Determine the net increase/decrease in net income for 2021. You were able to gather the following from your first-time audit client, ABC Corporation, as of and for theperiod ended December 31, 2021:Supplies bought last October 20, 2020; 10% used during2020; 20% remaining as of December 31, 2021; entrymade in 2020 includes a debit to expense for thewhole amount50,000Advance rental payment for 3 months paid to lessor onNovember 30, 2021; amount charged to rent expense;no adjusting entry madeSales recorded on January 2, 2022 pertaining to a30,000merchandise shipped to a customer last December28, 2021; FOB Shipping pointPurchases recorded last December 30, 2021; merchandisewas shipped last December 29, 2021, received120,000January 3, 2022; FOB DestinationInterest on an amount lent to a borrower; note wasreceived last December 1, 2021; term is 6 months;45,000face value is P100,000; no interest income recorded;interest rate per annum isA minor repair on an equipment on January 2, 2021 wascapitalized; the useful life of the equipment onJanuary 2, 2021 was 6 years9%300,000

Net income is the positive result of a company's revenues and gains minus its expenses and losses. A…

You were able to gather the following from your first-time audit client, ABC Corporation, as of and for the period ended December 31, 2021: Supplies bought last October 20, 2020; 10% used during 2020; 20% remaining as of December 31, 2021; entry made in 2020 includes a debit to expense for the whole amount 50,000 Advance rental payment for 3 months paid to lessor on November 30, 2021; amount charged to rent expense; no adjusting entry made Sales recorded on January 2, 2022 pertaining to a merchandise shipped to a customer last December 28, 2021; FOB Shipping point 30,000 120,000 Purchases recorded last December 30, 2021; merchandise was shipped last December 29, 2021, received January 3, 2022; FOB Destination Interest on an amount lent to a borrower; note was received last December 1, 2021; term is 6 months; 45,000 face value is P100,000; no interest income recorded; interest rate per annum is A minor repair on an equipment on January 2, 2021 was capitalized; the useful life of the equipment on 9% January 2, 2021 was 6 years 300,000

You were able to gather the following from your first-time audit client, ABC Corporation, as of and for the period ended December 31, 2021: Supplies bought last October 20, 2020; 10% used during 2020; 20% remaining as of December 31, 2021; entry made in 2020 includes a debit to expense for the whole amount 50,000 Advance rental payment for 3 months paid to lessor on November 30, 2021; amount charged to rent expense; no adjusting entry made Sales recorded on January 2, 2022 pertaining to a merchandise shipped to a customer last December 28, 2021; FOB Shipping point 30,000 120,000 Purchases recorded last December 30, 2021; merchandise was shipped last December 29, 2021, received January 3, 2022; FOB Destination Interest on an amount lent to a borrower; note was received last December 1, 2021; term is 6 months; 45,000 face value is P100,000; no interest income recorded; interest rate per annum is A minor repair on an equipment on January 2, 2021 was capitalized; the useful life of the equipment on 9% January 2, 2021 was 6 years 300,000

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Activities Required In Completing A Quality Audit

Section: Chapter Questions

Problem 87RSCQ

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Soon after December 31, 2019, the auditor requested a depreciation schedule for trucks of Jarrett Trucking Company, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period 2016 to 2019, inclusive. The following data were in the Trucks account as of January 1, 2016: The Accumulated DepreciationTrucks account, previously adjusted to January 1,2016, and duly entered in the ledger, had a balance on that date of 16,460. This amount represented the straight-line depreciation on the four trucks from the respective dates of purchase, based on a 5-year life and no residual value. No debits had been made to this account prior to January 1, 2016. Transactions between January 1,2017, and December 31, 2019, and their record in the ledger were as follows: 1. July 1, 2016: Truck no. 1 was sold for 1,000 cash. The entry was a debit to Cash and a credit to Trucks, 1,000. 2. January 1, 2017: Truck no. 3 was traded for a larger one (no. 5) with a 5-year life. The agreed purchase price was 12,000. Jarrett paid the other company 1,780 cash on the transaction. The entry was a debit to Trucks, 1,780, and a credit to Cash, 1,780. 3. July 1, 2018: Truck no. 4 was damaged in a wreck to such an extent that it was sold as junk for 50 cash. Jarrett received 950 from the insurance company. The entry made by the bookkeeper was a debit to Cash, 1,000, and credits to Miscellaneous Revenue, 50, and Trucks, 950, 4. July 1, 2018: A new truck (no. 6) was acquired for 20,000 cash and debited at that amount to the Trucks account. The truck has a 5-year life. Entries for depreciation had been made at the close of each year as follows: 2016, 8,840; 2017, 5,436; 2018, 4,896; 2019, 4,356. Required: 1. Next Level For each of the 4 years, calculate separately the increase or decrease in earnings arising from the companys errors in determining or entering depreciation or in recording transactions affecting trucks. 2. Prove your work by one compound journal entry as of December 31, 2019; the adjustment of the Trucks account is to reflect the correct balances, assuming that the books have not been closed for 2019.
It is February 16, 2020, and you are auditing Davenport Corporation's financial statements for 2019 (which will be issued in March 2020). You read in the newspaper that Travis Corporation, a major customer of Davenport, is in financial difficulty. Included in Davenports accounts receivable is 50,000 (a material amount) owed to it by Travis. You approach Jim Davenport, president, with this information and suggest that a reduction of accounts receivable and recognition of a loss for 2019 might be appropriate. Jim replies, Why should we make an adjustment? Ted Travis, the president of Travis Corporation, is a friend of mine; he will find a way to pay us, one way or another. Furthermore, this occurred in 2020, so lets wait and see what happens; we can always make an adjustment later this year. Our 2019 income and year-end working capital are not that high; our creditors and shareholders wouldnt stand for lower amounts than they already are. Required: From financial reporting and ethical perspectives, prepare a response to Jim Davenport regarding this issue.
You were able to gather the following from your first-time audit client, WXY Corporation, as of and for the period ended December 31, 2021: Supplies bought last October 20, 2020; 10% used during 2020; 20% remaining as of December 31, 2021; entry made in 2020 includes a debit to expense for the whole amount 50,000 Advance rental payment for 3 months paid to lessor on November 30, 2021; amount charged to rent expense; no adjusting entry made 30,000 Sales recorded on January 2, 2022, pertaining to a merchandise shipped to a customer last December 28, 2021; FOB Shipping point 120,000 Purchases recorded last December 30, 2021; merchandise was shipped last December 29, 2021, received January 3, 2022; FOB Destination 45,000 Interest on an amount lent to a borrower, note was received last December 1, 2021, term is 6 months face value is 100,000; interest income recorded interest rate per annum is 9% A minor repair on an equipment on January 2, 2021, was…
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You have been assigned to audit the MACHINERY account of WHITE Printing Corporation for the year ended December 31, 2020. In the course of your examination, you found out that your client acquired on July 1, 2020 three printing machines for a list price of ₱280,000 with a 10% trade discount, term 2/10, n/60. The liability was fully paid on September 1, 2020. In addition, freight charges of ₱1,040 and cost of installation of P5,000 were paid. The client recorded the transactions under machinery account for ₱280,440. How much is the Machinery account overstated?
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Jares Investments Global Limited is a listed company which manufactures stationery products. The company’s profit before tax for the year ended 31 December 2020 is GH¢16·3m and total assets as at that date are GH¢66·8m. You are an audit supervisor of Jeremiah & Associate and you are currently finalizing the audit program for the year-end audit of your existing client Jares Investments Global Limited. You attended a meeting with your audit manager where the following matters were discussed: Trade payables and accruals Jares Investments Global Limited purchases its raw materials from a large number of suppliers. The company’s policy is to close the purchase ledger just after the year end and the financial controller is responsible for identifying goods which were received pre year-end but for which no invoice has yet been received. An accrual is calculated for goods received but not yet invoiced (GRN) and is included within trade payables and accruals. The audit strategy has…
Jares Investments Global Limited is a listed company which manufactures stationery products. The company’s profit before tax for the year ended 31 December 2020 is GH¢16·3m and total assets as at that date are GH¢66·8m. You are an audit supervisor of Jeremiah & Associate and you are currently finalizing the audit program for the year-end audit of your existing client Jares Investments Global Limited. You attended a meeting with your audit manager where the following matters were discussed: Trade payables and accrualsJares Investments Global Limited purchases its raw materials from a large number of suppliers. The company’s policy is to close the purchase ledger just after the year end and the financial controller is responsible for identifying goods which were received pre year-end but for which no invoice has yet been received. An accrual is calculated for goods received but not yet invoiced (GRN) and is included within trade payables and accruals. The audit strategy has…
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