Williams-Santana Inc. is a manufacturer of high-tech Industrial parts that was started in 2009 by two talented engineers with little business training. In 2021, the company was acquired by one of its major customers. As part of an Internal audit, the following facts were discovered. The audit occurred during 2021 before any adjusting entries or closing entries were prepared. a. A five-year casualty Insurance policy was purchased at the beginning of 2019 for $33,000. The full amount was debited to Insurance expense at the time.
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- Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2009 by two talented engineers with little business training. In 2021, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2021 before any adjusting entries or closing entries were prepared. The income tax rate is 25% for all years. A five-year casualty insurance policy was purchased at the beginning of 2019 for $36,500. The full amount was debited to insurance expense at the time. Effective January 1, 2021, the company changed the salvage value used in calculating depreciation for its office building. The building cost $612,000 on December 29, 2010, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $100,000. Declining real estate values in the area indicate that the salvage value will be no more than $25,000. On December 31, 2020,…Williams-Santana Incorporated is a manufacturer of high-tech industrial parts that was started in 2012 by two talented engineers with little business training. In 2024, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2024 before any adjusting entries or closing entries were prepared. a. A five-year casualty insurance policy was purchased at the beginning of 2022 for $35,000. The full amount was debited to insurance expense at the time. b. Effective January 1, 2024, the company changed the salvage value used in calculating depreciation for its office building. The building cost $600,000 on December 29, 2013, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $100,000. Declining real estate values in the area indicate that the salvage value will be no more than $25,000. c. On December 31, 2023, merchandise inventory was overstated…Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years. a. A five-year casualty insurance policy was purchased at the beginning of 2016 for $36,500. The full amount was debited to insurance expense at the time. b. Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $612,000 on December 29, 2007, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $100,000. Declining real estate values in the area indicate that the salvage value will be no more than $25,000 c. On December 31, 2017,…
- Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years. A five-year casualty insurance policy was purchased at the beginning of 2016 for $33,500. The full amount was debited to insurance expense at the time. Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $598,000 on December 29, 2007, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $110,000. Declining real estate values in the area indicate that the salvage value will be no more than $27,500. On December 31, 2017,…Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years. A five-year casualty insurance policy was purchased at the beginning of 2016 for $40,000. The full amount was debited to insurance expense at the time. Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $650,000 on December 29, 2007, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $110,000. Declining real estate values in the area indicate that the salvage value will be no more than $27,500. On December 31, 2017,…Williams-Santana Inc. is a manufacturer of high-tech industrial parts that was started in 2002 by two talented engineers with little business training. In 2016, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2016 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years. a. A five-year casualty insurance policy was purchased at the beginning of 2014 for $35,000. The full amount was debited to insurance expense at the time. b. On December 31, 2015, merchandise inventory was overstated by $25,000 due to a mistake in the physical inventory count using the periodic inventory system. c. The company changed inventory cost methods to FIFO from LIFO at the end of 2016 for both financial statement and income tax purposes. The change will cause a $960,000 increase in the beginning inventory at January 1, 2015. d. At the end of 2015, the company…
- You are the independent auditor engaged to audit Millay Corporation’s December 31, 2020, financial statements. Millay manufactures household appliances. During the course of your audit, you discovered the following contingent liabilities. 1. Millay began production of a new dishwasher in June 2020 and, by December 31, 2020, sold 120,000 to various retailers for $500 each. Each dishwasher is under a 1-year warranty. The company estimates that its warranty expense per dishwasher will amount to $25. At year-end, the company had already paid out $1,000,000 in warranty expenses. Millay’s income statement shows warranty expenses of $1,000,000 for 2020. 2. In response to your attorney’s letter, Morgan Sondgeroth, Esq., has informed you that Millay has been cited for dumping toxic waste into the Kishwaukee River. Clean-up costs and fines amount to $2,750,000. Although the case is still being contested, Sondgeroth is certain that Millay will most probably have to pay the fine and clean-up…You are engaged to audit the December 31, 2020, financial statements of Justin Company, a manufacturer of household appliances. Your audit disclosed the following situations: In June 2020, the company began producing and selling a new line of dishwasher. By the end of the year, it had sold 120,000 to various dealers for P15,000 each. The product was sold under a 1-year warranty, and the company estimates the warranty costs to be P750 per dishwasher. Justin had paid out P30 million in warranty expenses as of December 31, 2020, which is also the amount shown as warranty expense in its income statement for the current year. In response to your letter audit, Justin’s lawyer informed you that the company is involved in a lawsuit for violating environmental laws regulating hazardous waste. Although the litigation is pending, Justin’s lawyer is certain that Justin will most probably have to pay cleanup cost Justin is the defendant in a patent infringement suit by Bever over Justin’s use of a…You are the independent auditor engaged to audit Broady Corporation’s December 31, 2022, financial statements. Broady manufactures small appliances. During the course of your audit, you discovered the following contingent liabilities. 1. Broady began production of a new blender in August 2022 and, by December 31, 2022, sold 381,000 to various retailers for $60 each. Each blender is under a one-year warranty. The company estimates that its warranty expense per blender will amount to $4. At year-end, the company had already paid out $831,000 in warranty expenses. Broady‘s income statement shows warranty expenses of $831,000 for 2022. Broady accounts for warranty costs on the accrual basis. 2. Broady is the defendant in a patent infringement lawsuit by Crusher Blenders, Inc. over Broady‘s use of a blade design and ice crushing technique in its new blender. Broady’s general counsel claims that, if the suit goes against Broady, the loss would be approximately $25,000,000; however, their…
- During the year end audit of Cressman Corporation's financial statement for 2019, you discover the following items: 1. Cressman capitalized $75,000 to the patent account at the beginning of 2018 for the cost of a patent. This amount included $50,000 of R&D costs. The patent was amortized over a 20-year life in 2018 and 2019. 2. At the beginning of 2018, Cressman paid its lawyers $8,000 to successfully defend a patent infringement suit regarding the patent in item 1. Cressman debited this cost to legal fees expense. 3. At the beginning of 2018, Cressman purchased a patent for $30,000 from the Baylor Company to prevent potential competition. It recorded the cost in the Patent account and amortized this cost over the remaining legal life of the patent obtained in item 1 (19 years). However, Cresssman agreed to a suggestion by the auditors that the life of the original patent obtained in Item 1 was protected for only 7 more years as of the beginning of 2020. Required. Prepare adjusting and…20 Williams-Santana Inc. is a manufacturer of high-tech industrial parts that was started in 2009 by two talented engineers with little business training. In 2021, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2021 before any adjusting entries or closing entries were prepared. a. A five-year casualty insurance policy was purchased at the beginning of 2019 for $32,500. The full amount was debited to insurance expense at the time. b. Effective January 1, 2021, the company changed the salvage value used in calculating depreciation for its office building. The building cost $580,000 on December 29, 2010, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $100,000. Declining real estate values in the area indicate that the salvage value will be no more than $25,000. c. On December 31, 2020, merchandise inventory was overstated by…Jares Investments GlobalLimited is a listed company which manufactures stationery products. The company’s profit before tax for the year ended 31 December 2020is GH¢16·3m and total assets as at that date are GH¢66·8m. You are an audit supervisor of Jeremiah& Associateand you are currently finalizing the audit program for the year-end audit of your existing client Jares Investments Global Limited. You attended a meeting with your audit manager where the following matters were discussed: Trade payables and accruals Jares Investments Global Limitedpurchases its raw materials from a large number of suppliers. The company’s policy is to close the purchase ledger just after the year end and the financial controller is responsible for identifying goods which were received pre year-end but for which no invoice has yet been received. An accrual is calculated for goods received but not yet invoiced (GRN) and is included within trade payables and accruals. The audit strategy has identified a…