Connect Access Card for Principles of Auditing & Other Assurance Services
21st Edition
ISBN: 9781260299366
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Chapter 16, Problem 35QRA
To determine
Describe the course of action by the auditor in the given situation.
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On October 21, Rank & Brink, a CIA firm, was retained by Suncraft Appliance Corporation to perform an audit for the year ended December 31. A month later, James Minor, president of the corporation, invited the CIA firm’s partners, George Rand and Alice Brink, to attend a meeting off all officers of the corporation. Mr. Minor opened the meeting with the following statement:
“All of you know that we are not in a very liquid position, and our October 31 balance sheet show it. We need to raise some outside capital in January, and our December 31 financial statements (both balance sheet and income statement) must look reasonably good if we’re going to make a favorable impression upon lenders or investors. I want every officer of this company to do everything possible during the next month to ensure that, at December 31, our financial statements look as strong as possible, especially our current position and our earnings.”
“I have invited our auditors to attend this meeting so…
You are engaged to perform the first audit of the Torrents Company for the year ended December 31, 2022. You find the following account balances related to shareholders' equity:
Preference shares, P100 par
P3,000,000
Ordinary Shares, P10 par
6,500,000
Capital Surplus
(1,640,000)
Retained Earnings
15,000,000
Due to the antiquated terminology and negative balance, you examine the Capitak Surplus account first and find in it the following entries:
Credit/(Debit)
Premium on Ordinary Shares
P2,710,000
Capital from donated land
1,600,000
Treasury shares (50,000 ordinary shares at cost)
(750,000)
Premium on Preference Shares
300,000
Appropriation for contingencies
2,500,000
Share dividend issued (50%)
(2,000,000)
Prior period adjustment (net of income taxes)
(1,200,000)
Loss from the fire (uninsured), 2022
(1,800,000)
Property dividend distributed
(600,000)
Cash dividends declared to be paid in 2023
(2,400,000)
Balance
(P1,640,000)
Your examination of…
You are engaged to perform the first audit of the Torrents Company for the year ended December 31, 2022. You find the following account balances related to shareholders' equity:
Preference shares, P100 par
P3,000,000
Ordinary Shares, P10 par
6,500,000
Capital Surplus
(1,640,000)
Retained Earnings
15,000,000
Due to the antiquated terminology and negative balance, you examine the Capitak Surplus account first and find in it the following entries:
Credit/(Debit)
Premium on Ordinary Shares
P2,710,000
Capital from donated land
1,600,000
Treasury shares (50,000 ordinary shares at cost)
(750,000)
Premium on Preference Shares
300,000
Appropriation for contingencies
2,500,000
Share dividend issued (50%)
(2,000,000)
Prior period adjustment (net of income taxes)
(1,200,000)
Loss from the fire (uninsured), 2022
(1,800,000)
Property dividend distributed
(600,000)
Cash dividends declared to be paid in 2023
(2,400,000)
Balance
(P1,640,000)
Your examination of…
Chapter 16 Solutions
Connect Access Card for Principles of Auditing & Other Assurance Services
Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Identify three items often misclassified as...Ch. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Prob. 9RQCh. 16 - What safeguards should be employed when the...
Ch. 16 - You are asked by a client to outline the...Ch. 16 - Prob. 12RQCh. 16 - Prob. 13RQCh. 16 - Prob. 14RQCh. 16 - Prob. 15RQCh. 16 - What are loss contingencies? How are such items...Ch. 16 - Prob. 17RQCh. 16 - Prob. 18RQCh. 16 - Prob. 19RQCh. 16 - What is the meaning of the term commitment? Give...Ch. 16 - Prob. 21RQCh. 16 - What are subsequent events?Ch. 16 - Describe the manner in which the auditors evaluate...Ch. 16 - Prob. 24RQCh. 16 - Prob. 25RQCh. 16 - Prob. 26RQCh. 16 - In your audit of the financial statements of Wolfe...Ch. 16 - Prob. 28QRACh. 16 - Prob. 29QRACh. 16 - Prob. 30QRACh. 16 - Prob. 31QRACh. 16 - The auditors opinion on the fairness of financial...Ch. 16 - Prob. 33QRACh. 16 - Prob. 34QRACh. 16 - Prob. 35QRACh. 16 - Prob. 36QRACh. 16 - Prob. 37AOQCh. 16 - Prob. 37BOQCh. 16 - Prob. 37COQCh. 16 - When auditing the statement of cash flows, which...Ch. 16 - The search for unrecorded liabilities for a public...Ch. 16 - The aggregated misstatement in the financial...Ch. 16 - Prob. 37GOQCh. 16 - Prob. 37HOQCh. 16 - Prob. 37IOQCh. 16 - Prob. 37JOQCh. 16 - Prob. 37KOQCh. 16 - Which of the following events occurring on January...Ch. 16 - Prob. 38OQCh. 16 - Prob. 39OQCh. 16 - Prob. 40OQCh. 16 - Match the following terms to the appropriate...Ch. 16 - Prob. 42OQCh. 16 - Prob. 43PCh. 16 - Prob. 44PCh. 16 - Prob. 45PCh. 16 - Prob. 46PCh. 16 - Prob. 47PCh. 16 - Prob. 48PCh. 16 - The audit staff of Adams, Barnes Co. (ABC), CPAs,...Ch. 16 - Prob. 50RDC
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