Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Textbook Question
Chapter 24, Problem 23DQP
In an audit of the Marco Corporation as of December 31, 2016, the following situations exist. No entries have been made in the accounting records in relation to these items.
- 1. During the year 2016, the Marco Corporation was named as a defendant in a suit for damages by the Dalton Company for breach of contract. An adverse decision to the Marco Corporation was rendered and the Dalton Company was awarded $4,000,000 damages. At the time of the audit, the case was under appeal to a higher court.
- 2. On December 23, 2016, the Marco Corporation declared a common stock dividend of 1,000 shares with a par value of $1,000,000 of its common stock, payable February 2, 2017, to the common stockholders of record December 30, 2016.
- 3. The Marco Corporation has guaranteed the payment of interest on the 10-year, first mortgage bonds of the Newart Company, an affiliate. Outstanding bonds of the Newart Company amount to $5,500,000 with interest payable at 5% per annum, due June 1 and December 1 of each year. The bonds were issued by the Newart Company on December 1, 2014, and all interest payments have been met by that company with the exception of the payment due December 1, 2016. The Marco Corporation states that it will pay the defaulted interest to the bondholders on January 15, 2017.
Required
- a. Define
contingent liability . - b. Describe the
audit procedures you would use to learn about each of the situations listed. - c. Describe the nature of the
adjusting entries or disclosure, if any, you would make for each of these situations.*
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Chapter 24 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 24 - Prob. 1RQCh. 24 - Explain why an auditor is interested in a clients...Ch. 24 - Prob. 3RQCh. 24 - Prob. 4RQCh. 24 - Prob. 5RQCh. 24 - Prob. 6RQCh. 24 - Prob. 7RQCh. 24 - Prob. 8RQCh. 24 - What major considerations should the auditor take...Ch. 24 - Identify five audit procedures normally done as a...
Ch. 24 - Prob. 11RQCh. 24 - Prob. 12RQCh. 24 - Prob. 13RQCh. 24 - Prob. 14RQCh. 24 - Prob. 15RQCh. 24 - Prob. 16RQCh. 24 - Prob. 17RQCh. 24 - Prob. 18.1MCQCh. 24 - Prob. 18.2MCQCh. 24 - Prob. 18.3MCQCh. 24 - Prob. 18.4MCQCh. 24 - Prob. 19.1MCQCh. 24 - Prob. 19.2MCQCh. 24 - Prob. 19.3MCQCh. 24 - Prob. 20.1MCQCh. 24 - Prob. 20.2MCQCh. 24 - Prob. 20.3MCQCh. 24 - Prob. 21.1MCQCh. 24 - Prob. 21.2MCQCh. 24 - Prob. 21.3MCQCh. 24 - Prob. 22DQPCh. 24 - In an audit of the Marco Corporation as of...Ch. 24 - Prob. 24DQPCh. 24 - The field work for the June 30, 2016, audit of...Ch. 24 - Prob. 26DQPCh. 24 - Prob. 27DQPCh. 24 - Prob. 28DQPCh. 24 - Prob. 29DQPCh. 24 - Prob. 30DQP
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