The errors below were noted after the books of CalMart Corporation were audited at the close of 2021 Indicate the effects of each of the following errors with an O for Overstatement, U for understatement and N for no effect in the appropriate column.20202021Retainedbefore closingEamings Retained Earnings afterclosingNet IncomeAssetLiabilityRetainedbefore closingEarnings Retained Eamings afterclosingNet IncomeAssetLiabilityUnderstatement of 2020 endinginventory worth P2,000.Failure to record accrued intereston notes payable at the end of2020.Notes payable, principalamount P10,000; interest rate,10%; acquired March 31,2020.Failure to recognize unearnedrent at the end of 2020 worthP1,000.Goods received in December2020recordedpurchases when paid in 2021.The goods were excluded fromthe 2020 ending inventory.wereas

Given error Effect of the error Understatement of 2020 ending inventory worth P2,000. It…

The errors below were noted after the books of CalMart Corporation were audited at the close of 2021 Indicate the effects of each of the following errors with an O for Overstatement, U for understatement and N for no effect in the appropriate column.

The errors below were noted after the books of CalMart Corporation were audited at the close of 2021 Indicate the effects of each of the following errors with an O for Overstatement, U for understatement and N for no effect in the appropriate column.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Discuss whether the changes described in each of the cases below require recognition in the CPA’s audit report as to consistency. (Assume that the amounts are material.) a. The company changed its inventory method to FIFO from weighted-average, which had been used in prior years. b. The company disposed of one of the two subsidiaries that had been included in its consolidated statements for prior years. c. The estimated remaining useful life of plant property was reduced because of obsolescence.
Murray & Co., CPAs completed the audit of Classic, Inc., a non-issuer, on March 1, 2018 for a January 31, 2018 fiscal year end. The audit team encountered no significant issues and found no material misstatements. Murray & Co. has audited Classic, Inc. for several years and past audits did not reveal any significant issues or material misstatements. The audit team partner determined that a standard (unmodified) report on Classic, Inc.'s financial statements was appropriate. The auditors’ report, drafted by I.M. Nu, a staff assistant, is provided below. Independent Auditor’s Report To the Board of Directors and Shareholders Classic, Inc. Report on the Audit of the Financial Statements OpinionWe have audited the financial statements of Classic Inc., which comprise the balance sheet as of January 31, 2021 and the related statements of changes in shareholders' equity and cash flows for the year then ended, and the related notes to the financial statements. In our opinion, the…
S1: Material misstatements that are discovered by the auditor are accumulated on "passed adjusting journal entries" working paper. S2: In dual dating, the report is redated and review procedures are extended to the date of the event. a. BOTH STATEMENTS ARE TRUE b. BOTH STATEMENTS ARE FALSE c. ONLY S1 IS TRUE d. ONLY S2 IS TRUE
Uncorrected Misstatements and Performance Materiality. Pat Colt is auditing thefinancial statements of Manning Company. The following is a summary of the uncorrectedmisstatements that Colt has identified during the past three years. These misstatements areimmaterial and have related to isolated matters. In this summary, parentheses imply that themisstatements would have reduced balances if they had been corrected (e.g., in 2014, themisstatements would have reduced net income by $82,500, assets by $100,000, liabilitiesby $17,500, and equity by $82,500 if corrected).LO 11-4LO 11-4YearEffect onNet IncomeEffecton AssetsEffecton LiabilitiesEffecton Equity2014 $(82,500) $(100,000) $(17,500) $(82,500)2015 (22,000) (25,500) (3,500) (22,000)2016 30,000 30,000 0 30,000 During the most recent audit, Colt concluded that expenses totaling $130,000 were recognized in January 2018 (when Manning paid them) but should have been recognized in 2017.Required:a. How does the misstatement identified in 2017…
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While completing your audit work for the 30 June 2019 audit of Greenfield Ltd, you become aware of the following material matters: I. On 5 July, Blue Pty Ltd, a major customer of Greenfield Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Greenfield Ltd as at balance date, management of Greenfield Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2019 financial report. However, they are prepared to disclose this information as a note to the financial report. II. On 15 July, Greenfield Ltd entered into a new contract to supply wine to Wine Taster, a major new wine store that had set up operations in northern South Australia. The contract was similar in nature to other contracts previously negotiated with other wine stores. Management does not believe that any change to the financial report is required. III. Greenfield Ltd has capitalised significant funds incurred in developing an improved new wine cap that allows the…
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Uncorrected Misstatements and Performance Materiality. Pat Colt is auditing the financial statements of Manning Company. The following is a summary of the uncorrected misstatements that Colt has identified during the past three years. These misstatements are immaterial and have related to isolated matters. In this summary, parentheses imply that the misstatements would have reduced balances if they had been corrected (e.g., in 2014, the misstatements would have reduced net income by $82,500, assets by $100,000, liabilities by $17,500, and equity by $82,500 if corrected). Check the below image for misstatements- During the most recent audit, Colt concluded that expenses totaling $130,000 were recognized in January 2018 (when Manning paid them) but should have been recognized in 2017.Required:a. How does the misstatement identified in 2017 affect net income, assets, liabilities, and equity? (Assume a 35 percent tax rate for Manning.)b. Describe the rollover method of evaluating…
As a result of analytical procedures an auditor determines that gross profit has declined from 30% to 15% in the current year. The auditor should.. A. Document manamgent intentions with respect to reversing the trend. B. Evaluate managment's performance in causing the deline C. Require a footnote disclosure D. Consider the possibility of an error in the financial statements.
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