Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 13.12E
To determine
Introduction: Interim reporting is made in between the fiscal year. It is made before the completion of fiscal year in mostly public corporation for taking various decisions for the remaining period. Mostly quarterly and half yearly report is prepared.
The acceptability of the method proposed for interim report for the given cases.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
What type of disclosure or accounting do you believe isnecessary for the following items?(a) Because of a general increase in the number of labordisputes and strikes, both within and outside the industry,there is an increased likelihood that a companywill suffer a costly strike in the near future.(b) A company reports a material unusual and infrequentloss on the income statement. No other mentionis made of this item in the annual report.(c) A company expects to recover a substantial amountin connection with a pending refund claim for aprior year’s taxes. Although the claim is being contested,counsel for the company has confirmed theclient’s expectation of recovery
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.
When comparing the % of sales in the last month of the year to the total sales for the
year, the auditor notes that the percentage seems significantly higher this period
than previous periods. The auditor is aware that the management receives a bonus
for meeting certain performance metrics. The sales booked during the last month of
the year allowed the company to meet that sales metric, earning management the
bonus. Given this information, which of the following assertions with respect to
revenue would you most likely be concerned about?
Both occurrence and cutoff
Cutoff
Completeness
Occurrence
Chapter 13 Solutions
Advanced Financial Accounting
Ch. 13 - Prob. 13.1QCh. 13 - Prob. 13.2QCh. 13 - What are the three 10 percent significance tests...Ch. 13 - Prob. 13.4QCh. 13 - A company has 10 industry segments, of which the...Ch. 13 - Prob. 13.6QCh. 13 - Prob. 13.7QCh. 13 - Prob. 13.8QCh. 13 - Prob. 13.9QCh. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Prob. 13.13QCh. 13 - Prob. 13.14QCh. 13 - Maness Company made a change in accounting for its...Ch. 13 - Prob. 13.1CCh. 13 - Prob. 13.2CCh. 13 - Prob. 13.3CCh. 13 - Prob. 13.7CCh. 13 - Prob. 13.8CCh. 13 - Prob. 13.9CCh. 13 - Reportable Segments Data for the seven operating...Ch. 13 - Prob. 13.2.1ECh. 13 - Prob. 13.2.2ECh. 13 - Prob. 13.2.3ECh. 13 - Prob. 13.2.4ECh. 13 - Prob. 13.2.5ECh. 13 - Prob. 13.2.6ECh. 13 - Prob. 13.2.7ECh. 13 - Prob. 13.2.8ECh. 13 - Prob. 13.2.9ECh. 13 - Prob. 13.2.10ECh. 13 - Prob. 13.2.11ECh. 13 - Prob. 13.3.1ECh. 13 - Prob. 13.3.2ECh. 13 - Multiple-Choice Questions on Interim Reporting...Ch. 13 - Prob. 13.3.4ECh. 13 - Prob. 13.3.5ECh. 13 - Prob. 13.3.6ECh. 13 - Prob. 13.3.7ECh. 13 - Prob. 13.3.8ECh. 13 - Prob. 13.3.9ECh. 13 - Prob. 13.3.10ECh. 13 - LIFO Liquidation During July, Laesch Company,...Ch. 13 - Inventory Write-Down and Recovery Cub Company, a...Ch. 13 - MutiniedChoice Questions on Income Taxes at...Ch. 13 - Prob. 13.6.2ECh. 13 - Prob. 13.6.3ECh. 13 - MutiniedChoice Questions on Income Taxes at...Ch. 13 - Prob. 13.6.5ECh. 13 - Prob. 13.6.6ECh. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Prob. 13.11ECh. 13 - Prob. 13.12ECh. 13 - Prob. 13.13PCh. 13 - Prob. 13.14PCh. 13 - Interim Income Statement Chris Inc. has...Ch. 13 - Prob. 13.17PCh. 13 - Prob. 13.20PCh. 13 - Matching Terms Match the items in the left-hand...
Knowledge Booster
Similar questions
- Health Corporation has several current notes receivable on its year-end balance sheet. While collection seems certain, it may be delayed beyond one year. Because of this, the controller wants to re-classify these notes as non-current. Health's treasurer also thinks that collection will be delayed but does not favor re-classification because this will reduce the current ratio from 1.5:1 to 0.8:1. This reduction in current ratio is detrimental to company prospects for securing a major loan. 1. Should the controller re-classify the notes? Give reasoning. 2. Does the treasurers position pose an ethical dilemma for the controller. Explain.arrow_forwardWhen the IASB issues new standards, the implementation date is usually twelve months from the date of issuance, with early implementation encouraged. Becky Hoger, a controller, discusses with her financial vice president the need for early implementation of a standard that would result in a fair presentation of the company’s financial condition and earnings. When the financial vice president determines that early implementation of the standard will adversely affect the reported net income for the year, he discourages Hoger from implementing the standard until it is required. Required: a) What, if any, is the ethical issue involved in this case? b) Is the financial vice president acting improperly or immorally?: c) What does Hoger have to gain by advocacy of early implementation and who might be affected by the decision against early implementation?arrow_forwardIdentify the applicable qualitative characteristics referred to in the Conceptual Framework for Financial Reporting that is not adhered in the scenario below and indicate the respective group to which each characteristic belongs to. You are also required to indicate the sub-category (if applicable) to which the qualitative characteristic belong to. A company discovered at the end of the fiscal year that credit sales transactions from the last 2 months of the period were not recorded as the accountant was waiting for a transfer of cash or equivalent to settle the outstanding amounts. a. Faithful Representation; completeness; Enhancing b. Faithful Representation; completeness; Fundamental c. Faithful Representation; neutral; Fundamental d. Faithful Representation; free from error; Fundamentalarrow_forward
- necessary adjustments. However, the directors refuse to amend the financial statements to Simon and Co has been engaged to perform an audit for High Trendy Sdn Bhd for that the difference is due to an adjustment to inventory that had not been reflected in the draft financial statements. After reviewing the inventory adjustment, you have made the the year ended 31 December 20xx. While finalizing the audit, you noted that the net profit is MYR 350,000 in the directors' report compared with MYR 500,000 in the Statement CASE 15 Jon Comprehensive Income. Based on your discussion with the management, you find out e the difference is due to an adjustment to inventory that had not been reflected in the ocessary adjustments. However, the directors refuse to amend the financial statements to reflect the adjustment. Required: Discuss the type of audit opinion and draft an auditor's report to accompany the above situation.arrow_forwardSituation CAIN Corp generally has good control policies and activities related to authorization of transactions for accounting entry, and the accounting manual has instructions for recording sales transactions in the proper accounting period. The company regularly closes the accounting process each Friday at 5pm to prepare weekly management reports. The year-end date (cut-off date) is December 31, and this year, December 31 was a Monday. However, the accounting was performed through Friday as usual, and the accounts were closed for the year on January 4. Paper Trail All the entries were properly dated after December 31, including the sales invoices, cash receipts and shipping documents. However, the trial balance from which the financial statements were prepared was dated December 31. Nobody noticed the slip of a few days because the Friday closing was normal. Amount CAIN reported sales of P672,000 and gross profit of P268,800 over the January 1-4 period. Cash collections on…arrow_forwardIs it an entity inherent risk for the information below? To help stimulate sales and operating efficiency, Marco Inc. recently instituted a profit- sharing bonus agreement for its employees, including top management. Management negotiated the plan because employees have gone without raises for several years. The agreement bases employee bonuses on unaudited net income for the past year because of the need to adjust employees' salaries at the beginning of each year. However, management will adjust future bonuses for any audit adjustments made after the bonuses are set based on unaudited data. The firm sets a bonus pool based on five percent of operating income, which limits the total available to pay bonuses. Management bases individual bonuses on an employee's position, length of service, and certain specific negotiated terms with individual officers. If it is an inherent risk, what is the feature of the firm that will possibly affect inherent risk and explain how and why; that is…arrow_forward
- Situation CAIN Corp generally has good control policies and activities related to authorization of transactions for accounting entry, and the accounting manual has instructions for recording sales transactions in the proper accounting period. The company regularly closes the accounting process each Friday at 5pm to prepare weekly management reports. The year-end date (cut-off date) is December 31, and this year, December 31 was a Monday. However, the accounting was performed through Friday as usual, and the accounts were closed for the year on January 4. Paper Trail All the entries were properly dated after December 31, including the sales invoices, cash receipts and shipping documents. However, the trial balance from which the financial statements were prepared was dated December 31. Nobody noticed the slip of a few days because the Friday closing was normal. Amount CAIN reported sales of P672,000 and gross profit of P268,800 over the January 1-4 period. Cash collections on customers'…arrow_forwardExplain whether Colston Company correctly reported the following items in the financial statements:a. In a recent year, the company discovered a clerical error in the prior year’s accounting records. As a result, the reported net income for the previous year was overstated by $45,000. The company corrected this error by restating the prior-year financial statements.b. In a recent year, the company voluntarily changed its method of accounting for longterm construction contracts from the percentage of completion method to the completed contract method. Both methods are acceptable under generally acceptable accounting principles. The cumulative effect of this change was reported as a separate componentof income in the current period income statement.arrow_forwardSandra: We are beginning our audit of Imex and have prepared ratio analyses to determine if there have been significant changes in financial position. This helps us guide the audit process. This analysis indicates that the inventory turnover has decreased from 5 to 2.8 and the accounts receivable turnover has decreased from 12 to 8. I was wondering if you could explain this change in operations. Travis: There is little need for concern. The inventory represents computers that we were unable to sell during the holiday buying season. We are confident, however, that we will be able to sell these computers as we move into the next fiscal year. Sandra: What gives you this confidence? Travis: We will increase our advertising and provide some very attractive price concessions to move these machines. We have no choice. Newer technology is already out there, and we have to unload this inventory. Sandra: …and the receivables? Travis: As you may be aware, the company is under tremendous pressure…arrow_forward
- An auditor noted that client sales increased 10 percent for the year. At the same time, Cost of Goods Sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent. Based on this information, the auditor is most likely concerned abouta. Unrecorded costs.b. Improper credit approvals.c. Improper sales cutoff.d. Fictitious sales.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_forwardBarber Technologies designs and develops software to be used for the management of inventory by both retailers and manufacturing firms. Over the past three years, the company has experienced significant competition and a declining market resulting in a significant deficit in retained earnings. In response to this condition, you have suggested that management consider the following: a. Recognize all asset impairments.b. Restructure the long-term debt by committing to make future payments that are less than the basis of the original debt.c. Adjust the par value of common stock to eliminate the deficit in retained earnings. Discuss how the above actions will likely affect: 1. The current ratio, debt-to-equity ratio, and return on equity. 2. The determination of net income in subsequent periods.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,