplies at the end of each year were consistently omitted:2020: P95,000; 2022: P100,000; 2023: P140,000B. The footings and extensions showed that the inventory on December 31, 2022 was understated by P80,000C. P105,000 worth of inventories were received on January 5, 2022 and were not included in the physical count as of December 31, 2021. Upon investigation, however, you discovered that these goods were shipped free-alongside by the supplier on December 28, 2021. The invoice for the goods were received and recorded in the purchase journal on December 29, 2021.D. The following advance payments to suppliers at the…
Which of the following may not be included in a typical audit program for auditing Retained Earnings? a. Reference to market quotations for the granting of share options to employees. b. Reference to fair market value of real property declared as property dividends. c. Determination of the effect of a change in policy regarding the use of average cost formula for inventories for the current year, where the entity previously elected the first-in-first-out cost formula. d. Reference to market quotations for the declaration of a 10% stock dividends.
Ambrose is auditing the financial statements of Mays (dated December 31, 2017). The date of the auditor’s report is February 17, 2018, and the audit report release date is February 20, 2018. For which of the following matters would Ambrose have the least responsibility?a. The obsolescence of inventory held on December 31, 2017, that was identified on January 20, 2018.b. A customer’s deteriorating financial condition that was identified on February 19, 2018.c. A merger that was announced by Mays and known by Ambrose on February 12, 2018.d. A major loss due to a catastrophe that occurred and was known by Ambrose on March 1, 2018.
Consider the following given phrase that is not included in the opinion paragraph of thestandard (unqualified) auditor’s report:“The financial statements present correctly, the financial position of ABC Company as at December 31, 2019, and its financial performance and its cash flows for the year then ended inaccordance with Canadian generally accepted auditing standards.”i. What is the correct phrase that is included in the opinion paragraph of the standard(unqualified) auditor’s report?ii. Briefly explain why the given phrase is a poor replacement for the correct phrase
Which of the following may not be included in a typical audit program for auditing Retained Earnings? Group of answer choices Reference to market quotations for the granting of share options to employees. Determination of the effect of a change in policy regarding the use of average cost formula for inventories for the current year, where the entity previously elected the first-in-first-out cost formula. Reference to market quotations for the declaration of a 10% stock dividends. Reference to fair market value of real property declared as property dividends.
Uncorrected Misstatements and Performance Materiality. Pat Colt is auditing thefinancial statements of Manning Company. The following is a summary of the uncorrectedmisstatements that Colt has identified during the past three years. These misstatements areimmaterial and have related to isolated matters. In this summary, parentheses imply that themisstatements would have reduced balances if they had been corrected (e.g., in 2014, themisstatements would have reduced net income by $82,500, assets by $100,000, liabilitiesby $17,500, and equity by $82,500 if corrected).LO 11-4LO 11-4YearEffect onNet IncomeEffecton AssetsEffecton LiabilitiesEffecton Equity2014 $(82,500) $(100,000) $(17,500) $(82,500)2015 (22,000) (25,500) (3,500) (22,000)2016 30,000 30,000 0 30,000 During the most recent audit, Colt concluded that expenses totaling $130,000 were recognized in January 2018 (when Manning paid them) but should have been recognized in 2017.Required:a. How does the misstatement identified in 2017…
You were first appointed auditor of the RST Corporation in 2020. You completed the audit for 2020 and prepared audited financial statements directly from the audit working papers. You have returned to make the 2021 audit and discovered that the client's bookkeeper failed to record the adjusting entries you made in 2020 audit working papers, which entailed adjustments for the following items The December 31, 2020 inventory was understated by P5,000. No entry was made for accrued utilities expense of P2,500 as of year-end. Ordinary motor repairs of P3,200 were charged to Accumulated Depreciation during 2020. The company failed to record the provision for uncollectible accounts in the amount of P6,000. Your examination of the 2021 entries in the accounts uncovered the following: An expenditure of P10,000 for repairs of office equipment had been charged to furniture and Equipment. The company records depreciation at 10% of the December 31 balance of the Property and Equipment accounts.…
The fieldwork for the December 31, 2018 audit of Schmidt Corporation ended on March 17, 2019. The financialstatements and auditor's report were issued on March 29, 2019. In each of the material situations (1 through 5)below, indicate the appropriate action (a, b, c). The possible actions are as followsa. Adjust the December 31, 2018 financial statements.b. Disclose the information in a footnote in the December 31, 2018 financial statements.c. No action is required.The situations are as follows:________ 1. On March 1, 2019, one of Schmidt Corporation's major customers declared bankruptcy. The customer'sfinancial condition in 2018 was deteriorating and they owed Schmidt Corporation a large sum of money as of thebalance sheet date.________ 2. On February 17, 2019, Schmidt Corporation sold some machinery for its book value.________ 3. On February 20, 2019 a flood destroyed the entire uninsured inventory in one of Schmidt'swarehouses.________ 4. On January 5, 2019, there was a significant…
The board of directors of Danson Company limited asked Jameel & Soften, a Private AuditingFirm to audit Danson’s financial statements for the year ended 31st December 2019. Jameel &Soften explained the need to make an enquiry of the predecessor auditor and requestedpermission to do so. Danson’s board of directors refused to honor the request on the grounds thatrelations with the predecessor had deteriorated so significantly that Jameel & Soften wouldreceive biased and defamatory information from the predecessor. a. What is the purpose of the communication between the successor and the predecessorauditor?b. How does communication aid in assessing audit risk?c. What position should Jameel & Soften assume in the present situation? How should theyrespond to Danson’s refusal to permit communication with the predecessor auditor?