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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Chapter 26, Problem 18.1MCQ
To determine
Identify the option that best describes the operational audit..
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When privately-held Toys "R" Us filed for bankruptcy in fall 2017, it disclosed that it had $5 billion in debt and was spending about $400 million per year for interest on that debt. Toys "R" Us net debt was $109.0 million in 2005, just before being taken over by private equity buyers in 2005. In that takeover, the company incurred $5.3 billion in debt. Sales revenue in the twelve months before the buyout in 2005 were $11.2 billion. Sales in the twelve months ending October 2017 were $11.1 billion.During the bankruptcy and store closing announcement in March 2018, the Toys "R" Us CEO stated that the company had fallen behind on the general upkeep and condition of its stores, which contributed to the decline in sales. It has also faced intense competition from other retailers, such as Amazon.com and Walmart. Toys "R" Us had had plans during 2017 to invest in technology, upgrade its stores to have toy testing areas, and create other features that would draw customers into the stores, but…
D'Lite Dry Cleaners is owned and operated by Joel Palk. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of
dry cleaning is done by another company at wholesale rates. The assets, liabilities, and common stock of the business on July 1, 20Y4, are as follows: Cash, $45,000;
Accounts Receivable, $93,000; Supplies, $7,000; Land, $75,000; Accounts Payable, $40,000; Common Stock, $60,000. Business transactions during July are
summarized as follows:
a. Joel Palk invested additional cash in exchange for common stock with a deposit of $35,000 in the business bank account.
b. Paid $50,000 for the purchase of land adjacent to land currently owned by D'Lite Dry Cleaners as a future building site.
c. Received cash from customers for dry cleaning revenue, $32,125.
d. Paid rent for the month, $6,000.
e. Purchased supplies on account, $2,500.
f. Paid creditors on account, $22,800.
g. Charged customers for dry cleaning revenue on account,…
Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers.
Jerry,
Incorporated Kate Company
Number of orders
Units per order
sales returns:
Number of returns
Total units returned
Number of sales calls.
3
2,000
60
360
1
60
5
140
4
Colleen sells its products at $290 per unit. The firm's gross margin ratio is 20%. Both Jerry and Kate pay their accounts promptly and
no accounts receivable is over 30 days. After using business analytics software to carefully analyze the operating data for the past 30
months, the firm has determined the following activity costs:
Activity
Sales calls
Order processing
Deliveries
Sales returns
Sales salary
Cost Driver and Rate
$ 700 per visit
460 per order
100 per order
210 per return and $5 per unit returned
80,000 per month
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Using customers as the cost objects, classify the activity costs into cost categories…
Chapter 26 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 26 - Prob. 1RQCh. 26 - Prob. 2RQCh. 26 - Prob. 3RQCh. 26 - Prob. 4RQCh. 26 - Prob. 5RQCh. 26 - Prob. 6RQCh. 26 - Prob. 7RQCh. 26 - Prob. 8RQCh. 26 - Prob. 9RQCh. 26 - Prob. 10RQ
Ch. 26 - Prob. 11RQCh. 26 - Prob. 12RQCh. 26 - Prob. 13RQCh. 26 - Prob. 14RQCh. 26 - Prob. 15RQCh. 26 - Prob. 16.1MCQCh. 26 - Prob. 16.2MCQCh. 26 - Prob. 16.3MCQCh. 26 - Prob. 17.1MCQCh. 26 - Prob. 17.2MCQCh. 26 - Prob. 17.3MCQCh. 26 - Prob. 18.1MCQCh. 26 - Prob. 18.2MCQCh. 26 - Prob. 18.3MCQCh. 26 - Prob. 19.1MCQCh. 26 - Prob. 19.2MCQCh. 26 - Prob. 19.3MCQCh. 26 - Prob. 20DQPCh. 26 - Prob. 21DQPCh. 26 - Prob. 22DQPCh. 26 - Prob. 23DQPCh. 26 - Prob. 24DQPCh. 26 - Prob. 25DQP
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