Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 17, Problem 2CP
To determine
Determine J’s concern about inventory and accounts receivable turnover ratios.
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Michael Corporation is on a calendar year basis. The following data were found during your audit:1) An excerpt from the client’s trial balance revealed the following account balances:Accounts receivable P 80,000Inventory, per count 1,200,000Accounts payable 790,000Net sales 6,050,000Net purchases 3,300,000Net income 610,0002) The client conducted an inventory count on December 31, 2021. Michael Corporation normally sells at 30% gross profit based on selling price.3) Goods were in transit FOB destination from a supplier in the amount of P120,000. Further testing revealed that the suppliers invoice pertaining to the delivery was received and recorded on December 28, 2021.4) Good costing P70,000 had been received on December 31, and recorded as a purchase. However, upon your inspection, the goods were found to be defective and would be immediately returned.5) Materials costing P224,000, sold and billed on December 30 under a “bill and hold” agreement, had been segregated in the warehouse…
In conducting your audit of Blue Lagoon Corporation, a company engaged
in import and wholesale business, for the fiscal year ended June 30, 2021,
you determined that its internal control system was good. Accordingly, you
observed the physical inventory at an interim date, May 30, 2021 instead
of at June 30, 2021.
You obtained the following information from the company's general
ledger.
Sales for eleven months ended May 31, 20121 (before
audit adjustments)
Sales for the fiscal year ended June 30, 2021 (before
audit adjustments)
Purchases for eleven months ended May 31, 2021
(before audit adjustments)
Purchases for the fiscal year ended June 30, 2021
(before audit adjustments)
Inventory, July 1, 2020
Physical inventory, May 30, 2021
P1,615,000
1,843,000
1,296,000
1,536,000
170,200
264,000
Your audit disclosed the following additional information.
a. Shipments costing P12,000 were received in May and included in the
physical inventory but recorded as June purchases.
b. Deposit of P4,000…
Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 20X4. In planning the audit, Marilyn is attempting to develop expectations for planning analytical procedures based on the financial information for prior years and her knowledge of the business and the industry, including these:
Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend.
Based on her knowledge of industry trends, she believes that the gross profit percentage for 20X4 should be about 2 percent less than the percentage for 20X3.
Based on her knowledge of regulations, she is aware that the effective tax rate for the company for 20X4 has been reduced by 5 percent from that in 20X3.
Based on a review of the general ledger, she determined that average depreciable assets have increased by 10 percent. Purchases of equipment occurred relatively evenly throughout the year.
Based on her knowledge of…
Chapter 17 Solutions
Financial Accounting
Ch. 17 - Prob. 1DQCh. 17 - What is the advantage of using comparative...Ch. 17 - Prob. 3DQCh. 17 - How would the current and quick ratios of a...Ch. 17 - Prob. 5DQCh. 17 - What do the following data, taken from a...Ch. 17 - a. How does the rate earned on total assets differ...Ch. 17 - Kroger, a grocery store, recently had a...Ch. 17 - Prob. 9DQCh. 17 - Prob. 10DQ
Ch. 17 - Prob. 1PEACh. 17 - Prob. 1PEBCh. 17 - Prob. 2PEACh. 17 - Vertical analysis Income statement information for...Ch. 17 - Prob. 3PEACh. 17 - Prob. 3PEBCh. 17 - Prob. 4PEACh. 17 - Prob. 4PEBCh. 17 - Prob. 5PEACh. 17 - Inventory analysis A company reports the...Ch. 17 - Prob. 6PEACh. 17 - Prob. 6PEBCh. 17 - Times interest earned A company reports the...Ch. 17 - Times interest earned A company reports the...Ch. 17 - Asset turnover A company reports the following:...Ch. 17 - Asset turnover A company reports the following:...Ch. 17 - Prob. 9PEACh. 17 - Prob. 9PEBCh. 17 - Common stockholders' profitability analysis A...Ch. 17 - Common stockholders' profitability analysis A...Ch. 17 - Earnings per share and price-earnings ratio A...Ch. 17 - Earnings per share and price-earnings ratio A...Ch. 17 - Revenue and expense data for Gresham Inc. for two...Ch. 17 - Prob. 2ECh. 17 - Common-sized income statement Revenue and expense...Ch. 17 - Prob. 4ECh. 17 - Prob. 5ECh. 17 - The following data were taken from the balance...Ch. 17 - Prob. 7ECh. 17 - The bond indenture for the 10-year, 9% debenture...Ch. 17 - The following data are taken from the financial...Ch. 17 - Prob. 10ECh. 17 - The following data were extracted from the income...Ch. 17 - Prob. 12ECh. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Hasbro and Mattel, Inc., are the two largest toy...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Three major segments of the transportation...Ch. 17 - Prob. 17ECh. 17 - Profitability ratios Ralph Lauren Corporation...Ch. 17 - The following data were taken from the financial...Ch. 17 - The balance sheet for Garcon Inc. at the end of...Ch. 17 - Earnings per share, price-earnings ratio, dividend...Ch. 17 - The table that follows shows the stock price,...Ch. 17 - Earnings per share, discontinued operations The...Ch. 17 - Prob. 24ECh. 17 - Prob. 25ECh. 17 - Unusual items Explain whether Colston Company...Ch. 17 - Prob. 1PACh. 17 - For 2016, Indigo Company initiated a sales...Ch. 17 - Effect of transactions on current position...Ch. 17 - The comparative financial statements of Bettancort...Ch. 17 - Addai Company has provided the following...Ch. 17 - Prob. 1PBCh. 17 - Prob. 2PBCh. 17 - Effect of transactions on current position...Ch. 17 - Prob. 4PBCh. 17 - Crosby Company has provided the following...Ch. 17 - Financial Statement Analysis The financial...Ch. 17 - Prob. 1CPCh. 17 - Prob. 2CPCh. 17 - The condensed income statements through income...Ch. 17 - Prob. 4CPCh. 17 - Marriott International, Inc., and Hyatt Hotels...
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- An audit client sells 15 to 20 units of product annually. A large portion of the annual sales occur in the last month of the fiscal year. Annual sales have not materially changed over the past five years. Which of the following approaches would be most effective concerning the timing of audit procedures for revenue?a. The auditor should perform analytical procedures at an interim date and discuss any changes in the level of sales with senior management.b. The auditor should inspect transactions occurring in the last month of the fiscal year and review the related sale contracts to determine that revenue was posted in the proper period.c. The auditor should perform tests of controls at an interim date to obtain audit evidence about the operational effectiveness of internal controls over sales.d. The auditor should review period-end compensation to determine whether bonuses were paid to meet earnings goals.arrow_forwardMichael Corporation is on a calendar year basis. The following data were found during your audit: 1) An excerpt from the client’s trial balance revealed the following account balances:Accounts receivable P 80,000Inventory, per count 1,200,000Accounts payable 790,000Net sales 6,050,000Net purchases 3,300,000Net income 610,000 2) The client conducted an inventory count on December 31, 2021. Michael Corporation normally sells at 30% gross profit based on selling price. 3) Goods were in transit FOB destination from a supplier in the amount of P120,000. Further testing revealed that the supplier's invoice pertaining to the delivery was received and recorded on December 28, 2021. 4) Good costing P70,000 had been received on December 31 and recorded as a purchase. However, upon your inspection, the goods were found to be defective and would be immediately returned. 5) Materials costing P224,000, sold and billed on December 30 under a “bill and hold” agreement, had been segregated in the…arrow_forwardREFER TO IMAGE FOR NUMBERS Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 20X4. In planning the audit, Marilyn is attempting to develop expectations for planning analytical procedures based on the financial information for prior years and her knowledge of the business and the industry, including these: Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend in terms of actual dollar increases. Based on her knowledge of industry trends, she believes that the gross profit percentage for 20X4 should be about 2 percent less than the percentage for 20X3. Based on her knowledge of regulations, she is aware that the effective tax rate for the company for 20X4 has been reduced by 5 percent from that in 20X3. Based on her knowledge of economic conditions, she is aware that the effective interest rate on the company’s line of credit for 20X4 was…arrow_forward
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