As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clientsNovak Corp. is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired landby issuing 3,000 shares of its $20 par value common stock. The owners asking price for the land was $130,000, and the fairvalue of the land was $115,500.1.2Prepare the journal entries for each of the situations above. (Credit account titles are automatically indented when amount is entered. Donot indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts)Account Titles and ExplanationNo.1.Crane Company is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquiredland by issuing 20,000 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at$271,500. The stock was selling at $11 per share.2.Dates>DebitCredit

Journal Entry is the primary step to record the transaction in the books of accounts. The increase…

Answered: As an auditor for the CPA firm of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

You have reviewed the work performed by your assistant, Samson Chow, on the audit of Bexca Ltd for the year ended 30 June 2018 and have noted the following two independent matters: (i)In testing investments in listed securities, Samsonselected all shareholdings with a market value above $200,000 and checked them to the closing market value reported by the Australian Stock Exchange to determine the net realisable value of each shareholding. The items tested totalled $5,500,000, or 60% of the total balance. Of the items tested, only one error of $110,000 was discovered. Samsonconcluded that the error was not itself material, as only 2% of the balance was tested. He extrapolated this error to the total population and estimated that the error for the total population would be $185,000, which was also immaterial. Therefore, he concluded that the investments in listed securities were fairly stated at the lower of cost or net realisable value. (ii)Bexca Ltd has 1,000 stock lines that are…
Dandy Container Corporation engaged the accounting firm of Adams and Adams to audit financial statements to be used in connection with a public offering of securities. The audit was completed, and an unqualified opinion was expressed on the financial statements that were submitted to the Securities and Exchange Commission along with the registration statement. Two hundred thousand shares of Dandy Container common stock were offered to the public at $11 a share. Eight months later, the stock fell to $2 a share when it was disclosed that several large loans to two "paper" corporations owned by one of the directors were worthless. The loans were secured by the stock of the borrowing corporation that was owned by the director. These facts were not disclosed in the financial statements. The director involved and the two corporations are insolvent. Select whether each of the below statements is true or false under statutory law. 1. The Securities Act of 1933 applies to the above-described…
The statement of financial position (balance sheet) of Omni-Pave Company reports assets of $7,800,000. Ellen Martin advises you that a major accounting firm has audited the statements and attested that they were prepared in accordance with Generally Accepted Accounting Principles. She tells you that she can buy the total owner's interest in the business for only $5,400,000 and is seriously considering the opportunity. She says that the auditor's unqualified opinion validates the $7,800,000 value of the assets. Ellen believes she would be foolish to pass up the opportunity to purchase the assets at a price of only $5,400,000. What part of the accounting equation is Ellen failing to consider? Comment on Ellen's misconceptions regarding the auditor's role in providing information that is useful in making investment decisions.
Risk Capital Limited, a publicly held Delaware corporation, was considering the purchase of a substantial amount of the treasury stock held by Florida Sunshine Corporation, a closely held corporation. Initial discussions with the Florida Sunshine Corporation began late in 20X0. Wilson and Wyatt, CPAs, Florida Sunshine’s public accountants, regularly prepared quarterly and annual unaudited financial statements. The most recently prepared unaudited financial statements were for the fiscal year ended September 30, 20X0. On November 15, 20X0, after protracted negotiations, Risk Capital agreed to purchase 100,000 shares of no-par Class A treasury stock of Florida Sunshine at $12.50 per share. However, Risk Capital insisted upon audited statements for the calendar year 20X0. The contract specifically provided: “Risk Capital shall have the right to rescind the purchase of said stock if the audited financial statements of Florida Sunshine for calendar year 20X0 show a material adverse change…
Monicker Co. engaged the audit firm of Gasner & Gasner to audit its financial statements that Monicker was going to use in connection with a public offering of its securities. Monicker's stock regularly trades on the NASDAQ. The audit was completed and the auditor issued an unqualified opinion on the financial statements, which Monicker submitted to the SEC along with the registration statement. Three hundred thousand shares of Monicker common stock were sold to the public at $13.50 per share. Eight months later, the stock fell to $2 per share when it was disclosed that several large loans to two "paper" companies owned by one of the directors were worthless. The loans were secured by the stock of the borrowing corporation and by Monicker stock owned by the director. These facts were not disclosed in the financial statements. The director and the two corporations are insolvent. Considering these facts, indicate whether each of the following statements is true or false, and briefly…
Sunland Corporation purchased 370 shares of Sherman Inc. common stock for $ 13,100 ( Sunland does not have significant influence). During the year, Sherman paid a cash dividend of $ 3.00 per share. At year-end, Sherman stock was selling for $ 37.50 per share.Prepare Sunland's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit (a) enter an account title to record the purchase of the investment enter a debit amount enter a credit amount enter an account title to record the purchase of the investment enter a debit amount enter a credit amount (b) enter an account title to record…
Risk Capital Limited, a publicly held Delaware corporation, was considering the purchase of a substantial amount of the treasury stock held by Florida Sunshine Corporation, a closely held corporation. Initial discussions with the Florida Sunshine Corporation began late in 20X0. Wilson and Wyatt, CPAs, Florida Sunshine’s public accountants, regularly prepared quarterly and annual unaudited financial statements. The most recently prepared unaudited financial statements were for the fiscal year ended September 30, 20X0. On November 15, 20X0, after protracted negotiations, Risk Capital agreed to purchase 100,000 shares of no-par Class A treasury stock of Florida Sunshine at $12.50 per share. However, Risk Capital insisted upon audited statements for the calendar year 20X0. The contract specifically provided: “Risk Capital shall have the right to rescind the purchase of said stock if the audited financial statements of Florida Sunshine for calendar year 20X0 show a material adverse change…
. The common stock of Wilson, Inc. is owned by 20 stockholders. Doe & Doe, CPAs audited Wilson's financial statements as of December 31, 2017. The audit firm rendered an unqualified opinion on the financial statements. Relying on Wilson's financial statements, which showed net income for 2017 of $1,500,000, Peters purchased 10,000 shares of Wilson stock for $200,000 on April 10, 2018. Wilson's financial statements contained material misstatements. Because Doe & Doe did not carefully follow professional auditing standards, it did not discover that the statements failed to reflect unrecorded expenses, which reduced Wilson's actual net income to $800,000. After disclosure of the corrected financial statements, Peters sold his shares for $100,000, which was the highest price he could obtain. Peters has brought an action against Doe & Doe under federal securities law and common law. Answer the following, setting forth reasons for your conclusions: Will Peters prevail on his…
The following audit procedures are commonly performed by auditors in the verification of owners’ equity: 1.Review articles of incorporation and bylaws for provisions about owners’ equity. 2.Analyze all owners’ equity accounts for the year and document the nature of any recorded change in each account. 3.Confirm capital stock transactions with the stock registrar and transfer agent. 4.Confirm shares issued and outstanding with the stock registrar and transfer agent. 5.Review the minutes of the board of directors’ meetings for the year for approvals related to owners’ equity. 6.Recompute earnings per share. 7.Review debt provisions and senior securities with respect to liquidation preferences, dividends in arrears, and restrictions on the payment of dividends or the issue of stock. Required State the purpose of each of these seven audit procedures. List the type of misstatements the auditors can uncover by the use of each audit procedure.
View Policies Show Attempt History Current Attempt in Progress Your answer is partially correct. As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients. Pina Colada Corp. is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 3,000 shares of its $20 par value common stack. The owners' asking price for the land was $135,000, and the fair value of the land was $115,500. 1. 2. Cullumber Company is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 19,500 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at $267,500. The stock was selling at $11 per share. Prepare the journal entries for each of the situations above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required,…
Tamarisk Corporation purchased 380 shares of Sherman Inc. common stock for $13,300 (Tamarisk does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $37.00 per share.Prepare Tamarisk's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (
Adams Moving and Storage, a family-owned corporation, declared a property dividend of 800 shares of GE common stock that Adams had purchased in February for $24,000 as an investment. GE’s shares had a market value of $28 per share on the declaration date. Prepare the journal entries to record the property dividend on the declaration and payment dates and record adjustment of stock to fair value Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS