Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 13, Problem 40ITC
You are reviewing the property, plant, and equipment working papers of Mandville Corporation, a company that publishes travel guides. The lead schedule for the account is included in the chapter as Figure 13.1. The following are among the findings relating to changes in the account:
1. Land: The addition represents the purchase of land adjacent to the company’s existing plant and is financed as follows:
On June 17, the date on which the buyer and seller discussed the transaction, shares of Mandville Corporation stock were selling for $77.50. On June 30, the settlement date (day of the sale), Mandville stock was selling for $70.00 per share. The
Examination of publicly available records has indicated that prices of comparable land in the area have been relatively constant, selling in a range from $140,000 to $160,000 during the past 18 months.
2. Land improvements: This account was increased by three journal entries (each recorded with a debit to land improvements and a credit to cash) during the year. Each of these improvements relates to the new land that was purchased in point (1) above.
3. Building: The building was constructed by an independent contractor; the contract was for $473,000. Progress payments were made during construction through use of proceeds of a bank loan, for which the building serves as collateral. The interest during construction was capitalized ($22,000), while the interest subsequent to construction but prior to year-end ($20,000) was expensed.
4. Equipment: The change in the equipment was a trade of old book “update printing equipment” for two new computer servers and associated software that will maintain electronic updates. Until recently, updates of outdated portions of guidebooks were printed and “shrinkwrapped” with the guidebook. Now the updates will be available on Mandville’s website. The old equipment had a cost of $60,000 and
5. Depreciation provisions: Mandville uses software to calculate depreciation to the exact day.
Required:
- a. For additions (1) through (4) above, prepare any necessary
adjusting entries . If in any case your adjusting entry relies upon an assumption, provide that assumption. - b. For item (5), prepare a calculation of the depreciation provisions and determine whether they appear reasonable. For this calculation, assume that acquisitions, on average, occur at mid-year. If the provision does not appear reasonable, discuss follow-up procedures related to the provisions. Use the following table for your calculation:
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The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale ceramic business. The receipts are identified by an asterisk next to the item letter.
a.
Fee paid to attorney for title search
$ 2,500
b.
Cost of real estate acquired as a plant site: Land
285,000
Cost of real estate acquired as a plant site: Building (to be demolished)
55,000
c.
Delinquent real estate taxes on property, assumed by purchaser
15,500
d.
Cost of razing and removing building acquired in B
5,000
e.*
Proceeds from sale of salvage materials from old building
4,000
f.
Special assessment paid to city for extension of water main to the property
29,000
g.
Architect’s and engineer’s fees for plans and supervision
60,000
h.
Premium on one-year insurance policy during construction
6,000
i.
Cost of filling and grading land
12,000
j.*
Money borrowed to pay building contractor
900,000
k.
Cost of repairing windstorm damage during…
The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale ceramic business. The receipts are identified by an asterisk next to the item letter.
a.
Fee paid to attorney for title search
$ 2,500
b.
Cost of real estate acquired as a plant site: Land
285,000
Cost of real estate acquired as a plant site: Building (to be demolished)
55,000
c.
Delinquent real estate taxes on property, assumed by purchaser
15,500
d.
Cost of razing and removing building acquired in B
5,000
e.*
Proceeds from sale of salvage materials from old building
4,000
f.
Special assessment paid to city for extension of water main to the property
29,000
g.
Architect’s and engineer’s fees for plans and supervision
60,000
h.
Premium on one-year insurance policy during construction
6,000
i.
Cost of filling and grading land
12,000
j.*
Money borrowed to pay building contractor
900,000
k.
Cost of repairing windstorm damage during…
Chapter 13 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 13 - Prob. 1RQCh. 13 - K-J Corporation has current assets of 5 million...Ch. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Explain the use of a system of authorizations for...Ch. 13 - Moultrie Company discovered recently that a number...Ch. 13 - Does a failure to record the retirement of...Ch. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQ
Ch. 13 - Prob. 11RQCh. 13 - Prob. 12RQCh. 13 - Prob. 13RQCh. 13 - Prob. 14RQCh. 13 - Prob. 15RQCh. 13 - Gibson Manufacturing Company acquired new factory...Ch. 13 - Prob. 17RQCh. 13 - Do the auditors question the service lives adopted...Ch. 13 - Prob. 19RQCh. 13 - Explain how the existence of lease agreements may...Ch. 13 - Prob. 21RQCh. 13 - Prob. 22QRACh. 13 - Prob. 23QRACh. 13 - Gruen Corporation is a large diversified company...Ch. 13 - Prob. 25QRACh. 13 - Prob. 26QRACh. 13 - Prob. 27QRACh. 13 - Prob. 28QRACh. 13 - Prob. 29QRACh. 13 - Prob. 30QRACh. 13 - Prob. 31QRACh. 13 - To assure accountability for fixed-asset...Ch. 13 - Prob. 32BOQCh. 13 - Which of the following is an internal control...Ch. 13 - Which of the following accounts should be reviewed...Ch. 13 - Prob. 32EOQCh. 13 - Prob. 32FOQCh. 13 - Which of the following statements is not typical...Ch. 13 - Prob. 32HOQCh. 13 - Prob. 32IOQCh. 13 - An effective procedure for identifying unrecorded...Ch. 13 - Which of the following is not an overall test of...Ch. 13 - Prob. 32LOQCh. 13 - Prob. 33OQCh. 13 - Analysis of which account is least likely to...Ch. 13 - Prob. 34BOQCh. 13 - Prob. 34COQCh. 13 - Prob. 34DOQCh. 13 - A search for overstated property, plant, and...Ch. 13 - The following are typical questions that might...Ch. 13 - Prob. 36PCh. 13 - Prob. 37PCh. 13 - Chem-Lite, Inc., maintains its accounts on the...Ch. 13 - Prob. 39PCh. 13 - You are reviewing the property, plant, and...
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